Stanford MBA price tag hits $185K: Highest in the world
management.fortune.cnn.com
management.fortune.cnn.com
A friend of mine in high school wasn't the brightest guy when it came to the core classes, but was hands down THE guru in auto shop. The guy could disassemble an engine entirely and put it back together squeaky clean before he could even drive a car himself while I would (and still do) struggle to even change the oil.
He's now doing just fine for himself working as a manager at a local auto repair shop, and will most likely be happy doing that the rest of his life.
The US educational progression has a strong bias toward one type of intelligence, and seems to more easily sideline people like your friend.
For example, most young people are told to set their sights on college. Realistically, most young people are not suited for "4+ years of uninterrupted study." This might not seem obvious if you took AP/honors classes your whole life; in that case, the mean is probably much lower than you've been conditioned to expect.
As far as I've read, more education is good for anyone who can afford it. (Even at its inflated prices, a college degree remains a good investment for most.)
It seems to me the real problem is that most people who'd do just as well with a smaller university education are paying 5x as much for a big/name school education. Which, for those taking on debt, is hardly optimal. And their willingness to do this is what drives the prestige/price bubble.
So, really, the correctable social prejudice is not breaking "everyone should go to college" [1], it's breaking "small school education is inferior to big/name school education". [2]
[1] Though that could certainly stand a weakening and reformation to "most people should do post-high school education", with a heavy dose of de-stigmatization for trade schools, community college and the like.
[2] That prejudice is undoubtedly true of a minority of places and programs, but rarely; and extremely so in the case of undergrad programs.
Travel can be education. So can reading. In fact we should always be learning something new. You don't need a university for that.
It's rather like the famous anecdote of the would-be musician who asks a famous self-taught master how they should approach becoming a musician. Paraphrasing: Aspirant: "How do I go about becoming a great musician?" Master: "Go to school." Aspirant: "But you never went to school." Master: "I never had to ask anyone 'how', either".
Which is to say: those who are capable and willing to do self-directed learning will do so regardless. For anyone who seeks/takes advice on how to proceed "go to college" remains the best answer.
There's no doubt that universities represent declining value for money to their students[1][2]. But the reason we tell young people that they should go to college if they want to achieve something in life is because higher education, particularly at the top universities, remains a great investment.
[1] - http://www.economist.com/news/united-states/21567373-america...
They do have a coming problem though. With the escalation in price and the well known stories of college grads moving back in with their parents, their next set of customers are starting to question if college is for them. Essentially the education industry has started to eat its young and does so even more every time prices rise above reasonable amounts. The other thing to consider is that the cost for college has risen much faster than the label price. Given that most students need loans, when you factor in interest paid and the long term rise in interest rates - the cost of education has REALLY gone up... much more than is reported.
At some point things will correct - either the government will step in (unlikely) or there will be a fall out when inevitably their customers realize that education is more of a liability than an asset.
The more worrying thing, IMO, are the people paying a bunch of money for Journalism or English Literature degrees.
We are building a society with an extreme focus on personal wealth. Since we are stuck on a single planet with limited resources, that type civilization will not end well.
The problem is not the focus on personal wealth. The problem is that some people think that if they like doing something, its the reason enough to force other people to pay for it, just because that people have personal wealth and thus by definition are soulless fatcats whose property has to be "redistributed" because it's not fair that their pursuits are profitable and poetry reading is not. This is the real problem we are having right now.
The problem is rather that even with this historically high number of jobs available in history, literature, and so on, the universities are now producing people with degrees in those fields at a much higher rate than there are jobs available. Each faculty member added supports the creation of that many more new degrees in the field every year. Our society currently has a place for n historians (and that's a bigger n than ever before), but there are now also n^2 (or whatever) people with history degrees competing for those slots.
There is a place for professionals in these fields, certainly; but there is not a place for every single person who thinks it'd be fun to be a professional historian. The number of people interested in doing that is just far larger than the number of people our society needs to do that. Not everyone can be an astronaut or a rock star, and being a professional in the liberal arts is not different.
I imagine you should already have a substantial income to qualify even for 185K loan (in most places, it's a mortgage-size loan, with over 2K per month payments), let alone paying 185K in cash, so the improvement should be from the level of people that are already capable of spending 185K - i.e. either having current income substantially higher than, say, level of experienced software developer, or somehow having amassed 185K in cash that they can invest in their education.
This system is what enables American universities to put such high price tags on education, and also what allows the students to actually get approved for such large loans. Almost all of the risk is assumed by the borrower. Even if the graduate cannot find sufficiently gainful employment to repay the loan, the lender still eventually gets a return on their investment. If they were forced to take a loss, that would cause lenders to make their approval processes more stringent, and would limit most students' ability to attend these universities. So it becomes a political issue because no politician wants to be perceived as being responsible for limiting students' access to higher education. The fact is that the risks and costs must be absorbed by someone--under the current system it is the students' future selves. (My personal opinion is that this is a form of modern indentured servitude and should be outlawed.)
