Detailed analysis of the Stanford GSB program: costs and benefits

02. MBA Choice Algorithm

Previous article in the “From Moscow to Stanford” series.

Make the right choice of MBA. Justify it to yourself and to the admission committee.

MBA selection criteria

How to choose an MBA program?

As it was mentioned in the previous article, the decision of getting an MBA is not obvious. On one side of the scale we have international career opportunities and a network of contacts from different countries, on the other – monetary and time costs. Since you are reading this article, so far the first pan of your scales has been heavier. Let’s see whether this will change by the end of the article.

The next decision you need to make on the way to MBA is to which MBA programs to apply. If the choice is not obvious for you (as it was in my case), then I recommend sticking to a similar algorithm:

  • Select the area in which you want to build a career. For example, renewable energy, health care, venture capital investments, marketing, etc.
  • On the basis of searching on the Internet, communicating with friends, studying forums and websites of schools, make a list of 10 programs that are strong in the field you chose.
  • Conduct a detailed analysis of each program.
  • Select the best three programs and apply to them.

Steps 1-2, in my opinion, do not require additional comments. Steps 3-4 are discussed below. But why do we need these steps 3-4 at all? Isn’t it easier to take 10 universities and apply to all? No, not easier, and here is why:

(1) Before investing a lot of time in preparation, and then, perhaps, much more time and money in education, you should understand well where and why you are going;

(2) The probability that you will be able to prepare competitive applications for more than 3 programs is negligible;

(3) You will have to explain your choice in the essay on each program. It is important to show that you have done your “homework”, thoroughly studied the features of the programs and understand why you need the program, and why the program needs you.

Detailed analysis of MBA programs

So, you have selected 10 potentially interesting MBA programs. What’s next?

It is most convenient to search and analyze information on MBA programs using the principle of Benefits – Costs (see illustration above). Reliable valuation of each item will not be possible, so I cut off the NPV/discounted cost analysis, which is popular among some applicants. I did not invent another MECE structure (maybe you can advise something?)

It is useful to get at least a minimum set of information for each program. The following sources of information will help you:

  • Websites
  • Visiting campuses
  • Webinars with admission committees, students and graduates
  • Communicating with students and graduates of diverse years
  • Blogs of current students

As an example, on the main issues here is the information that I collected about Stanford during my preparation.

Benefit

  1. Employment

  • Where do graduates work and how much do they earn?
  • Are graduates of a business school able to change the industry after education?
  • How effective is the business school career center?
  • Do employers often come to the business school campus? Or do you have to go yourself or even fly somewhere?

Stanford graduates work mainly in the financial sector and information technology. A huge part of them go into education and run their own businesses. The average salary of a graduate of 2015 was $ 133.5 thousand per year (base) plus $ 73.5 thousand per year (bonus and so on). The huge role is played by the Stanford Career Center, which begins to work with students from the first days of the first year of study.

Students who wanted to radically change their activity succeeded in doing this. For example, one recent graduate from Russia, who worked in consulting before Stanford, founded a company for educational software for children in California and is now successfully developing it. Those who wish to get into venture capital funds also often, though not without difficulty, manage to do it.

Employers from various industries on a regular basis visit the campus, so it is not necessary to travel to other cities for interviews. In addition, Silicon Valley is the technological heart of the United States, and you can reach the headquarters of most of the world’s leading IT companies in an hour.

 2. Networking

  • How many people are there in class? What countries and industries are they from? Do you find them successful?
  • How many people are there in the Alumni Network Business School?
  • Are there lecturers in the business school that you would like to study with? Mentors you would like to work with? Are there interesting guest speakers?

A class in a business school is a university stream in our understanding. A class at Stanford is about 400 people per year (for comparison, at Harvard – about a thousand). 40% of the class are women. Also, 40% of the class are students from 52 countries of the world, except the USA.

Prior to the MBA, most students worked in private equity/venture capital funds, technology sector and consulting. Many founded their own small companies and investment funds. I personally know several students and graduates of Stanford, and in my understanding they are successful people. I would like to study with them.

