MBA & Business Education Guide 2005: Funding your studies

MBAs don't come cheap, especially if you are an executive with a mortgage and family. Financing a business education requires serious planning, but there are ways of realising your dream.

Last Updated: 31 Aug 2010

Take out a personal loan. Remortgage your house. Apply for a scholarship.

Blow your savings. Whichever way you decide to pay for your course, MBAs don't come cheap. Tuition fees alone will set you back anything from £12,000 to £40,000-plus, depending on which business school you attend. On top of that, there are living expenses, which will be particularly steep if you study in London or the south-east of England, and even higher in certain parts of Europe. Add to this expenditure on travel, course materials and, for full-time programmes, the 'opportunity cost' of being out of a job, and you're looking at a hefty bill.

Take 34-year-old Stephanie France, for example, who is due to complete her full-time MBA at Bradford School of Management this year. She has already forked out £16,950 for tuition fees, but estimates that the total price tag will be closer to £55,000, once she's taken into account living costs, books, stationery and, crucially, the loss of earnings from her previous job as a design and project sales manager.

'We've gone from a two-income family to a one-income family - and it's taking the strain,' says France, a mother of one who is financing the course through personal savings and remortgaging the family home (see case study). 'However, I consider my MBA to be a real investment. I expect to recoup the costs within three years, so it's worth every penny.'

Financing your business education clearly requires some serious budgeting and planning. Most business schools will encourage you to tighten your purse-strings, adjust your spending patterns and minimise debt well in advance of arriving on campus, so that you can increase your borrowing capacity if required.

'Being clear about the costs is vital in preparing for an MBA,' says John Glen, director of Cranfield School of Management's MBA programme.

'Be aware of the bottom line.'

Most students on full-time MBA courses fund their studies themselves, sometimes with savings or redundancy payments, and sometimes with help from parents or a supportive spouse. If you're a homeowner, you may consider releasing equity in your house and thus paying for your MBA over the term of your mortgage.

If you need a loan to bridge any funding gap, there is a dazzling array of payment schemes to chose from; you just need to know where to look.

Start by contacting your admission's office. Most business schools run loan schemes in partnership with local banks, offering low-interest deals and the option of delaying repayment until your course is complete.

Henley Management College, for instance, has linked up with HSBC to help students cover the cost of tuition fees and up to £5,000 of living expenses a year; IESE in Barcelona runs a loan scheme through Banco Sabadell; the Wharton School in Philadelphia runs a scheme through Citi- bank, and so on.

Next, check out the student loan programme at the Association of MBAs (AMBA), which it operates on behalf of NatWest Bank. To be eligible, you must have been offered a place at an accredited school, be a permanent UK resident and have the right amount of work experience (two years for graduates and at least five years for non-graduates). If you plan to study full-time, you can borrow up to two-thirds of your pre-course salary plus tuition fees; part-time students can get tuition fees, study equipment and course expenses; distance-learning students in full-time employment can borrow up to £10,000.

You should also look into the government-sponsored Career Development Loan (CDL), which is available to all EU nationals and allows you to borrow up to £8,000. CDLs are available via four banks: Clydesdale Bank, Barclays Bank, the Royal Bank of Scotland and the Co-operative Bank.

A company sponsorship is the dream option: you do an MBA, someone else pays for it and you are guaranteed a job at the end of it. According to research from AMBA, 50% of graduates have all their course fees paid by their employer, and a further 17% receive financial assistance from their employer for part of their fees.

A growing number of companies, including Vodafone, Deutsche Bank, British Telecom, IBM and heavyweight consultancy firms such as Boston Consulting Group, actively encourage their top-performing recruits to enrol on MBA courses after a few years in the job. This usually takes the form of evening classes, block studies or distance learning. That way, students are putting into practice what they learn as they study.

Yet taking the corporate route is not always as straightforward as it seems. First, there's the enormous pressure of combining a job with study.

After a long and stressful day in the office, do you really want to come home and start writing an essay on corporate social responsibility? Make sure you find out exactly how much study time your employer will give you before you sign up to a company-sponsored MBA.

Second, if your employer is willing to fund your course, it may stipulate that you have to work there for a number of years after you complete your programme. All contracts will have an exit clause, but if you wish to pull out, you will usually be asked to repay the company the amount they have invested in you, and some will even add a surcharge for administration costs.

