Debt levels for graduates appear to be rising – but not for those with MBA degrees. New data reveals that MBA graduates leave business school with less debt than all other Master’s graduates – and even undergraduates.
The analysis, compiled by the New America Foundation with data from the U.S Department of Education, suggests that debt for graduates accounts for some of the most “dramatic increases” in student borrowing.
MBA graduates, on the other hand, fare much better. The average U.S MBA leaves business school with around $40,000 of debt, according to the report.
This new research also reveals that the median debt load of MBAs has remained steady from 2004 to 2012, despite tuition fees increasing.
It will be welcome news for prospective MBA students who are put off by the steadily rising cost of a top business education. Six of the top-ten ranked schools in the United States plan to increase tuition costs, at an average of around 4 per cent, and others are expected to follow suit throughout the year.
And this is just for U.S MBA graduates, where programs are typically two years in length, compared to European schools’ preference for 12-month programs, meaning European MBAs may be even better off.
From 2004 to 2012, the debt load for a typical MBA borrower increased just $627, to $42,000, resulting in a monthly payment of as little as $5, according to the report.
Over the same period, the debt load for a Master of Science graduate shot up more than $15,000 to $50,400, the report says, while Master of Arts graduates’ debt loads rose about $20,000 to $58,539.
The numbers used include loans used to pay for both undergraduate degrees and post-graduate study. Students who graduate with no debt aren’t included in the median debt figures. This is relevant to MBAs because 43 per cent leave business school debt-free, according to the same study.
Most top-ranking MBA programs require several years’ work experience for candidates, many of whom come from lucrative functions like consulting and financial services.
Interest in executive MBA education has also picked up in recent years and many EMBA candidates have their tuition paid for them by employers.
There are also a range of MBA scholarships offered by business schools, which help off-set the cost of tuition. All of the above offer reasons as to why MBAs leave U.S schools with less debt.
While it has been reported that some schools are hiking up their tuition fees, MBA salaries are also increasing, according to research by the Graduate Management Admissions Council.
A GMAC survey released last week shows that In the U.S, the median base salary for senior-level graduates surveyed by GMAC was $122,000. That dwarfs the $101,093 median starting salaries for European graduates GMAC reported last November.
And although U.S education can be the most expensive, its graduates earn an enormous amount more than some parts of the Asia Pacific region. Senior-level Indian graduates, for example, receive just $40,000 per year on average, according to GMAC.
Contrary to this data, applications to some school’s full-time MBA programs haven’t seen much increase in recent years, despite the fact that MBA degrees remain affordable.
However, cost doesn’t seem to be putting off prospective students. MBAs can recoup their tuition fees within a year of graduating and business schools are developing closer ties with businesses, which are becoming increasingly important, agrees Mark Davies, Employer Relations Manager at Imperial College Business School.
“Businesses have been less willing to take a chance on MBA recruits with potential, looking instead for those who have the practical skills and experience they are sure can deliver value from day one.”