How to finance your MBA

Embarking on executive education, like an MBA degree, is usually time-consuming and expensive.

But this should not stop one from furthering one’s studies, says Brigitte Roediger, an MBA graduate from the University of Stellenbosch Business School (USB). “Where there’s a will, there’s a way,” she says.

Financing options range from self-funding, taking out student loans, applying for scholarships and even sponsorships from employers and companies.

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ABOUT TIME: Ronald King, head of technical support for PSG Wealth, says financing decisions should be based on the duration of one’s studies. Photo: Provided

Investment decisions should be based on the timeframe of one’s studies, says Ronald King, head of technical support for PSG Wealth. Financing one year of study could vastly differ from trying to fund 10 years of study, he told Finweek.

With long-term studies, it is best to invest in shares, he suggests. Individuals opting to study over one or two years, however, should consider investing in a money-market account, he says.

King advises prospective students only to borrow money for capital development. “Do not borrow money for buying groceries,” he says. Studying is a capital investment. Often graduates are remunerated for their qualifications, and can use their income to pay off the loan, he explains.

Finding company sponsorship

When she wanted to enrol for her MBA, Roediger says her former employer was not willing to sponsor her education.

“They felt it was too expensive and I was ‘too junior’ for them to invest in me,” explains Roediger, who ended up financing her studies with a student loan.

Globally, the trend is that employers are less eager to finance employees’ MBA studies, says Marietjie Theron-Wepener, marketing and stakeholder relations director at USB.

Citing a report from The Economist, Theron-Wepener says the number of MBA students sponsored by employers dropped to 39% in 2015 from 69% in 2005.

According to King, employers’ reluctance to sponsor employee studies stems from a belief that investing so much time and money into one individual is not beneficial to them. This is because many employees find opportunities at other companies after receiving their MBAs.

The key thing in getting your employer to pay is to ensure that they see the value in the qualification.

However, if prospective MBA students are willing to sign a lock-in agreement, it will be much easier them to get their employers to finance their education, says King. This would include agreeing to focus their studies on a field that is relevant to the sponsor company, and/or to gain skills training that would be beneficial to their employers.

“The future is for people with specialist skills,” he says, adding that companies want employees who stand out from the crowd.

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VALUE: Pat Fletcher, executive financial planner at Consolidated Financial Planning advises employees to make their employers see the value in their executive education. Photo: Provided

“The key thing in getting your employer to pay is to ensure that they see the value in the qualification,” says Pat Fletcher, executive financial planner at Consolidated Financial Planning.

Kofi Simpson, an executive head hunter at recruitment company Aperture Group, says his employers asked him to leave when he enrolled for an MBA at the University of Johannesburg. “What I was planning on studying wasn’t going to add value to management of the company,” he says.

After speaking to fellow MBA graduates around the world, Roediger observed that South African companies don’t know or appreciate the value that MBA graduates can offer.

“I think that companies see it as a cost instead of as an investment,” she says.

Roediger states that if companies that have employed MBA graduates were to share the value of hiring these candidates, it would encourage more employers to sponsor employees’ executive education.

After initially agreeing to pay for her MBA, Edith Kennedy says her former employers defaulted on the remaining payments after making the initial deposit and paying the first instalment, forcing her to fund her studies herself. “My company wanted me to stop doing my MBA.”

“I cashed in my pension to cover the costs for the first year and in the second year took out a personal loan with my bank.”

During her third year Kennedy took out a second loan. Scraping together money, paying off loans and rebuilding her pension was a “learning curve” she says. “It made me stronger and more determined to finish my MBA.”

Kenny also advises prospective students to talk to MBA graduates in order to understand what they went through and how the programme changed their business acumen and leadership ability.

They should also speak to their department head to find out about possible career development within the division and company, and base career goals around this to campaign for funding, she adds.

Access to finance lies in the access to information

Access to finance influences an individual’s decision to embark on further learning, the institution they choose and the length of their degree.

If employers don’t finance prospective students, learning institutions can advise them on scholarships or alternative financing options, advises Theron-Wepener.

According to Simpson, a number of scholarships are available from learning institutions overseas. He is funding his studies with a student loan, but would’ve preferred to study abroad or get a scholarship.

Roediger had to complete her MBA part-time because she had to stand surety for herself. Simpson also had to extend his two-year degree to three years in order to secure funding for his dissertation, which he will complete in his third year.

There aren’t enough funding platforms or “creative” repayment plans available to individuals, says Kennedy. “It is also a case of knowing where to find the right funding and what is available out there.”

Similarly, Simpson and Roediger say that information on financing options is not freely available.

Prospective students are not always guided in finding alternative options to fund the high costs of an MBA, says Kennedy. For example, there are companies that are willing to fund the research element of the MBA if they do their research project on a business problem that affects those companies specifically. There are many funds overseas for underprivileged students, but they don’t always know where to start looking for them, she adds.

This article was featured in Finweek magazine.

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