An innovative way to pay for this MBA degree


It’s no secret that the cost of an MBA deters many potential candidates from applying or even considering going back to school. After all, the student debt burden is reaching unprecedented heights, forcing changes in lifestyle decisions for many years to come. Even graduates of part-time online MBA programs are taking on massive debt, in some cases $ 100,000 or more.

But now UC-Davis Graduate School of Management is piloting an innovative interest-free deferred tuition fee plan for future applicants to its online MBA program for students who don’t want to go into debt or find themselves in debt. an unfavorable situation. revenue sharing agreement.

Under the new plan, announced today (September 16), admitted students would pay the first half of their full tuition fee of $ 105,480, or roughly $ 50,000 like any other student in the 70-credit program, and would defer all tuition payments for the second half. . After the start, graduates can expect to pay around 10% of their income per month until they have paid the remaining tuition fees.

“You do your job for the first 36 credit hours and pay your fees like everyone else,” says Dean Hanumantha R. Unnava. “Once you start your 37th hour, you pay no tuition fees for up to six months after you graduate. And then we’ll take 10% of your income every month, and you’ll pay for that over the next few years. Assuming an MBA student earns $ 100,000, we’re now talking about five years to pay it off. And if they earn less, it might take a few more years.


Unnava believes the deferred plan could eventually increase the pool of available applicants by up to 20%, as it makes a graduate degree more immediately accessible to applicants who don’t want to take on heavy debt. Even for graduates of programs less expensive than the UC-Davis program, it is not uncommon for a high percentage of students to graduate with over $ 50,000 in debt for an online MBA. “I think this model is going to be widely adopted in higher education, and we are delighted to be the first school to do so,” he said.

At UC-Davis, the online MBA program, launched just two years ago, has already doubled the school’s enrollment. Currently, 550 students are enrolled in the Online MBA. The deferred tuition option will be offered to incoming students in the school’s January class. Unnava expects that about 30% of the 60 to 80 students who sign up at that time will likely benefit from the new payment plan.

UC-Davis Graduate School of Management was the first business school in the UC system to launch an online MBA. Today it is the first to offer a deferred tuition option. The school’s deferred tuition option will be managed by London-based EdAid, which claims the program will increase enrollment and performance, improve completion rates, promote access and diversity, and increase student participation. income of each incoming cohort. For Dean Unnava, much of the motivation for adopting the plan is to increase access to the school’s online MBA.


H. Rao Unnava, Dean of the Graduate School of Management at UC-Davis. UC-Davis photo

“What got us to this point was we were talking to the students while they were applying to the program or going through the program and they were asking if they couldn’t pay for six months,” he says. “Even if you give them a scholarship of $ 20,000, the problem is cash. They were concerned that they would have to pay $ 80,000 in two and a half years (the average length of the online MBA program). We knew there were people who didn’t apply because they didn’t have the money. This seemed like a segment that would benefit from a deferral of their tuition fees rather than a reduction in tuition fees. “

The deferred tuition fee scheme is different from more common revenue sharing arrangements. On the one hand, the deferred plan is irrelevant. There is also no scenario in which you would pay more than the tuition. And if you lose your job for some reason, you don’t have to make your monthly payment until you get a new job. Income sharing plans, on the other hand, include interest payments and graduates can find themselves paying twice or more of the amount of money they receive. It is possible to repay much more than what you get under a revenue sharing plan.

For the Graduate School of Management, the deferred tuition fee program would cost the school an immediate loss of tuition, as well as a small percentage of income for EdAid, although the initial drop in tuition fees is shared with 2U, the school’s online education partner. “Obviously this is a big blow to GSM cash flow, but because we have 2U as a partner and they also had a similar idea, the impact on revenue would only be our share,” Unnava adds. . “So they’re participating as well, so it would be a lot less of a success for us if we had done that for the full-time MBA program. “


Ultimately, he adds, “it translates into the equivalent of the tuition relief you might give a student. But the problem remains. If you don’t have a lot of savings and you know you have to pay the $ 90,000 even after the scholarship and you don’t have it, you won’t go looking for your MBA. $ 50,000 is all you need now, and you can start paying later. It is much more comfortable for people.

The Dean uses the metaphor of buying a home. “It’s like buying a house if you can afford someone to pay for it over 30 years. Even though the seller of the house gives me a $ 100,000 rebate on a million dollar house, the problem remains with the cash flow. Debt actually has something associated with it: a repayment schedule with accrued interest. If you have a problem, it keeps generating interest. It is a side of the debt that is ruthless. No matter what happens in your life, you still have to pay your interest. It is much more forgiving for people. If you lose your job, you won’t have to pay until you find a new job. This is specifically for people who will not graduate due to financial issues.

Unnava makes it clear he’s trying the plan. “This is a pilot stage,” he says. “We want to understand market forces. It should be easy for the students so that they can focus on learning and not deal with these issues. We have to see what the numbers will be, but we know we can be slightly ahead or in balance when all is said and done. But we will have increased access to the online program by a significant number. For me, as a dean, this is an interesting way to ensure some future income for the next dean. The cost of educating students has already been paid. For the future dean, this could bring in quite a bit of money each year that could be used for innovation, as this money is unrelated to running expenses.


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