A Master of Business Administration (or MBA) is a flexible degree that allows for a potentially lucrative career in a number of business-specific areas. The perks of this degree — which can be many — don’t come without its drawbacks, however, with the main one being average MBA student loan debt — a hefty $66,300 balance. There is a lot to consider before going the MBA route, but most people who do so are able to keep their eye on the end goal: an increase in their annual earnings by at least 90%. So — how exactly do student loans factor into an MBA degree? Here’s what you need to know.
What is the average MBA student loan debt?
Nearly half of 2018 MBA graduates from top schools around the world borrowed at least $100,000 to finance their degree. For most, however, the sticker shock of taking out that much money for an education isn’t much of a factor in the decision. According to the “How America Pays for Graduate School” study by Sallie Mae — in which 22% of the respondents were studying for an MBA — two-thirds saw a graduate degree as a new minimum standard for professional careers, and only 12% actually picked their school based on cost (quality or convenience was far more important, with 86% of respondents choosing their school based on those factors).
What is the starting salary for MBAs?
Many MBA graduates don’t worry about how much they borrowed for their education because they expect to start earning a comfortable salary upon graduation. The median starting salary for business school graduates in the U.S was $110,000 in 2017, according to an annual survey by the Graduate Management Admissions Council. What’s more, according to a recent survey, at the 26 schools where at least 20% of survey respondents reported borrowing six-figure sums for their MBAs, the median starting pay ranged from $80,000 to $140,000. Since the average starting salary for 2019 graduates with bachelor’s degrees alone was $50,944, one could see how an MBA can be enticing, student loans and all.
Still, increasing costs at prestigious schools that offer MBAs may be making an impact on the industry as a whole. For the second consecutive year, even the highest-ranked business schools in the U.S. reported significant declines in MBA applications in the 2018-2019 year.
How to make the most of your MBA
With the heavy level of debt you could incur for an MBA, it’s important to make the most out of your degree in order to make the costs worth it. How much money you make after graduating is heavily influenced by a number of factors like years of experience, career field (whether you head into the government, nonprofit or the private sector, for example) and location, among other things. With an MBA in hand, considering the following questions can help you determine how make the most profit with your degree.
- What field of work do you plan to pursue? Your salary could be greatly influenced by which career you pick. Graduates who move on to venture capital firms and private equity companies could stand to make enough to cover their debt and then some, while someone working at a nonprofit, in education or for the government might not make quite as much. If it’s your dream to work at a nonprofit or for the government, then salary shouldn’t stop you — just realize that it will likely take you longer to pay down your debt while doing so.
- How will cost of living factor into your decision? Getting an MBA at a prestigious school comes with more than just the price tag of attending the school. If you’ll need to move to a new area to make the best use of your new degree, it’s important to factor in cost of living changes, as well. For example, some of the best states for MBA graduates include Illinois (where Chicago could be expensive, but other cities like Springfield and Rockford could be cheaper), District of Columbia and New Jersey. Before settling on a job offer in a new market, make sure you take salary, cost of living and debt repayment plans all into consideration.
Moving ahead MBA student loan debt
Statistics show that obtaining an MBA can open the door to a number of lucrative and fulfilling career opportunities, but it’s worth considering the debt that comes with this type of degree as well. If you considered all the statistics, weighed all the factors and went ahead with your MBA, you are likely juggling a significant student loan burden right now. There are a number of options when it comes to financing your MBA education, and while you hopefully found the right initial match, that doesn’t mean there isn’t more that can be done to help make the repayment process easier and, potentially, cheaper. Once you’ve obtained your degree and are a few years into your career, you can always look into refinancing your MBA student loans, which often carries both short- and long-term benefits and could save you significant money over the long run if you’re eligible for a lower interest rate and can bring down your overall monthly payments.1
Learn more about mitigating your MBA student debt through student loan refinancing today.