The best time to start planning your financing is before you apply to business school. After all, you’re committing to one of the biggest financial investments you’re likely to make at the same time you forego an annual salary. Last month, the FT reported that the average Stanford GSB student expects to spend around $218,000 over two years while giving up roughly $200,000 in earnings. As for other top US programs, tuition and living costs add up to more than $100,000 a year. But the FT also cites that on average, MBAs who study at one of the world’s top schools also double their pre-MBA salary within three years.
If cost is one of your key considerations, the good news is that there’s a vast array of financing options to make it all possible. But before you dive into the details, step back to understand your options and set a strategy. This part of the process is uniquely tied to your profile and circumstances—your personal resources, nationality, chosen program and credit history are all factors that will impact your financing approach. At Fortuna Admissions, we often discuss funding options and advise candidates on their scholarship applications. Having myself headed up INSEAD’s Admissions & Financial Aid office, here’s my guidance to get you started:
Set your savings strategy.
It’s never too early to start saving for your MBA, in fact, you should do so as soon as you decide you are going to apply. While need-based aid exists—HBS touts on its website that 50 percent of its students are eligible for need-based fellowships—the truth is that it can be difficult to obtain financial aid without serious financial hardship. (Having blown your savings on a grand wedding doesn’t count.)
Saving now means getting serious about adjusting your expenditure downwards; this is a good time to cut back on your daily Starbucks. You’re not alone if you’re among the young professionals with a chunky disposable income accustomed to spending what you earn without much thought—especially if you don’t have kids or a mortgage payment. It can be a big shock to be thrust into a student lifestyle again, so it’s better to start the trimming earlier rather than later.
First, get to know all potential costs and project a realistic budget for the length of your program. Beyond the hefty tuition, costs include living expenses, materials and books, study trips and extracurricular activities. Don’t underestimate your budget—it can be difficult and time-consuming to refinance mid-course. You also want to be in a position to make the most of the opportunities you have during business school, such as study trips and career treks as well as travel to interviews.
Next, look at the financial aid resources of your target programs. Most schools have helpful online info, and if you’re admitted you’ll likely receive a framework of options related to public and private loans, scholarships, flexible payment terms and trusted sources of indie financing. Remember, schools that accept you want you to have the money to attend; it is a blow to the admissions office when admits drop out because they can’t finance their MBA.
Target scholarships where you’re a good fit.
Some 48 percent of two-year MBAs received a scholarship, according to data for the FT’s 2017 ranking. While scholarships can be highly competitive, they’re often tailored to specific profiles—from personal attributes to gender, industry or academic distinction and service.
It begins with your MBA application—be aware it poses an opportunity to qualify for a merit scholarship, not just admission to the program. All applicants may be automatically considered for merit-based scholarships, and most schools regularly dole out selective fellowships. At INSEAD, so-called “spot scholarships” go to the very best candidates upon admission, though the bulk of funds are allocated after candidates submit specific scholarship or aid applications. The most selective schools (especially HBS and Stanford GSB) have very deep pockets. While there’s often no separate paperwork to be eligible for merit scholarships, you’ll want to submit your MBA application in earlier rounds before scholarships are allocated.
To be considered for most other need-based financial aid, you’ll need to submit separate applications (take careful note of deadlines). Many outside groups offer funding, from industry associations to clubs, athletic groups and ethnic associations. The funding scene is constantly evolving, so start research early and stay informed. New scholarships are regularly announced: This year NYU Stern launched the Advancing Women in Business Scholarship to reduce gender inequity, which covers the first year of tuition, while Forté fellowships are awarded to outstanding female applicants to an array of MBA programs. INSEAD lately announced its Mexico Excellence Scholarship, fueled by its value for diverse cultural perspectives and belief in “open borders.”
Sometimes there’s an element of reciprocity—the Boustany Foundation, which gives priority to candidates of Lebanese descent for a two-year award to HBS, expects grads to complete an unpaid internship at the foundation upon graduation, while a Stanford GSB fellowship funds candidates committed to generating economic development in the Midwest US for at least two years. NYU Stern’s new Fertitta Veterans Program reduces tuition to a flat fee of $30k/year for former US military members, while veterans at other schools may be eligible for fee waivers and funding through the Yellow Ribbon Program. HBS maintains a well-curated and comprehensive sampling of outside funding opportunities in a variety of categories.
Understand the evolving landscape of loans.
Most education financing is in the form of student loans. But while scholarships don’t tend to have borders, loan eligibility is largely determined by where you live. For US citizens, the lowest interest loans are often offered by the government (whether you’re studying domestically or overseas). To be eligible for US federal and state financial aid, you’ll need to complete the Free Application for Federal Student Aid (FAFSA).
There are also private loans, and some U.S. banks will allow international students to borrow with a creditworthy U.S. citizen cosigner. But alternative options that offer a non-cosigning option continue to grow—from school-based partnerships with credit unions (such as Wharton and Duke Fuqua) to innovative investment models. Prodigy Finance, founded by INSEAD MBA alumni, is one such venture that’s based on a predictive model and takes potential future income into account (not just credit history); Prodigy’s non-cosigner loans have now funneled over $250M to 6,200 students from 118 countries.
Consider creative tactics.
Some enterprising students have turned to Crowdfunding their MBA on platforms such as Indiegogo or GoFundMe, making a viable case to their wider community to invest in their future potential by helping to fund their MBA degree. This DIY fundraising tactic may be appealing to those with particular marketing and social media savvy.
Perhaps more practical: Some countries may allow tuition to be deducted from personal taxes, such as Canada, Germany and France. That said, things in the US are a lot more complex, where any deduction must meet the narrow definitions of the law in terms of improving or enhancing the skills necessary to do your job or is required by your employer. My colleague Matt Symonds offers more specifics in his Forbes column, Is Your MBA Tax-Deductible?
There’s also the prospect of loan forgiveness if you’re pursuing a career in the public or nonprofit sectors. Yale SOM purports its Loan Forgiveness Program to be the oldest and most generous among b-schools, supporting grads pursuing “public interest” jobs around the globe.
Finally, don’t rule out employer sponsorship—some industries, like consulting, favor investment in MBA education. The FT reports that 9 percent of MBA alumni who graduated from a top 100 program in 2010 received some form of employee sponsorship.
At the end of the day, most students integrate multiple sources to fill out their package—some combination of personal savings and loans, and if you’re lucky, a well-placed scholarship. “The value of an MBA, like the cost, is about more than the money,” says my colleague Judith Hodara, former head of Wharton admissions, citing incalculable benefits like a program’s alumni network and front-row access to the latest industry insights. “While it is mission-critical to get practical about costs, the array of financial assistance that exists means that dollars shouldn’t stand in your way.”
by Caroline Diarte Edwards. Caroline is a Director at MBA admissions coaching firm Fortuna Admissions and former Director of MBA Admissions at INSEAD. Fortuna is composed of former Directors and Associate Directors of Admissions at many of the world’s best business schools.