B-Schools With The Highest Debt

NYU Stern School of Business

NYU Stern School of Business

B-Schools With The Highest Debt

Imagine you’re competing in a race. At the starting line, you’re leaning in, itching for the starting gun to pop. Just one problem: there’s a slab of cement wrapped around your shin. You can still run, but that weight gets heavier and more painful by the mile. And you’ll push yourself harder than your peers just to keep pace.

That’s what debt is – always there, always in mind. It weighs you down, reduces your options, and makes every decision all the more risky. You prolong, delay, and ultimately take the path of least resistance. With debt, you tolerate what you’d normally stand up against – and you second-guess what you’d always embrace.

When it comes to an MBA, here’s the carnival pitch: “You need to invest money to make money.” It’s your standard return on investment. Give up two years of income – and cough up $55K a year – and you’ll make it up in five years. From there, the return just grows exponentially. If you’re risk-averse, a proposition like that is a nightmare. However, others respond to the risk-reward this way: “I’ll be the one who pays off the debt in three years.”

According to U.S. News & World Report, the average MBA debt load was $56,157 for the Class of 2014. Here is how U.S. News puts this number in context:

“That amounts to about $635 in monthly student loan payments over the course of a standard 10-year repayment plan, according to a student loan repayment estimator. That figure assumes 6.41% interest, which was the 2013-2014 rate for federal Graduate PLUS loans.”

However, U.S. News adds that this total doesn’t include student debt from undergraduate years. It also doesn’t account for burdens like mortgage or rent, car loans, life events (weddings, children, etc.), food, insurance, or even a vacation. What’s more, a $635 monthly payment is the average. If you want to attend a Stanford or Columbia, you’re certain to pay a premium.

For example, at the New York University Stern School of Business, the average loan payment is $1,300 – double the overall average U.S. News reported. In other words, you’ll spend nearly $80,000 more on your education over 10 years.

Stern is actually the extreme example. In new research from U.S. News, NYU topped out as the full-time MBA program where graduates carry the most debt. At Stern, the average debt is $116,533 (up from $93,832 last year). Although the school doesn’t disclose the percentage of graduates in debt (P&Q estimated it at 69% for the Class of 2013) – the numbers look intimidating. Tuition is nearly $61,000 a year,there’s another $2,500 in annual fees on top of that, with annual living expenses pegged at $37,310.

Certainly, Stern’s location in one of the world’s most expensive cities skews the numbers to an extent. And it’s not as if the school doesn’t offer strong financial aid – for example, there are 362 fellowships and 1,137 teaching assistantships available to full-time MBAs. Question is, does Stern yield the return – especially when debt numbers don’t factor in two years of lost income? That depends. Ranking 11th overall, Stern grads earn $136,357 starting out, making them 13th in pay. Look deeper and the numbers improve. Twenty-eight per cent of 2014 Stern graduates moved into either consulting, where compensation averaged $130,00 for base salaries, plus $29,324 for signing bonus and $18,966 for other guaranteed bonuses. And 35% of graduates joined investment banks, diversified financials, or hedge funds. Here, starting incomes ranged from $100,000 (investment banks) to $120,000 (asset management). And that doesn’t include signing bonuses ($27,000 to $41,992) or other guaranteed bonuses ($18,896 for investment banks and $52,667 for hedge funds).

And here’s another measure. In joint research between Poets&Quants and PayScale, Stern graduates earned $2,639,000 in salary and bonuses, on average, over the 20 years after graduation. And those totals were up to $150,000 more than earnings produced by graduates at higher-ranked programs like Chicago Booth, Northwestern Kellogg, Duke Fuqua, and Michigan Ross. In other words, the sticker shock may be higher at NYU, but students ultimately make up any differences on the back end.

For the Class of 2013, Duke University’s Fuqua School of Business was the top school for debt at $108,816 (with 66% in debt). Despite falling to second, the average debt for Duke grads jumped to $115,201 (with 65% of the Class of 2014 carrying debt). MIT’s Sloan School of Management retained the third spot, though its debt also shot up from the previous year,to $106,602 from $100,512. Rounding out the top five for debt were Cornell’s Johnson Graduate School of Management ($106,200 — up from $97,500) and the University of Virginia’s Darden School of Business ($102,122 – down from $102,968).

Yale, San Francisco (Masagung), Northwestern (Kellogg) and Pepperdine (Graziadio) – which were among the 10 biggest MBA programs for debt for the Class of 2013 – dropped out of this year’s Top 10. However, neither Yale nor Kellogg shared debt numbers with U.S. News (while Masagung and Graziadio graduates’ debt loads shrunk by over $11,200 and $1,700 respectively). At the same time, George Washington, North Carolina Kenan-Flagler, UCLA Anderson, and Carnegie Mellon Tepper all joined the list. At 58th, George Washington ($92,969) is the lowest-ranked school on the list.

Several top-tier programs, such as at Stanford ($77,559), Harvard ($77,991), Berkeley Haas ($77,628), and Texas McCombs ($69,409) reported more debt than the average ($56,157) – still modest considering their stature. At the same time, Wharton, Chicago Booth, Columbia, and Dartmouth Tuck didn’t share debt numbers with U.S. News. However, if 2013 estimates are any indication, Wharton would top the list on debt, with Columbia tying Duke. At the same time, Booth would likely rank just below Harvard and Stanford for debt.

Top Schools for Full-Time MBA Debt:

Business SchoolAverage MBA DebtFull-Time 2014 Graduates With Debt3-Month Placement RateAverage Starting SalaryU.S. News Rank
 New York University (Stern) $116,533 NA 90.4% $135,933 11 (Tie)
 Duke University (Fuqua) $115,201 65% 89.8% $137,154 13 (Tie)
 MIT (Sloan) $106,602 65% 92.8% $142,936 5
Cornell University (Johnson) $106,200 NA 89.8% $132,316 16
 University of Virginia (Darden) $102,122 66% 93.4% $136,474 10
 University of Michigan (R0ss) $101,107 46% 89.7% $140,497 11 (Tie)
 George Washington University $92,969 43% 85.2% $89,671 58 (Tie)
  University of North Carolina (Kenan-Flagler) $87,533 57% 89% $124,641 18
 UCLA (Anderson) $86,928 45% 88.6% $127,535 15
 Carnegie Mellon University (Tepper) $86,443 55% 88.3% 20

Source: U.S. News & World Report

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Source: U.S. News & World Report