What Graduates Think About Their Student Loans

Out of every three business school graduates, at least one is seriously worried about their capability to pay back their student loans, and one in five declare they are “very or extremely” worried. These figures come from a recent study of MBA alumni by the Graduate Management Admission Council (GMAC).

Over the last years, the financial debt load of MBA graduates from the country’s leading programs has constantly been growing, and hikes in tuition fees have much higher than possible increases in starting MBA earnings. The recent Great Recession has hurt a lot of students as well, and many students started out with their professional education while having a lot less money in the bank to finance their academic studies. The average debt level for MBA graduates at Wharton and Columbia is nowadays already well into the six-figures and average debt levels at schools like Duke, Yale, Dartmouth, Michigan and Virginia’s Darden School are already exceeding $90,000 for MBA graduates. Add to this student-debt-by-state

Obviously, student loans have for a long time been a substantial part of the financial assistance package for a lot of most students. Over half (52%) of future business school students interviewed by GMAC in 2012 pointed out that financial loans were going to be an important component of their financial resources. Other sources they mentioned that helped paying for their academic education were including personal savings, grants, fellowships, and scholarships.

The study shows that around 19% of business school graduates are “very or extremely” worried about their potential to repay their student loan debt.

Of all the research participants who still have to pay back their loans, GMAC reported last January that half (49%) stated that  they expected no problems about doing so, and about one third (34%) declared to be somewhat concerned about their ability to pay off their student loans determined by their present financial circumstances, and 19% of all graduates claimed they were very or extremely concerned. Comparable to reactions obtained prior to graduation in 2012, the burden of their debt does not influence or define how graduates look at the value of their academic education: 94% of all alumni reporting to hold student loan debt upon graduation ranked the worth of their MBA education as very good to outstanding, in comparison with 95 percent of graduates who had no student loan debt. All of them rated their academic education highly for value.

In general, the GMAC studt learned that 60% of graduates reported having obtained loans to fund their graduate management education, and these figures are constant for more graduation years. When GMAC interviewed students a few months before graduation, 58% of the Class of 2012 anticipated to graduate while holding debt. Outcomes from the GMAC student exit survey uncovered no connection between a student’s debt and the student’s evaluation of their study program’s academic quality, value, or reputation.

Over two-thirds of full-time MBA graduates claim they have student loans

However, the level of student debt among alumni is varying by program type. A little over two-thirds (68%) of full-time MBA graduates report they have loans, in comparison with 48% of part-time MBA graduates. Half (50%) of EMBA graduates, and 48% of non-MBA master’s degree-holders declare to have considerable student loan debt. Despite the fact that far more full-time MBA graduates have obtained loans in comparison with the other students who completed business school, they at the same time record the highest loan repayment between all graduates and indicated the least concern about their capacity to pay back their study loans in accordance with their present-day financial circumstances.

Worldwide, the GMAC survey responses demonstrated several regional differences in the way students rely on financial loans to pay for their academic education. MBA graduates who studied in the United States (63%) and Central Asia (78%) were having the highest percentages of student loan debt. Graduates who studied in Asia, the Pacific Islands and Europe were having the lowest percentage of student loan debt, respectively 40% and 44%

Business School Alumni With Student Debt In Percentages (2000 – 2012)

The main reason why MBA students are willing to get into debt for their MBA degree is the anticipated hike in earnings after graduation. In general, irrespective of the chosen program type, GMAC states that graduates will experience a 50% return on their investment only two years after graduation, and will see a full return after only four years. The GMAC study revealed that 74% of all graduates stated that the amount of extra income they experienced has met or surpassed their expectations.

Around 85% of the class of 2013 state that the return on investment on their MBA degree was in accordance with or surpassed their expectations whereas only 67% of the class of the year before felt similarly. Not surprisingly, many student continue to go after their MBA degree and don’t hesitate to borrow money even for their car.

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