Archive for July, 2012

Thanks Uncle Sam – Earning An MBA Just Got More Expensive

Major changes recently occurred to major federal student loan programs and anyone interested in pursuing an MBA should take note.  These changes will have dramatic effects on borrowing costs, and should be taken into consideration before one starts down the MBA path.  I’ve written on this blog before about the importance of choosing an MBA program best suited to one’s financial situation.  I selected CSUF because it allowed me to earn my degree part-time, continue working full-time, and still be able to graduate without carrying any student loan debt.

That last factor has become more challenging for students considering MBA programs.  Student loan debt has been rising, and these federal student aid changes will do little to improve that situation.  These major changes to Stafford loans and the Graduate Plus Loan Program will force most students to more carefully consider the costs of MBA programs they are choosing.

Stafford loans have been a popular financial aid vehicle for students funding their education.  Students are allowed to borrow up to $20,500 and don’t need to begin making payments until after they’ve graduated.  In the past, the interest on those loans didn’t start accruing until the student graduated as well.  In addition, the student was granted a 6-month grace period following graduation before repayment needed to start.  Here’s the problem – interest now begins accruing on the loans immediately.  What kind of effect can that have on a one’s borrowing costs?  According to Bloomberg Businessweek, a student who borrows $8,500 a year would pay an additional $1,773 in interest!  To put that $8,5000 in perspective, that’s approximately my yearly cost in CSUF’s part-time MBA program.  That seemingly slight change to the lending rules can add 20% to the cost of attending school – a hefty sum to pay in a particularly challenging job market.

Another major change affects both Stafford and Graduate Plus Loans.  The government has increased the origination fees one must pay when borrowing from these programs.  Stafford origination fees rose from 0.5% to 1%, and Graduate Plus fees have increased from 2.5% to 4%.  What does this mean for MBA students?  Mainly, it begins to make private student loans more competitive.  They historically haven’t been the first financial aid choice for students because they tend to have higher interest rates.  These recent changes now make public and private student loans more competitive.  However, that isn’t saying much.  Students may now have more lenders to choose from, but they still end up paying more for their education.

My advice – pay careful attention to the total cost of earning an MBA.  And that doesn’t just include the costs of tuition, books, and loan interest.  Be sure to weigh the opportunity cost of lost wages (if you’re earning a full-time degree and can’t work), and be sure to consider costs like moving expenses if you’ll be going out-of-state.  Making the decision to earn an MBA is a huge decision.  The recent changes to federal student aid don’t make that decision any easier, and illustrate just how weighty a financial decision it can be.

What’s your experience with federal student loans?  Are you concerned about having to take out loans for school?  Leave your comments below or send me a message on Twitter @orangecountymba.  I’d love to hear your thoughts on this topic.

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Step Off the Cliff, Take the MBA Plunge

The background on my laptop currently contains an inspirational image I downloaded from Primer Magazine.  It’s a simple cliff, with messages written at its peak and trough.  The messages read “Comfortable is no way to spend your life.  Learn to enjoy living on the edge.”  And as funny as it may sound, that quote speaks perfectly to my recent situation registering for my fall 2012 MBA classes.

Courtesy of Primer Magazine

I’ve written in previous posts and for CSUF about my decision this summer selecting an MBA degree concentration.  I put thought into the career direction I want to pursue, but when registration rolled around I was still uncertain as to what direction I wanted to move in.  On top of that, after reviewing CSUF’s course options, I found several classes across a variety of disciplines that piqued my interest.  So I decided the best possible concentration for me out of CSUF’s offerings was essentially no concentration at all.  I decided the General MBA concentration would be my best fit.  It would allow me to tailor my degree with courses that interested me, and I’d have the freedom to choose any disciplines I wanted for my electives.

I must admit I’m not always the most adventurous person.  I’m perfectly willing to try new foods or watch a random movie on Netflix, but I tend to be more cautious when it comes to making career decisions.  Therefore, when it came time for me to register for my fall MBA courses this past Tuesday, I hesitated making one my elective selection.  My second course decision was easy – I had one core class remaining, Marketing Management, so I immediately registered for that.  But the other class would be my first of four electives, and I was torn between a safe pick and a more adventurous selection.

The safer pick would have fallen in line with my undergraduate degree which was in finance.  But I’ve started to learn during the years since my graduation that I don’t find finance terribly interesting – I want to pursue something more creative and that involves more interaction with people.  The other fall course that had caught my eye was New Venture Management, and dealt with the management, HR, and organizational issues faced by start-ups and early ventures.  The topics seemed much more interesting than the standard finance topics like capital budgeting, and on top of that the course description said it would require case studies and work with local business (two things I’ve found I really enjoy doing).  On paper, New Venture Management seemed like a shoe-in.  But I still found myself a little hesitant when 6:30 rolled around and it was time for me to register.

