Hello all, it’s me again. I’ve been speaking with a few prospects and a few admitted students, and one thing that has come up a lot is the cost of coming to school. New York is an expensive city, tuition costs a lot, and giving up two years of salary is a big deal. Since the federal government has done away with subsidized student loans for graduate students, the cost of borrowing has increased as well.
These are all true, and all important, so I want to talk a little about how to think about the financial burden of business school, and some ways to mitigate it.
Business School is an Investment
The main reason that business school is such a popular destination for young professionals is not just because it’s an awesome time (see my previous posts), but because it’s an investment with a high return on investment (ROI). Most students see a notable increase in earnings after having graduated relative to their earnings before their MBA. For the Stern class of 2012, the average base salary was $107,875, with an average signing bonus of $32,054 and average guaranteed bonus of $27,773, bringing the mean total to $167,702. As you may have guessed, the average incoming student is making markedly less than that prior to entering school.
One additional important thing to factor into this is that the return is not just a financial one. There are also major non-financial benefits, like the education received, leadership skills developed, and the network built over your time at business school. These may certainly contribute to the financial gains from your first job, but they also bring with them the ability to work across a broad variety of roles and industries, the skills and education needed to advance your career at an accelerated pace, and a strong support network that can help you change companies, industries, or functions down the line. All of these should be factored into your decision of whether or not to come to business school.
It Can Be Made Cheaper
Once you choose to attend business school, there are a few things you can do to help lessen the financial burden on yourself when you arrive.
Many Sternies choose to reduce their loan burdens by taking positions on campus. These could be roles as Teaching Fellows, Graduate Fellows, or other positions, but the basics are generally the same. You work for either a professor, a department, or an administrative body (e.g., Admissions, the Office of Career Development, etc.) and the pay you get goes directly to reducing your loan burden. These jobs are generally not taxed, since you’re not actually getting paid – the school is simply reducing your tuition by the amount you earn. So that’s nice. I’ve taken a few of these roles – specifically, I am a Graduate Ambassador for Admissions, a Career Coach for the Office of Career Development, and a Teaching Fellow for Professor Damodaran’s Corporate Finance course and for Professor Purdy’s Team Communications course.
Other students get positions at companies during the year through internships. A major benefit to studying at Stern is that our location in the heart of Downtown Manhattan provides amazing opportunities to get work experience during their time here, while still taking classes, participating in clubs, and having social lives at school. Getting an internship during the spring or fall semester can not only provide students with a supplemental source of income – it can also help them build their network and work experience in whatever field they are looking to recruit.
Lastly, almost every Stern student spends their summer working in a ten to twelve week internship. These internships span nearly every industry, every MBA-friendly functional role, and the entire globe. A vast majority of these positions are paid, and for a few social enterprise-focused positions that aren’t paid, the school can help with funding through a program called SIIF (Stern Impact Internship Fund). This fund provides a stipend to students working in social enterprise so that they can work in an area they are passionate about, and also afford to eat for the summer.
I hope this helps to ease some concerns about the financial impact of attending business school. When I thought about all of this, it became clear to me that my MBA would be well worth my investment, and since I’ve been here, all of the evidence has verified that. However, it may not be the right choice for everyone. So before you take that big step of investing two years and many dollars into your education, do what you should do before any big investment – due diligence. Read up on ROIs for MBAs going into your target industry, calculate the NPV of your MBA (don’t worry if you don’t know what that is – you don’t have your MBA yet), and figure out what you really want to get from this experience.
You can also check out what Stern has to say about financial aid by clicking here.