Are you willing to be tied to your company for two or three years after your MBA? What if you find yourself going back to a similar role, rather than the career step-change you were looking forward to? Always consider whether tuition reimbursement by your employer will outweigh any limitations on career mobility.

A sprinkling of grants and scholarships are available to MBA students.

These vary from school to school and range from a few thousand pounds to full fees, so competition for them is fierce. Scholarships are usually directed at high-flying individuals and applicants from specific groups that the school wishes to attract on to its programme. London Business School, for example, has funds aimed directly at women, including the Forte Foundation Scholarship and The Celia Atkin Avent Scholarship. 'We're keen to address the ridiculous imbalance of females in executive education,' explains Julia Tyler, director of the school's MBA programme.

Cranfield School of Management, meanwhile, has scholarships available to candidates from particular sectors, ranging from the voluntary and criminal justice sectors to the agricultural and airline industries.

Applying for a scholarship tends to be pretty straightforward, often requiring you to write a short essay outlining your skill set. Occasionally, qualifying students will be invited to attend a panel interview. For other awards, you will be automatically considered on completion of your original application form.

For a list of postgraduate grants and European funding sources, flick through The Grants Register: The complete guide to postgraduate funding worldwide, published by Palgrave Macmillan, which contains details of more than 3,500 awards. A copy should be available in the reference section of your public library, or you can buy it online from Amazon for £165.

When weighing up the costs of doing an MBA course, most students will have two crucial questions in mind: 'Is all this expense, and in many cases debt, really worth it?' and 'Will I recoup the costs?'

Judging by the results of AMBA's 2005 Career Survey, the answer to both questions is a resounding 'yes'. MBA graduates experience an average 18% jump in their salary after graduation, and a whopping 53% leap in their pay cheques three to five years after graduation. Last year, the average MBA graduate earned £66,500 in base salary, plus £19,200 in variable cash earnings, such as performance-linked bonuses.

'There's a tremendous debate, particularly within academic circles, as to whether the MBA still holds as much value in today's climate,' says Arthur Francis, dean of University of Bradford School of Management.

'I would say only this: employers aren't daft. If they are paying our MBA graduates these high salaries, then they must rate the product.'

Of course, there's more to an MBA than the promise of a fat pay cheque at the end of it. Many students do an MBA because it opens up new job opportunities and allows them to switch industries. Nearly a quarter of graduates use their degree skills to set up their own business, according to AMBA's report, and 41% of graduates employed in the public sector see their MBA as a doorway to the private sector.

Then there are the 'soft' benefits: presentation skills, confidence, an international network and an insight into what business and management is all about - and those are the very things you can't put a price on.


Ask Stephanie France about the pressures of studying for an MBA and she won't sugar the answer. 'It's like having a part-time job on top of a full-time job. It's tough and it's continuous. I study until 10pm every night in the week, and for four hours on a Saturday and four hours on a Sunday.' Add to that the responsibility of looking after her 12-year-old son Adam, and it starts to sound rather exhausting. 'I have to plan absolutely everything. If I need to take my son somewhere, I'll bring one of my textbooks along and read it in the car while I'm waiting for him.'

So why do it? Why give up a well-paid job as a design and project sales manager to do an MBA? 'I had been working in the same sector for 14 years,' she explains.

'I sat back one day, took a bit of a reality check and thought: what do I really want to be doing in 10 years' time? I decided that I wanted career progression. I wanted to change industry. I wanted to be on the board of a large organisation.'

But in order to make those strides, 34-year-old France realised that she needed to add something extra to her CV. As a mature student with a family, she started to investigate business schools in her local area.

'I was looking for an MBA that would raise my profile and maximise my learning. I consulted the rankings lists, looked at accreditation and spoke to alumni to see what the MBA could offer me, other than just study.

Bradford School of Management has a great reputation in the north, so I knew it would add extra clout to my CV.'

France says the course has deepened her knowledge of the corporate world - but she has seen some of her classmates struggle. 'I did a national course in business and finance back in 2001, so I have a slight advantage over some of my fellow students who haven't been in a classroom for years.'

Due to complete her MBA this year, France has already had three interviews for commercial management roles within publicly listed organisations.

'The response I've had from employers so far is very encouraging. I am convinced that by the time I finish the course, I will have found the right job for me.'

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