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Budgeting for the MBA, can I justify the cost?

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Budgeting for the MBA, can I justify the cost? [#permalink] New post 21 Mar 2012, 14:32
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Hi there guys,

I was wondering if I could get a bit of advice?

I'm an international student and had been thinking about an MBA for the last couple of years. I'd narrowed my search down to two highly ranked schools, and much to my delight was accepted on to one program (top 15) and dinged at the other (top 5). After being accepted the financial implications are now beginning to hit home and I must admit, I'm beginning to have second thoughts..

While I'm still waiting on a couple of decisions on scholarships, I've not been awarded anything thus far and am facing the prospect of fully self-funding. I've done my budgeting calculations and the whole cost of the MBA including tuition, insurance, accommodation, living costs and budgeting for tuition fee rises is a rather staggering $250k. Sure, there may be opportunities to earn money during internships and other opportunities but I have been advised not to take this as a given..

I've worked for a governmental organisation for all of my working life so my earnings have not been spectacular, but for the first time in my life I've managed to clear my old student debts and have some good savings in the bank mainly thanks to a recent remortgage. Even using up all of my saved funds, I'm facing having to borrow an extra $100k.

Historically I've been quite open minded about taking on debt for the right reasons, but my no-consigner options are at 8% (based on the 4.5% + prime which I understand is at historically low levels, thus likely to rise) with a up front 3% "admin fee". 100k of that kind of loan really makes me cringe, especially as I'm interested in pursuing an entrepreneurial track after graduation and don't want to be weighed down or forced in to a job I don't really want to do, just for the money.

It's all rather sobering as I think the MBA is a great opportunity for me and I was really stoked to get in to the school of my choice, but I'm now wondering whether I can justify the cost and whether I should have given myself more options (perhaps cheaper courses, applied to more schools for more chances of scholarships etc).

Does anyone have any views/opinions/advice on my situation? I also read a lot about the potential to negotiate with your school but these are mainly aimed at people who have scholarship offers from other schools... in my case, having applied to only two schools, I don't have any better offers to bargain with, only the possibility of not being able to attend due to financial reasons. Has anyone had an luck getting positive results with schools in this kind of situation?

Any advice would be very gratefully appreciated!

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Re: Budgeting for the MBA, can I justify the cost? [#permalink] New post 22 Mar 2012, 09:19
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I am not sure if my post got lost or .... I swear I replied :)
There are a number of discussions on the forum that address the Entrepreneur issue. You can do a quick search and find the debates - you are definitely asking the right question.

In general it is not advisable to take on debt and spend 2 years of opportunity cost to do an MBA if all you want to do is start a business. I know a number of schools have incubators (Booth, and others) that help startups but you have to ask the question - is it going to help you enough or is it going to set you back 2 years? For some it is - again Booth has quite a few graduates going into starting a business relying on the network and also on the faculty at the school. Many have Business Plan competitions and such to encourage a startup environment.

Many people such as Jeff Bezos and Bill Gates (Steve Balmer dropped out of HBS) did not get their MBA. I do not think you need an MBA to do it but it seems to give more confidence to a few, at which point it often becomes a point between succeeding and failing and is worth it.

P.S. I have not encountered more than 1 person (she is a housewife) who thought the MBA was a waste of money.

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Re: Budgeting for the MBA, can I justify the cost? [#permalink] New post 07 Apr 2012, 03:05
I hear you.
The MBA is a long-term investment in your future and much easier to justify when you view it as such.
So whats your MBA + 5 year out plan? And, if your background has always included government service (as has mine until my now) how confident are you that you can start and run a successful business. Do you have an idea? Can you line up funding? Why would a company invest in you? If I can recommend a book, I will recommend The Intelligent Entrepreneur.
If you just like the general idea of entrepreneurship, an MBA is easier to justify to give you an understanding of business issues, network, better ability to raise capital, and the student loans will force you to work at an established firm afterward to see how the business world works. And to see if you really have the stomach for entrepreneurship (I don't mean this negatively, I wonder the same thing myself).
If you have a new widget you want to get to the market within 18 months, and you know the industry, can model the cash flows, then its more of a reasonable way.

Ok, cheaper ways to do it. I'm cringing at the interest rates on the loans too.
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Re: Budgeting for the MBA, can I justify the cost? [#permalink] New post 08 Apr 2012, 03:53
Hi guys,

Thanks for your replies, very helpful! It really is a toughie!

For the first time in my life I am in a strong financial position having managed to clear undergrad student loans, credit cards, etc, and have a good amount of savings and property equity in the bank. To then spend my entire life savings and take on a large amount of debt at unfavourable terms is a really difficult decision to make. To add to the pain, it seems tuition fees are being ramped up quite significantly over the next two years..

I have been a small time entrepreneur throughout my life and have a project I am currently working on which is still early stage but has shown promise on a bigger scale. I've always wanted to take things to the next level and found that while I have some really strong business skills there are plenty of areas where I am lacking. I figured b-school would help me fill in the cracks and build a network, and allow me to continue to develop my idea and perhaps even get some people on-board and launch it out of b-school.

I've spoken with a lot of people and most are astounded at the thought of taking on that much debt. Of course most of those people are not of the b-school mindset. If only I'd won the mega millions!!

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Re: Budgeting for the MBA, can I justify the cost? [#permalink] New post 09 Apr 2012, 12:42
I'm also in the same boat about justifying the cost, especially with a wife and a load of education debt from law school as well. Everyone I've talk to though, has been very pro-business school which helps, but then again, haven't really met many lawyers planning on going back to get an MBA lol.
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Re: Budgeting for the MBA, can I justify the cost? [#permalink] New post 23 Sep 2012, 22:43
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How about if someone did not have entrepreneurial plans, would it make sense to take on 100k @ 8% for an MBA...hmmm...maybe I guess. Depends on a lot of things. Would like to hear from ppl who have made such a decision.
Re: Budgeting for the MBA, can I justify the cost?   [#permalink] 23 Sep 2012, 22:43
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