MBA-related costs comprise the tuition and fees, travel and living expenses, health insurance, books, networking and social activities. The MBA tuition fees range from 10,000 to 100,000 Euro and the additional costs can double your overall investment.
Needless to say, few MBA-bound professionals can afford to finance the full cost of MBA studies from their own funds alone. However, some personal funding is always needed.
Sources of personal funding for MBA
Personal funding can come from several sources: your own savings, earnings during your MBA studies (only for part-time, distance or modular/executive MBAs) or support provided by your family (parents, siblings or spouse/partner). Overall, 42% of prospective MBA applicants plan to finance their MBA from personal sources, according to the 2014 Prospective Students Survey conducted by the Graduate Management Admission Council (GMAC).
This survey reports a 3% increase in the percentage of MBA prospects who plan to commit personal funds to their studies. Savings and earnings are the predominant sources of personal funding. The number of GMAC survey respondents who said they will rely on parental support is half that of students planning to invest their own savings and earnings.
Although Natalia, MBA’13, had a scholarship and a grant for her MBA in Italy, she had to commit personal funding as well because her grant was to be disbursed upon successful completion of the programme. Watch video interview here:
Why personal funds are a good option
Personal funding (42%) appears to be the major source of MBA funding, according to the GMAC survey, followed by loans (18%) and scholarships and grants (18%) and employer support (14%). One of the reasons for this is that using savings does not incur debts for students or their families. Scholarships are also a great source of ‘free funding’ but they are highly competitive. Employer support is both competitive and binding. Finally, MBA applicants usually have several years of full-time work experience at the time of their MBA application which makes it possible for them to accumulate savings.
I started saving immediately after my undergraduate degree and by the time I started my MBA 4 years later, I had some savings,
shares Phillipa who graduated from an MBA programme in San Francisco in 2013. Watch video interview here:
This is not the case with Master’s applicants, the majority of whom are fresh university graduates and rely primarily on parental support.
How to invest your personal funds
It is essential to be realistic about your budget. Calculate the amount you will have at your disposal three months before the start of your MBA programme, because a confirmation deposit and first semester fees should be paid in advance.
Identify MBA programmes where the overall cost (tuition and all other related expenses) fits your budget. You can afford a more expensive programme if it provides scholarships which you are eligible for. Although scholarships are competitive, they will save you money and will also bring you prestige. So it is usually worth the effort to apply.
Check what types of expenses scholarships cover and keep your savings to cover the rest of the cost. For example, living and travel expenses can seldom be covered by a scholarship or a grant. That is why they are a typical budget item on which you will need to spend your own money.
Learn more about the different sources of funding for your MBA studies in the other articles of the Debate of the Month: