One of the main selling points of completing an MBA is the potential to increase your earning potential by over 100%, but there’s no doubt that the initial outlay can be expensive.
Tuition fees for a full-time MBA at a top business school range from £35-60k, but there’s also living expenses to factor in. London Business School (LBS) tells us that students should expect to spend a minimum of £20k a year on books and living expenses. Add this to its tuition fees of £57,500 and the cost of completing a two-year MBA at LBS comes in at close to £100k.
The first thing to point out is that the business schools we spoke to recommended that you save at least 20% of the tuition fees before even exploring other funding opportunities. Assuming you’ve done this, what other options are available?
1. As bank loans disappear, look to more innovative options
Funding options for MBAs have been impacted by banks’ unwillingness to loosen the purse strings. Dedicated MBA loan programmes run by the likes HSBC, Barclays and NatWest have all dried up recently.
“Bank loans have been disappearing for MBA funding, and it’s increasingly difficult for students to rely on this to cover their fees,” says Steve Cousins, MBA recruitment and admissions officer at Cass Business School.
In the UK, there’s still the option of a Career Development Loan – run by Barclays, The Co-operative Bank and The Royal Bank of Scotland at an APR of 5-6% - but these offer a maximum of £10k.
In the US, schools such as Chicago Booth, Kellogg School of Management, New York Stern and the University of Rochester have signed up to a programme run by GMAC and Deutsche Bank to allow international students to secure loans without the need for a US co-signer (ie, someone to pick up the bill if you fail to pay it back). This is known as the Affiliated Loan Program (ALPs).
A more innovative option is Prodigy Finance, a community-based loan programme set up by three INSEAD alumni in 2007 to help provide funding for prospective MBAs in European business schools. It’s raised around $25m from ex-alumni, who invest money on the assumption that an MBA student will provide a beneficial rate of return. You’re assessed on a “predictive risk assessment”, namely what they think you can earn in the future, and the interest rate and payment schedule are based on this.
So far, the Cranfield School of Management, INSEAD, LBS, Manchester Business School, Oxford University’s Saïd Business School and Vlerick Leuven Gent Management School in Belgium have all signed up.
2. Delve deep into the scholarships on offer, and find what that suits your circumstances
There’s a vast array of scholarships available to MBA students, ranging from a few thousand pounds to full-funding. Some are open to all, others are targeted at particular nationalities, ethnicities, religions, gender or academic or industry interests.
In the financial sector, Bank of America Merrill Lynch, offers a single award of £20k for an LBS MBA with an interest in the investment banking industry; Deutsche Bank has a Women’s scholarship programme for 4 successful applicants and Goldman Sachs runs a scheme with INSEAD targeted at African nationals.
“You’re not obliged to take a role at the bank offering a scholarship upon graduation, but you will be invited to networking events, be required to undertake an internship and serve as an ambassador for the bank at career events,” says Oliver Ashby, senior manager, recruitment and admissions at LBS. “In some cases, students are also guaranteed a first round interview upon graduation.”
Securing a scholarship is no easy task; most are merit-based and candidates need to demonstrate exceptional academic prowess and professional achievements. “You need a good GMAT score, but the bigger element is work experience – not the length of service, but what you have achieved, whether that’s managing people or projects,” says Cousins. “You also need to clearly demonstrate your motivations for taking an MBA, and your interest in particular industries. Only exceptional candidates are considered.”
There are other criterion, however. For a start, some bursaries are available to those who can demonstrate evidence of financial hardship – in the UK, this at least means earning under £30k a year. Other factors like your partner’s earnings and number of dependents are considered.
Most countries will also have scholarships available to those seeking to study an MBA abroad. In the UK, though, the majority of local business schools want to attract more British candidates.
“Most business schools are struggling to attract British candidates – 90% of our MBA students are from overseas, for example, and increasingly there are more awards to reflect this,” says Ashby. “There’s a £20k award for ex-military forces personnel who want to work in the City, which is just one example. However, more alumni and donors are making awards available for British citizens.”
As well as the scholarships listed on their websites, business schools also receive one-off donations from individuals or corporations that often slip under the radar. It’s worth enquiring about these.
3. A lack of a formal sponsorship programme doesn’t mean money isn’t available
It’s more common for large consulting or private equity firms to sponsor their employees to undertake an MBA than it is for investment banks. The majority of bulge bracket banks used to offer a formal programme, but most have been discontinued in line with the current round of belt tightening.
“Most banks have reassessed their sponsorship programmes – some have closed them, whereas others have reassessed their criteria,” says Cousins. “Tie-ins are longer – typically three years – and awards can be linked to a specific internal project strategy, rather than general career progression.”
However, even if a formal sponsorship scheme isn’t available, it’s still possible to convince your employer to invest. Often, universities will help you put together a business case – specifying the business need, how the skills acquired will help the company and what the return on investment is.
“It’s increasingly on the shoulders of individuals to petition their management on the benefits of an MBA and secure sponsorship this way,” says Ashby. “If you’re a high-performer, most managers will do anything in their power to retain you, and it’s important to exploit this. We offer guidance on how to convince your employer.”
4. Get a mentor
Often, the best advice on funding your MBA can come from someone who’s been through the process themselves. A lot of business schools will put forward alumni to interview and assess potential MBA students. This isn’t necessarily a one-way street – often they take a ‘mentor’ role, offering CV and application advice as well as career planning tips. Funding is another common topic of discussion.
“It’s important that candidates explore every option available to them and alumni or current students can offer first hand advice to prospective candidates,” says Cousins.
5. Take the entrepreneurial route
You could always sell your car, re-mortgage your house or look to sell that family heirloom in order to fund your MBA, but it’s not really something business schools advise. Instead, a more common strategy is for students to try and secure money from outside investors.
More candidates are turning websites like Crowdfunder – where you can pitch an idea to potential investors or philanthropists to stump up the cash – in order to get some much-needed funding for their MBA.
People on the website are pitching for anything from a C3PO costume for a children’s charity to a novel about a whistle-blowing investment banker. You’ll have to be innovative to stand out.
“Often students have to offer something in return,” says Ashby. “Some are random donors, other private equity-style investors. In one case, a student needed £20k and offered 10% of their earnings for ten years post-graduation to the person who offered the money. In most cases, though, it’s been more conventional donations.”