Student debt

Despite Significant Debt for Graduates of Elite Business Schools, the Return on Investment for an MBA is High

Earlier this month, the Wall Street Journal reported that MBA graduates from the classes of 2016 and 2017 had an aggregate federal student loan burden of $3.7 billion, an average of $39,900 per student, according to data from the United States Department of Education. Graduates of elite MBA programs held even more significant debt on average. Northwestern’s Kellogg graduates averaged $116,420 and NYU’s Stern graduates averaged $105,931; similarly, alumni of Yale University’s School of Management, Chicago Booth, and UVA Darden all had average debt between $85,000 and $100,000. Notably, these data points only include federal loans and not money obtained from the private loan market, suggesting that the estimates do not represent the full debt load.

A Bloomberg Businessweek Survey on MBA debt was also released earlier this summer with similar findings. The survey, which included the responses of more than 10,000 2018 MBA graduates globally, found that close to 50 percent of students at top business schools had borrowed at least $100,000 to fund their MBA. Among the top U.S. programs, a minimum of 40 percent of the MBA graduates at Duke, Dartmouth, University of Michigan, Cornell, and University of Chicago said that they had taken on at least $100,000 in debt. The percentage was lower at MIT, University of Pennsylvania, NYU, and Northwestern, at around one-third of graduates.

The same Wall Street Journal article notes that “The cost of a traditional two-year MBA has more than doubled since the global financial crisis sent droves of college graduates back-to-school starting in 2008, to an average of $30,100 a year in 2016, according to the latest figures available from the Education Department.” Currently, however, according to the U.S. News and World Report, the tuition for the top 15 ranked two-year full-time MBA programs in 2019 exceeds $50,000, with some priced higher than $70,000.

Even if this summer’s announcement that Harvard Business School and the University of Chicago Booth will freeze tuition for the upcoming school year portends a broader slow-down in tuition hikes, the cost of an MBA will remain significant. Despite the high cost, however, the MBA has still been shown to have a strong return on investment. Last year, QS Quacquarelli Symonds, a data and research company specializing in education, released findings from its Return on Investment Report for the full-time MBA, which include:

  • The average global ten-year ROI of an MBA is $390,751, which accounts for tuition, cost of living, and foregone wages. The highest ROI is found at Stanford at $1,023,150, the only school to enter seven-digits.

  • The average global payback time is 51 months. Europe offers the quickest return at 39 months versus 55 in North America, which is likely due to shorter program lengths.

  • The U.S. is home to 19 of the top 20 schools for highest post-MBA salary. The global average is $79,829 ($89,037 in North America) and Stanford is at number one with an average of $140,600.

  • North America also has the highest average salary increase at 74 percent.

While the prospect of taking on large debt as an investment in an MBA shouldn’t necessarily deter prospective students, the means for financing the degree should be considered as thoughtfully as the school selection.

Top Medical Schools Take on Student Debt in Bid to Increase Diversity and Encourage Broader Specialty Selection

Recently, Washington University in St. Louis announced that it was going to commit $100 million over the next ten years for scholarships for medical students and to “enhance and modernize the school’s medical education program.” Up to half of the program’s future students will be able to attend the school tuition-free, with many others receiving partial tuition support. The program will begin with the 2019-20 entering class.

Washington University is the latest in a string of schools working to reduce the student-debt burden associated with medical school. Last August, New York University Medical School shocked and delighted students when it announced that all current and future medical students would be attending tuition-free. Kaiser Permanente, the following February, made a similar offer for its first five graduating classes. Additional schools, including Columbia University’s Vagelos College of Physicians and Surgeons and the David Geffen School of Medicine at UCLA also have created substantial scholarship funds to ease student loan burdens.

The rising cost of medical school debt negatively impacts not only medical students but also the greater public. Students graduating from public medical school programs carry a mean debt of just under $189,000, while those graduating from private medical schools have a mean debt closer to $209,000. This debt load can impact many aspects of public health, including deterring promising students from entering medical school, encouraging those in medical school to opt for higher paying specialties post-graduation, and creating higher stress and lower wellbeing for physicians and those in training. In late April, the AAMC published updated physician shortage numbers, with the projected shortfall of primary care physicians, a lower-paying specialty, ranging between 21,100 and 55,200 by 2032.

The schools offering reduced and tuition-free opportunities for their students believe that reducing student debt will encourage a more diverse applicant pool as well as empower graduates to pursue a broader range of medical specialties. “For most medical students, debt is a significant factor in selecting a school and a career path,” said Eva Aagaard, MD, Senior Associate Dean for Education and the Carol B. and Jerome T. Loeb Professor of Medical Education at Washington University in St. Louis. “We want to help alleviate that financial burden and instead focus on training the best and brightest students to become talented and compassionate physicians and future leaders in academic medicine….This is an investment in our students and in our institution, as well as in the health of St. Louis and the greater global community.”

 While many schools have adjusted their admissions processes to attract more minority applicants, using a combination of pipeline programs, more holistic admissions standards, and a focus on diverse representation on admissions committees, the problem has thus far remained. “From 2014 to 2018, the percentage of black students enrolled in medical school rose from 6 percent to 7.12 percent, according to the AAMC. Additionally, Latino medical students increased from 5.3 percent to 6.4 percent of total enrollment while Native Americans still account for less than one-half of a percent of all medical students.”

While it is still too early to gauge success, NYU has seen promising results in its first application wave since it eliminated tuition. While overall applications to medical schools in the United States have increased by 47 percent, African American, Hispanic and American Indian applicants only increased by two percentage points. At NYU, however, almost 9,000 applications were submitted for the 102 seats in the 2019 incoming class. There was a 103 percent increase from the previous year in applicants who self-identify as disadvantaged, a 140 percent increase in black applicants and a 40 percent increase in Pell Grant recipients. Dr. Rafael Rivera, Associate Dean for Admission and Financial Aid at NYU said, “The accepted pool that we have thus far reflects increased diversity in socioeconomic status, which is an important facet of diversity in the physician workforce that hasn’t gotten the attention it deserves.”

 The other objective of tuition-free and reduced medical school programs is the freedom that it affords graduates to select less lucrative specialties or career paths. The relationship between student debt and specialty preference is well-documented. An article reviewing research on the impact of student debt on primary care physicians, included references to a 2012 study that showed students with larger amounts of student debt are “more likely to switch their preference for a primary care career to a high-income specialty career over the course of medical school” as well as a 2016 qualitative study which found that, “students described their debt as making them feel more cynical, less altruistic, and entitled to a high income.” These findings suggest that reducing the debt, through reduced tuition or increased scholarships, will positively impact graduating students’ ability to select a specialty based on preference rather than need.

 Though only time will fully show the impact of these schools’ commitments to reducing student debt on the physician workforce, there is reason for optimism about the benefits that will be seen for medical students, physicians, as well as the public.