Actually, as far as I know most of education loans are now government loans, so there is zero incentive of changing the requirements, and zero incentive to reduce the costs. If these loans are losing money, we can just tax the rich and have more money, can't we?
Student loans are not all government loans, maybe 70% are Federal Student Aid loans. Both FSA loans and subsidized private loans are subsidized by the government, which only means that the government pays the portion of the interest that would be due while the student is still in school. But it does not matter whether the lender is the government or a bank--the loans still carry an interest rate and are still non-dischargeable. The government cannot "just tax the rich" to pay off students' loan balances, the government does not work that way.
They do have a 20 year minimum payment plan and then will forgive the remainder. Not sure if that becomes taxable after the fact.
They also have principal forgiveness plans for government or teaching service.
Source: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt...
The Stanford MBA's income need not be higher by 185K, for the comparison to be fair. It needs to be higher only by the difference between the cost of Stanford MBA and the other MBA.
It might not appeal to most HN readers but there's still a rational argument for the degree, even at this price.
At a $185,000 price tag, you're buying yourself into a job in big three managerial consulting (McKinsey, Bain, Boston Consulting Group), or finance, which generally comes with a very nice starting salary, signing bonus, and a built-in career trajectory.
Most consultants are either deep in consulting in 10 years and making very nice money (mid to high 6 figures, low 7) as a partner or manager or have moved on to vice president or higher level positions at client organizations you've consulted for.
Totally different worlds.
(Maybe VCs hate them since they try to create regular companies and that increases the value before VCs invest in them.)
Though I suspect $25K isn't even small a blip on the income statements of these people.
Also your note that 2% pursue startup opportunities seems to be incorrect, given that the 2012 employment report showed 13% of students not seeking employment to start a new business.
(About the 2%, the sample is very different so that should explain the difference with the report)
http://poetsandquants.com/2011/04/25/25-b-schools-that-lead-...
Guys, I have a question: Is it common for companies to pay for MBAs for their employees? Here in Brazil, it is a fairly common...
An MBA is usually considered individual learning by most employers, so the total cost is picked up by the individual. That said, there are companies out there that will consider picking up some or all the tab, especially for key employees or where there is a direct benefit demonstrated to the company. If you are working and taking an MBA at the same time, schools will offer "Executive MBAs" which are just part time courses with less full time classroom time. Often a week or two on campus, with everything else just online.
More often than not, however, people are taking an MBA to get into one of those key positions in the first place, and as such don't have the clout to receive funding from their company. You'll also find in North America that the value of an MBA is quite debatable overall.
That's great if tax laws allowed eduction deduction. A bit like stock losses can be offset annually.
MBA may not seem selective (a lot of mediocre people get in) on intelligence, but the "work experience" bar can be quite high and usually requires a leadership position in an established business (not some acq-hired startup) before 26. Stodgy blue-chips don't promote that fast, so no one gets that without their daddies pulling strings, which means they also come from money.
The vast majority of them have parental funding.
Most MBAs are self-funding; almost every MBA I met at the Berkeley, Stanford, Case, Loyola, USC, and UCLA business schools was. A few were lucky enough to have their employer bankrolling the degree. Perhaps one or two were attending on their parents' dime.
MBA may not seem selective (a lot of mediocre people get in) on intelligence, but the "work experience" bar can be quite high and usually requires a leadership position in an established business (not some acq-hired startup) before 26. Stodgy blue-chips don't promote that fast, so no one gets that without their daddies pulling strings, which means they also come from money.
MBAs can be very selective; it depends on the school, but even the most selective only require 2-3 years of work experience before they will seriously consider an applicant. Experience can be acquired in any industry, including startups, restaurants, and service industries. The key factor is not where an applicant worked, but what the applicant managed to accomplish while working there.
This can lead to newly minted MBAs having a good grasp of certain tools of management but fairly limited intuition around when to appropriately apply those tools.
The author of the story appearing in CNN is John Byrne who is the owner of poetsandquants.com website (of course it could be a coincidence but I don't think that's the case).
The article on CNN doesn't disclose this fact.
That doesn't make the data inaccurate necessarily but it shows how easy it is to get national media attention for your website at least if you target CNN as the recipient of some good link bating information.
This is the "about" page of the poetsandquants.com website:
http://poetsandquants.com/about/
Not much there, eh?
The very first paragraph of the article (below the byline) has a link to the author's website. And, the "About this author" section on the sidebar also mentions the fact.
http://observer.com/2010/08/john-byrnes-poets-quants-starts-...
Interesting though that this history (if true I haven't verified it) would be omitted from his "about" page.