Part of my hesitation stemmed from my fear of the unknown.  I had graduated with an undergraduate degree in Finance and managed to find a full-time job during a challenging economic climate.  What if my decision to pursue a different field hindered my ability to find the job I wanted down the road?  What if I ended up making a mistake?  How far back would that set me in my career?  How would I know if I’d made the right choice?  The “what if’s” managed to march through my head throughout the time leading up to 6:30.  Another part of me wanted to be practical, and wanted to stick with Finance because in my mind I felt that was a “safer” career option.  But in reality, how safe was it?  The financial sector had been one of the hardest hit during the recent financial crisis.  And I was paying for this MBA degree myself, so I only had to answer to myself when it came to determining my MBA and career directions.  Plus, I’ve always wanted to start my own business at some point in time; maybe this New Venture Management course would provide some helpful tips.  So I stepped up to the edge of the cliff, moved my laptop mouse over the Register icon, and stepped off the ledge and into the New Venture Management abyss.

Now this all might sound a little melodramatic, but it was definitely a bit of a struggle for me to choose this “less safe” class option.  And I’m sure this is a similar dilemma faced by numerous other MBA students.  They may struggle with similar class choices, or they might be debating whether to spend their time on campus devoted to the Investment Club.  Students might even second-guess themselves right before trying to network with a prominent guest speaker that came and spoke on campus.  It seems to me like we all face our own personal cliffs, and they might manifest themselves in things as small as deciding which course to take.  But the MBA journey, like life itself, is full of new adventures and new horizons, and most of the time the fun lies in simply taking the plunge over the edge of that cliff and seeing where the journey takes you.

Am I Ready For An MBA?

It’s summer, which means that along enjoying vacations and relaxing on the beach, some people are considering whether to pursue an MBA this fall.  A recent article from the Milwaukee Journal Sentinel explored this very question.  The story presented four reasons why pursuing an MBA could make sense for individuals considering the degree.  After completing my first year of CSUF’s MBA, I have my own insights and opinions to share regarding these four reasons, detailed below.

Your employer covers (some or all of) the costs.  Many employers want their best employees continuously improving their skills and working towards upper-management positions.  Often, instead of directly offering training programs to these employees (which can be costly), the employers offer to pay some or all of the costs of earning an MBA.  In my specific situation, my employer offers $2,000 a year in tuition reimbursements as long I remain with the organization.  Despite the fact that CSUF’s MBA program is a great value financially, I’m still happy to receive the tuition assistance.  And the best part is that I have flexibility once I earn my degree.  I didn’t have to agree to work “x” number of years for my employer after earning the MBA.  I can earn tuition reimbursements as long as I work there, but that also offers me the flexibility to leave whenever I wish (even during the middle of my degree).  Most other MBA programs are extremely expensive so unless you’ve qualified for a fantastic scholarship or inherited a lot of money, you better hope your employer will help cover some of those costs.

You find yourself needing another marketable skill.  This is one of the major reasons I chose to pursue an MBA.  Some people find their resume lacking certain skills in order to open doors to a field or industry they’re interested in entering.  In my case, my current job was not allowing me to develop the skills I wanted to transition to a new career path.  So I decided that CSUF’s MBA would be the best way for me to learn those necessary skills, and I’m developing those skills through the classes I chose and activities I participate in.

You know you want to be in management.  This is other major reason I chose to earn my MBA.  The only complaint I have about this reason (one year into my degree), is that CSUF’s MBA program only seems to cover management topics at a surface level.  There’s a big difference between role-playing the firing of a poor performing employee, and actually telling someone face-to-face they are out of a job and cannot support their family.  MBA programs seem to have a difficult time simulating those challenging situations, and it seems likely those scenarios can only be learned through experience.  But MBA programs are good at encouraging strategic-level thinking in students, which is an especially important skill for up-and-coming managers.

You have time to earn an MBA.  Earning an MBA degree is a huge time commitment.  Even for myself, I’m pursuing my degree part-time, balancing full-time work, writing a blog, spending time with friends and family, I still find making time for school to be a challenging balancing act.  My first MBA semester was especially difficult.  I learned quickly not to let myself fall behind on my course work, and my second semester was much more manageable once I learned that lesson.  Being aware of the time requirements of an MBA degree is extremely important.  Part-time degrees can still allow students time to work full-time.  Full-time degrees however, often won’t let students have a job during their first year.  In addition, time devoted to coursework and activities during a full-time program are enormous.  Be sure to select the program that best fits your life situation and work situation before fully embarking on your MBA journey.

Here is an interesting article I came across while reading this week:

“Why I Like People with Unconventional Resumes” – This Harvard Business Review author likes to see non-linear job changes from job applicants when filling senior positions.  These disruptive moves can indicate to hiring managers that a candidate is flexible, able to adapt, good at developing relationships, curious, inspired and determined.  Definitely an interesting idea to consider when applying for your next job.  Don’t think less of your non-linear job changes – they might help you land that next big gig!