Financial Aid

Debt Is Piling Up Faster for Most Graduate Students—but Not MBAs


A degree from one of Bloomberg Businessweek’s top 10 MBA programs will set you back more than $111,000 on average, at least before financial aid. If that kind of price tag causes you to break out in hives, you’re probably not a prospective MBA: New research shows the median debt load of a business school grad remained steady from 2004 to 2012, even as tuition costs increased, indicating that MBAs can generally afford the rising cost of a degree.

MBA grads’ static debt loads make them unique among graduates of advanced degree programs, according to research published on March 25 by the New America Foundation’s Education Policy Program. Median debt loads for graduate school borrowers increased to $57,600 in 2012, from an inflation-adjusted $40,209 in 2004, the study said. Over the same period, the debt load for the typical MBA borrower increased just $627, to $42,000. In contrast, the median debt load for a master of arts graduate rose to $58,539, from $37,965, according to the survey, while the debt load for the typical law student rose to $140,616, up from $88,634.

Let’s be clear about what’s being measured. The New America study used data from the Department of Education to determine the total amount of debt graduates from advanced degree programs are carrying by the time they’ve completed their studies. Therefore, the numbers above include loans used to pay for undergraduate degrees if those loans were not paid off by the time a student has wrapped up graduate studies. Moreover, students who graduate with no debt aren’t included in the median debt figures. (For those wondering: Fifty-seven percent of MBAs graduated with student debt in 2012, according to the study, up from 54 percent in 2004—the lowest percentage of any of the degree programs the study examined.)

The New America Foundation appears to have conducted the research with the motive of persuading policymakers and others to distinguish between undergraduate degrees, which the study calls “a must for anyone who wants to secure a middle-class income,” and graduate degrees, which usually aren’t “the foundation for economic opportunity.”

To that end, the study doesn’t offer any theories as to why MBA debt loads have remained stable. One likely reason is that many MBAs enroll in business school after having spent several years in the professional workforce, often in such lucrative fields as finance or management consulting. Some MBAs also get assistance with tuition from their employers, though company sponsorship of employee education is said to be waning. The upshot is that many MBAs seem to have saved enough to partially offset the cost of their education. That’s probably less true of people studying to be lawyers, doctors, or college professors.

From 2007 to 2012, the average cost of MBA tuition increased by more than a third, as my colleague Erin Zlomek reported last week. At the same time, the average starting salary for a newly minted MBA has held steady at about $93,000 since 2008. If MBAs are paying for their degrees with money saved from their early professional careers, that would help explain why rising prices haven’t dampened demand for the degree.

Nunzio Quacquarelli, owner of QS Quacquarelli Symonds, a London company that studies MBA programs, told Zlomek that higher costs don’t phase prospective MBAs: “They’re not going to bat an eye at $64,000, vs. $58,000 a year, when it comes to the value of their education and potentially benefiting their career.”

Clark is a reporter for Bloomberg Businessweek covering small business and entrepreneurship.

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