Once you have decided to follow the MBA route, the most important question indisputably is how to finance it. You need to carefully weigh the pros and cons of the different options of picking up the bill. The rule of thumb in this case is there is no rule of thumb. Universal solutions do not work and making the right decision is up to you, solely. This means taking into account your own personal and financial situation, your preferences, and understanding how to benefit the most from your business education.

Business education is not to be taken just as an expense. It represents an investment and, just as any investment, the return on it comes in the longer term. This, of course, does not mean that the rewards from the degree will be postponed unreasonably - quite the contrary. Despite the crisis, the available data still shows that MBA graduates have the highest starting salaries and enjoy an excellent standard of living in comparison to their colleagues with other degrees. It would not be an overstatement to say that if alumni had chosen the right school for their profile, they should have no difficulty repaying their loans. But the MBA goes way beyond that. It can enable you to reap benefits throughout your whole life – again – assuming that the school is the right one for your profile, career goals, abilities, and so on.

Funds and Savings

This is the perfect scenario. You, your spouse, or your relatives have some money in the bank and are willing to finance your education. This leaves you free of the burden of making monthly instalments and paying interest. And if the school is a good one, the investment would probably be more profitable than one involving stock indexes, commodities, futures and real estate.

An MBA does not come cheap. But there is a reason why the crisis did not bring its cost down. At the end of 2014, poetsandquants.com noticed that the price for Stern School of Business MBA and Stanford MBA (for a 2-year period) topped 200,000 USD for the first time. These are the most expensive schools and do not provide a representative example. In Europe and elsewhere, the MBA is a 1-year degree, and is much more affordable generally. But wherever you are located, a good and personally satisfying career requires effort and planning, and quality education comes as the pivotal point in this process.

Loans from Banks and Other Institutions

Afraid to take a loan for an MBA? Of course, you should do your own careful calculations and take into account your specific situation. But avoiding loans at all costs is not a good decision.

And, of course, there are loans and loans, and MBAs and MBAs. Perhaps visiting the neighbourhood loan sharks to finance your education would not be the wisest idea. A better one would be to visit a reputable bank. But make sure you have done your homework first. Pay off some of your loans first, if that is possible, so your credit profile looks more attractive. If you mention to the credit inspector that you have been enrolled for an MBA in a reputable school, this could give you an edge.

Many countries provide special loans for the education of their citizens (see the table at the end). Some of them are interest-free for a certain period of time and others do not even require repayment until you have reached a given salary level. Make sure you have researched all available government-sponsored options. If you are an applicant in the UK, you can take advantage of Professional Career and Development Loans, for example. In the US, government programmes such as Direct Loan and Direct Grad Plus Loan are available. Private entities also provide loans for specific nationalities. Candidates from Germany, Switzerland, and Austria, for example, can turn to companies such as Career Concept AG. The school of your choice might also cooperate with a certain bank or lender to provide more favourable conditions to its students.

International students enrolled in some of the top business schools can take advantage of loans provided by lenders such as Prodigy Finance. Another interesting financing option for them comes from Paras Education Foundation, which provides loans for applicants to schools in over 40 countries.

Scholarships and Grants

There are plenty of awards out there for MBAs. First of all check what your school can offer you. At Harvard Business School, 65% of MBA students receive some form of financial assistance. The school’s fellowships are needs-based, and every second student there receives an average of roughly 32,000 USD yearly from HBS. Awards can also be merit-based. In some schools, candidates are screened for them on admission and no special application is needed. This is the case in Yale where awards such as the Professor David Berg Leadership Scholarship, Shanna and Eric Bass ‘05 MBA Scholarship, and Joseph Wright Alsop (PhB 1898) Memorial Scholarship are available.

European governments, public and private institutions, and NGOs also provide scholarship for their citizens. If you are a German, you may take advantage of the opportunities offered by DAAD, Hanns-Seidel-Stiftung, Friedrich-Naumann-Stiftung, Friedrich- Ebert-Stiftung e.V., Konrad-Adenauer-
Stiftung, and many others. Scholarships and grants are aimed specifically at women and/or minorities. The Forte Foundation is a popular destination for women determined to develop as business leaders. African Americans, Native Americans and Hispanic Americans in the United States, on the other hand, can turn to the Consortium for Graduate Study in Management for an MBA fellowship.

Sponsorship from Employers

Assistance from your employer should not be underestimated. The trend in the Executive MBA sector has been steadily moving towards personal funding. And yet, as much as 42% of Executive MBA students still rely on their employers for a sponsorship, as opposed to 58% who bear the costs themselves. More and more programmes are offering scholarships and fellowships. According to the Executive MBA Council, only one quarter (24%) of EMBA students receive a full sponsorship, most often from employers.

Business owners and managers that value certain employees sometimes cater to them by sharing the cost of EMBA degrees in the school of their employee’s choice. Generally, the admission criteria for EMBA programmes are less strict: GMAT may not be among the requirements, and the average class age is higher. If the career goals of an employee and the business plans of a company overlap, the former could discuss sponsorship for business education with the latter. But this could also easily apply to an “ordinary” MBA, similarly to how it works with EMBAs.

Whatever the most appropriate way of financing your MBA, be careful not to underestimate the unknown. The realisation of your goals depends not only on your ambitions and opportunities but also on external factors outside your control such as the economy and the business environment.
Plans are important, mandatory even, but remaining conservative in expectations can prove to be crucial for a sustainable career and personal development in the long term. Just make sure your calculations are realistic; and enjoy your MBA.