Attending a top-tier business school is—you guessed it—an expensive proposition. Take Harvard Business School: The M.B.A. class of 2013 student budget hovers around $84,000 for tuition, living expenses, travel, and other ancillary costs. Once you tack on the opportunity cost of two years of forgone salary, it's easy to see why, as Poets & Quants points out, six-figure debt is commonplace for most graduating M.B.A.'s.
While freshly-minted and debt-laden M.B.A.'s are out of luck, current business school students and applicants may find some solace in President Obama's recent announcement regarding student loan reform. In a nutshell, the plan will reduce monthly payments to 10 percent of monthly discretionary income for low-income borrowers, and drop interest rates for students who consolidate into the government's direct-loan program. Also, any remaining balance would be waived after 20 years.
But what should you do if the mere thought of carrying vast amounts of debt for decades leaves you reaching for the Maalox?
[See U.S. News's rankings of top business schools.]
Find inspiration in No Debt M.B.A., a blog by a 20-something professional with a seat at one of the top five M.B.A. programs. The blogger and student has a lofty goal of graduating from business school in 2013 with no student loans. Since learning this spring that she got into her dream school—she only applied to one—the author of No Debt M.B.A. has written numerous posts about student loans, maximizing financial aid, how to minimize the expense of applying to business school, and much more.
Many M.B.A.'s shrug off massive student loans as a necessary investment to achieve that hefty return on investment from their post-M.B.A. salaries, but No Debt M.B.A. chafes when people tell her not to worry about graduating debt free, since she'll be rolling in dough once she's back in the work force.
"Student loans are not the investment, your degree is," she writes. "The other important note is that when you leverage debt you are also leveraging risk which reduces the value of your return on investment relative to a safe bet."
Part of her success—she has received a significant grant and will manage to pay for the entire first year in cash—is frugality, as evidenced by her ode to beans post and living with a $25 a week grocery budget. Given the tough economic climate, some schools have also taken steps to prepare M.B.A. students for living in leaner times.
[Check out U.S. News's tips for Paying for Graduate School.]
Ann Richards, associate director of admissions and director of financial aid at Cornell University's Johnson Graduate School of Management, suggests the tried-and-true concept of actually living like a student. This means sharing an apartment, asking family for support, reducing discretionary spending, and skipping that once-in-a-lifetime vacation before starting business school.
When asked to advise incoming students on managing their finances, Richards says preparing is key. Candidates should check their credit reports frequently and fix any problems that appear on their reports, and should put themselves on a budget and start to save for "non-educationally related" expenses like apartment deposits, moving costs, and interview expenses.
"Get your credit in order before you apply to business school," Richards urges.
Ultimately, taking on student loan debt is a personal decision. If an M.B.A. will lead to a career with a salary commensurate with the cost of the debt you are about to incur, the decision may be an easy one. Mark Zupan, dean and professor of economics and public policy at the Simon Graduate School of Business at the University of Rochester, advises incoming students to create a business plan to manage their finances while studying.
[See some high-paying graduate-degree jobs.]
"We're rated number one in ROI among private business schools in the U.S.," Zupan says, "but failing to plan is planning to fail."