Financing Business School

As I’ve mentioned before, a business school education is, at its root level, an investment. Those looking to pursue an MBA do so because they believe that the long-term value of the education is far greater than the up-front cost. The problem is that the majority of us don’t have a couple hundred thousand dollars sitting in our bank accounts to do such a thing. How do we get past that?

Let’s start by digging into the “up-front cost” of an MBA. HBS recently released the Class of 2013 student budget which I’ve included below. This essentially represents the cost to attend HBS for one year (note that the cost for trips to China, Machu Picchu, and/or South Africa is not included). Basing our estimate on these figures alone, 2-years at business school could cost you anywhere from $165,000 - $230,000 depending on your family status. Certainly not an insignificant amount of money!

HBS MBA Class of 2013 Student Budget





w/ One Child

w/Two Children






University Health Services Fee*





Blue Cross/Blue Shield (12 months)**





Program Support Fee***





Room & Utilities (9 months)





Board, Personal, Other (9 months)****










Additionally, it’s also important to note that these cost figures do not include the opportunity cost of attending school (namely the 2-years of foregone salary from not working). For someone leaving the military as an O-3, you can essentially add another ~$150,000 to the mix. While $380K (230 + 150) is far less than the $4 million that Bloomberg Businessweek estimates as the 20-year median cash compensation of an HBS grad, it’s still a sizeable amount – especially for someone who has been earning a military paycheck for the past 3-5 years!

So you find yourself in somewhat of a dilemma: you see the potential benefits, but are also aware that you don’t have a couple hundred thousand dollars lying around to throw toward a business school education.

Fortunately, the path to business school for people in your situation is a well beaten one. There are a number of ways – both general and veteran-specific – to reduce the actual cost to you and, with it, the amount of anxiety with which you enter business school. What cannot be defrayed is either paid for out of pocket or with student loans. Let’s discuss each of those in turn before I briefly discuss how I financed my business school education.

Military Benefits, Fellowships, & Scholarships (funding that does not require repayment)

· Military “Sponsorship” – If you decide to stay in the military, one of the many benefits available to you is 100% graduate school financing. This is referred to as “company sponsorship” on the civilian side of the fence and is a widespread practice used to further develop an organization’s human capital. I had two HBS classmates who were sponsored by their respective branches of service (one Army, the other Navy) and attended school while still on active duty. They continued to receive their military salary and basic housing allowance and walked away from HBS with both a diploma and zero student loan debt. In the Army, this option becomes available to officers who have completed their branch qualifying assignment (usually a company/battery/troop command). Having a conversation with your branch or career manager is a great first step in determining if sponsorship is right for you.

· Post 9/11 GI Bill – This is a huge benefit for veterans who have served on active duty on or after 11 September 2001. As of 1 August 2011, the GI Bill will cover up to 100% of public school in-state tuition and fees, up to $17,500 annually for private schools, and will provide a basic housing allowance stipend at the E-5 with dependent rate (about $2200 a month for the HBS zip code). Depending on the number of months of non-contractually obligated service you have under your belt, your GI Bill benefits can range from 40% (90 – 179 days of Post 9/11 active service) to 100% (greater than 1,095 days, or 3 years, of post 9/11 active service) of the maximum benefit amount. What do I mean by “non-contractually obligated service”? If you graduated from a service academy, for example, you’re contractually obligated to serve 60 months on active duty in order to fulfill your service commitment. Any months served beyond those 60 counts toward GI Bill eligibility. The same logic applies to ROTC graduates. If you attended college on a 4-year ROTC scholarship, you likely graduated with a 48-month active duty service obligation. Therefore, any active duty service beyond those 48 months would be non-contractually obligated service and would count as eligible service for the GI Bill. (Though not yet updated with the new regulations that take effect August 1st, the GI Bill benefits calculator can nonetheless be found here).

· Yellow Ribbon – Seeing as how most top-tier business schools are private institutions, and charge tuition and fees that (far) exceed the $17,500 private school ceiling discussed above, there is typically a gap between actual cost and what the veteran is eligible for with the GI Bill. The Yellow Ribbon Program exists to help close that gap. Schools choose whether to participate in the Yellow Ribbon Program and the rate at which they’re willing to contribute. The Department of Veterans Affairs (VA) then matches whatever the school contributes. Using HBS as an example:

o A veteran eligible for the maximum benefit rate under the GI Bill would receive $17,500 for tuition and fees as a result of Harvard being a private university.

o HBS, a Yellow Ribbon partner school, agrees to contribute $10,000 for up to 50 veterans each year (a list of the Yellow Ribbon partner programs and their contribution amounts can be found here).

o The VA matches HBS’s contribution of $10,000.

o The total benefit is thus $37,500, plus about $20,000 of BAH for the Boston/Cambridge zip code.

Though the annual cost to attend HBS for a year is a bit higher than the $57,500 benefit amount, the majority of the cost has been defrayed by the GI Bill/Yellow Ribbon contribution. Pretty phenomenal program if you ask me.

· Fellowships & Scholarships – Depending on the school, fellowships and scholarships are offered to students based on either need or merit, or a combination of the two. At HBS, all fellowships (pools of money available to students as a result of generous alumni donations) are entirely need based. These fellowships can range from a few thousand dollars to 100% of tuition. In addition to need based fellowships, other schools incorporate merit into their award criteria. At Wharton, for instance, students can receive full-tuition fellowships based solely on their outstanding record of academic, personal, and professional achievement. Finally, outside scholarships for which you qualify are fair game here as well. One that a few of my veteran classmates received was the Pat Tillman Military Scholarship. Definitely worth looking into.

Savings & Loans

Whatever is left over after military benefits, fellowships, and scholarships have been applied to the cost of your education is covered by you. Personal savings and family contributions are pretty self-explanatory. Graduate school loans, however, are a bit more intricate than they appear at first glance. These loans fall into two categories: GradPLUS and private loans

· GradPLUS – The GradPLUS loan is a loan from the federal government for individuals pursuing graduate education (as the name implies). It carries with it a fixed 7.9% interest rate and a 2.5% origination fee. Clearly the “fixed” nature of the loan is the most appealing aspect of the GradPLUS option. If you’re like me and expect serious inflation to take hold at some point in the near future (while I’m still repaying my student loans), the fixed rate is a pretty good deal.

· Private – During the glory days of 2004-2007, interest rates were extremely low and private loans, the soup du jour back then, were doled out in abundance. Today, they’re still available but are not nearly as ubiquitous. Although most private loans lack an origination fee, they carry with them a floating interest rate. Given the inflation discussion above, it’s definitely something to be aware of.

As for me, I ended up getting fellowship funding, received 40% GI Bill benefits for having served more than 90 days past my 5-year service obligation, and served in the National Guard throughout my 2-years at business school. So when it was all said and done, I walked away from HBS with about as much debt as I expected going in (~$120,000). Considering my family situation (married with two kids) and the fact that my wife stayed home with our daughter who was born a few months prior to business school, I’m pretty comfortable with that number.

As you continue to investigate the business school option, keep in mind that it’s easy to get overwhelmed by the cost and become immediately turned off as a result. Hopefully this sheds a bit of light on how to make pursuing an expensive but worthwhile degree work for you.

- Rob C., Guest Blogger and Co-Founder of MilitaryToBusiness: Consulting Service for Top Performers