Tuck MBAs Now Rack Up Most Student Debt

Leading business schools have been pouring tens of millions of dollars into scholarships to offset the increasing costs of their MBA degrees. But a new analysis shows that an increasing number of graduates are walking off campus with six-figure student debt.

MBA grads from 15 different business schools now claim that they owe $100,000 or more at commencement, according to new Bloomberg Businessweek data. The highest average debt—$123,000—was accumulated by graduating MBAs at Dartmouth College’s Tuck School of Business, which has lagged rivals in doling out scholarship support in recent years.

MBAs at many other schools, however, are not far behind. At the University of Pennsylvania’s Wharton School, graduates responding to Businessweek’s student survey said they racked up average debt of $122,000. Not surprisingly, Wharton also has fallen behind peer schools on scholarship support of its MBA students.

At a recent town hall meeting on campus on Oct. 17, Dean Geoffrey Garrett acknowleded the challenge. “The financial aid for MBAs is one of the highest priorities for me now because I know we’re behind most of our peers in financial aid, and we don’t want to be in a place where we say to you that we cost $20K more than our peers,” said Garrett, according to The Wharton Journal, the student newspaper for the business school.

‘WE WANT YOU TO MAKE CHOICES BASED ON WHAT’S BEST FOR YOU, NOT WHAT’S MOST AFFORDABLE’

“We want you to make choices based on what’s best for you, and not what’s most affordable for you,” adds Garrett. “But that’s an enormous undertaking for our MBAs because the mindset of our donors is ‘why should we aid MBAs when they come from big jobs and go to big jobs after they graduate?’ So I’m persuading them that we should consider the incredible opportunity costs that you’re all paying to be here. That’s the reality and it won’t go away.”

That is also the reality at several other leading MBA programs. At Columbia Business School, Northwestern University’s Kellogg School of Management, and the University of Virginia’s Darden School of Business, the average debt hit $120,000 (see table below for both average debt levels and pre-MBA pay).

Six-figure MBA debt has become a fact of life at schools that range from the University of Michigan’s Ross School of Business, where the average is $100,000, to Yale University’s School of Management, where the average is now $118,000.

DEBT BURDENS EXCEED PREVIOUS ESTIMATES OF MBA STUDENT BORROWING

The debt levels far exceed previous estimates of student loans for MBAs. Earlier this year, a Poets&Quants survey of debt burdens found only one school—Wharton—at or above $120K. The number for Wharton was $122,370, roughly the same as the average disclosed in the Businessweek study. In fact, many schools now decline to share the debt figures for their graduates. MBA programs that no longer disclose the data and whose students are well into six-figure holes include Tuck, Kellogg and Georgetown’s McDonough School of Business. Because Businessweek surveys graduating MBAs for its annual ranking, however, it asks MBAs how much money they have borrowed. The magazine said it recorded 9,332 survey responses from graduates.

The size of the debt is surprising on several levels. Even though Harvard Business School is providing its MBAs with $36 million in scholarship aid a year, HBS graduates say their average debt is $100,000. The soaring debt is also a surprise because many incoming MBA students are leaving jobs that pay them remarkably handsome salaries. At Harvard, Stanford, Wharton and Columbia, graduates told Businessweek that their pre-MBA pay averaged $80,000 a year. At MIT Sloan, Kellogg, Chicago Booth, and UC-Berkeley’s Haas School the pre-MBA average is $75,000 a year.

While the debt numbers are certainly high, not all MBA graduates go into debt to get their degrees. At Wharton, for example, the school estimates that about 45% of its grads leave school with student debt. And Businessweek said the overall average for the graduates it surveyed this year was $53,000, less than half the top amount at Tuck.