Budgeting For Business School

My name is Nikhil Agarwal. I graduated from Harvard Business School (HBS) in 2020 and have helped thousands of students with more than $500 million in student loans over the last three years through Juno, an organization that negotiates the lowest rates for MBA student loans.

When it comes to attending business school, one of the best ways to minimize your cost is to learn how to budget and manage your money. Read below to understand how to keep your costs in check.

Don’t Blindly Follow the Cost of Attendance Published by the School

In my opinion, schools grossly underestimate the median cost of attendance (COA) at MBA programs.

There are certainly students whose costs match the numbers published by the university. However, the majority of students will spend more on living expenses, especially rent, than the amount published in the school’s COA table.

For example, this is Harvard’s stated cost of attendance. I’ll reference it as we discuss various aspects of rent and living expenses.

Source: https://www.hbs.edu/mba/financial-aid/tuition-assistance/Pages/cost-of-attendance.aspx

How Do You Estimate Rent?

Here are a few common business school experiences and their associated costs. Decide which experience makes sense for you and figure out how much it costs at your school.

The examples below are related to Harvard Business School and the experiences we saw with people we knew. These data points are from 2019-20, but they’re likely still relevant.

Experience 1

My co-founder lived alone and paid about $2,600 a month to rent a one-bedroom apartment in Soldiers Field Park. That amount is significantly higher than the approximately $1,600-per-month estimate from Harvard.

Experience 2

I am married and also rented a one-bedroom apartment in Soldiers Field Park for about $2,600 a month. That amount is much closer to Harvard’s estimate of approximately $2,500 per month for married students.

Experience 3

In his second year, my co-founder moved into a two-bedroom unit. His share of the rent was around $1,600. That amount matches Harvard’s estimate.

Experience 4

We had many friends who stayed in the HBS dorms. Depending on the type of dorm, it can vary. For a “Type 4” dorm, it’s around $1,500 per month per person. There are 5 types total, with Type 1 being the smallest / cheapest and Type 5 the largest.

Experience 5

Some friends lived off-campus, and most of them lived with roommates and paid about $1,600 a month total.

A note on nine months versus 12 months: Harvard’s cost of attendance includes nine months of living expenses. I stayed on campus at Soldiers Field Park (a very popular choice for HBS students), and the only lease option was 12 months.

The downside when you’re an MBA student is that it’s not easy to sublet your apartment if you have a summer internship elsewhere. In my case, I was married, and my spouse was working in Boston. She had to stay in Boston for her job, and I had to get another apartment — and pay rent — for the summer. You should budget for paying for two rents during the summer months.

How Do You Estimate Living Expenses?

Here is where the cost difference can get pretty dramatic. In my opinion, discretionary spending can have a huge impact on your total costs.

Estimating the Cost of Trips

Even though MBA programs are notoriously grueling, there’s also plenty of time to travel. Some students will travel to exotic places every chance they get. Others will stay local.

One way to estimate your expenses is to plan out what you think you’ll do during each school vacation and how much it will cost. You can copy this table and use the right column to fill out how much you will spend for each break. Don’t forget to account for flights, hotels, food, alcohol, and local attractions.

Summer Break (Year 1)
Winter Break (Year 1)
Winter Break (Year 2)
Post-Graduation Trip (Year 2)
Spring Break (Year 1)
Spring Break (Year 2)
Thanksgiving Break (Year 1)
Thanksgiving Break (Year 2)
Long Weekend 1 (Year 1)
Long Weekend 2 (Year 1)
Long Weekend 3 (Year 1)
Long Weekend 4 (Year 1)
Long Weekend 1 (Year 2)
Long Weekend 2 (Year 2)
Long Weekend 3 (Year 2)
Long Weekend 4 (Year 2)

In addition to possible vacations, other opportunities will pop up. For example, I had an academic course that included travel. I participated in some career treks organized by the tech club. Some summer and winter breaks included multiple trips. If your school allows you to create a schedule where every weekend is a long weekend, you may find yourself traveling even more.

Dining Out and Local Attractions

This category is probably the most challenging to estimate. If you are outgoing, it’s safe to assume you’ll continue being that way during business school. Depending on where you lived before business school, you may end up spending more or less money. Use a cost-of-living calculator online to compare your current city to where your school is located.

You should also be prepared for the fact that your habits may or may not change. For example, I wasn’t very outgoing in the couple of years prior to business school, but I went out a ton my first semester. Then I returned to going out less frequently the rest of my time in business school.

Unless you’re very confident about what your lifestyle is going to be, it’s best to overbudget in these categories. You’d rather find yourself spending less than you planned for than the opposite. If that means you borrowed more than you needed, you can return some of the money or borrow less in your second year, when you have a better understanding of your expenses.

We interviewed several MBA students about their budgeting experiences and compiled them in an article, which you can find here. We also conducted a separate survey that asked students how much more than the published cost of attendance they spent. The median result was $15,000 more than the stated cost of attendance.

A note on FOMO: Fear of missing out is very real, especially in the first semester of business school. For example, as someone who had given up clubs for a few years before business school, I found myself going to several of them in my first semester.

From a financial perspective, I strongly encourage students to ensure they have the ability to spend a little more than they estimate for their first semester at least.

Budgeting Spreadsheet

There are many complex budget spreadsheets on Reddit and other websites. We don’t believe you need all that complexity.

I recommend using our simple budgeting worksheet. It helps you think through the various expenses and funding sources and understand how much you need to borrow.

Emergency Fund

Even grad students need an emergency fund. Some students are OK with depleting their entire savings by graduation, but then they get stuck with very expensive lending options if they have an unexpected expense or a delay before starting their job. Try to keep a few months of expenses in an emergency fund.

Value of Cash and Assets

As you figure out how to fund your MBA, it’s worth keeping in mind that cash or assets that can become cash give you a lot of flexibility.

For example, many of my classmates became interested in entrepreneurship through acquisition, which means buying a company right after school. Having cash or assets makes that path much easier to pursue than if you don’t have any cash.

Where Does the Money Come From?

Once you determine your budget, you need to figure out where the money is going to come from. If you are lucky enough to be sponsored, you may still need additional funds because the true cost of attendance is often higher than the published cost of attendance.

Your financial aid options typically include:

Scholarships, grants or company sponsorships
Loans or gifts from family
Student loans (read our guide) – LINK TO ‘A GUIDE TO STUDENT LOANS’
Savings
Stock sales

Most often, student loans are the bulk of the answer. That’s where Juno comes in, making sure you get the most affordable student loans. If you’d like to learn more about us and how we work, feel free to set up a time to speak with a member of our team.

Nikhil Agarwal is a co-founder of Juno. He started Juno in 2018 to negotiate a group discount for student loans and has since successfully grown the business to help students with over $400M of loans. He has an MBA from Harvard and a bachelors in Aerospace Engineering from University of Illinois – Urbana Champaign.