In addition, Stanford selects intelligent and talented people with great care, sifting out narcissistic egoists. According to the observations of various sources (not only of Stanford), Stanford not always manages to do this, but more often than other top schools.

The mentor teachers I would like to work with are Mark Leslie and Peter Wendell. The first is the guru of social entrepreneurship, the second is an experienced businessman and investor. I also count on the opportunity to meet with the founders of Y Combinator and a number of educational platforms. As for guest speakers, every week political leaders from different countries and heads of leading companies speak on campus as part of the Global Speaker Series and View from the Top. The latter are mostly from the Valley, of course. But for me personally, this is enough.

 3. Knowledge

  • Can you make your own lesson schedule? Or is there no freedom of choice?
  • How wide is the range of courses offered by the business school? Are there many courses of interest to you?
  • What is this business school particularly strong at?

The freedom to choose subjects at the Stanford Business School is quite wide. In the first semester there are compulsory basic courses, after which the student is free to choose what interests him. There is an opportunity to take courses from other magistracies, including Masters in Education and Masters in Computer Science. I plan to take a number of courses of these magistracies.

The strong direction of the business school is technology and everything related to Silicon Valley. In addition, many educational platforms came out of Stanford, which is interesting to me personally.

 4. Brand

  • What is the place of the business school in various ratings
  • Does the business school have credibility with the industry you are interested in? Other industries
  • Do students and graduates of the business school enjoy credibility with investors?
  • Does the business school have authority in the country in which you are going to work?

Stanford, along with Harvard, is considered the leading business school in the world. Unfortunately, business education in the MBA format in recent years has been losing popularity around the world. Thus, according to a friend from Bain Capital, even Wharton in the past five years has greatly lost credibility with private equity funds. Stanford is still maintaining an authoritative position with employers and investors. I do not know how long it will last.

5. Quality of life

  • Does studying take a lot of effort? Is it interesting?
  • Do you like the location of the business school in terms of country/climate/business environment?
  • Can you travel while in business school?
  • How comfortable are living conditions for your family (if you are traveling with your family)?

Stanford is a great place in terms of quality of life. Within 2 hours there are surf beaches and ski resorts. The sun shines all year round, and there is no need for jackets even in winter.

Technically the study is not too complex (there is no higher mathematics – if you don’t choose it yourself, of course). During the MBA, you can find time to travel around California and Latin America.

For wives and children at Stanford there are special groups BizPartners and BizKids. Families with children live compactly in the same place on campus, so the family will not be bored.

Costs

Let’s talk about the reverse side of the coin. I, like many of my friends who entered the MBA program, after receiving an invitation, seriously wondered – is it worth going? Business education gives graduates ample opportunities with a high, but not one hundred percent chance of implementation (for example, after Stanford there is a chance to stay in the US for work, including in a venture capital fund – but there is always a probability of a visa problem). Whereas the likelihood that you have to pay the loan is 100%.

6. Minimal cost

  • How much does the education and study materials cost?
  • How much are the flights?
  • How much does insurance, accommodation, food cost?
  • How much is clothing, entertainment, stuff?
  • What additional costs are incurred during studying? Are there compulsory trips abroad?

Stanford, like many other schools, assesses the expenditures for a year of study at GSB for different categories of students: students with and without spouses, living on campus and outside. The minimum you will have to invest is 103 thousand dollars a year. If you are traveling with your spouse – $ 120 thousand per year, with a child – about $ 140 thousand per year.

Add to this another 3-5 thousand dollars – the ticket from Moscow to Stanford and mandatory trips for the Global Experience Requirement program.

So, the minimum cost of education at Stanford GSB for a student without a family living on campus is about 108 thousand dollars a year, or 216 thousand dollars in two years. You can probably manage to reduce these costs. But I do not know yet how.

Stanford GSB Cost Summary, затраты на MBA, стоимость MBA

Source: https://www.gsb.stanford.edu

 7. Estimated cost

  • Are you satisfied with the minimum quality of life inherent in the cost of living calculation? If not, how much are you willing to spend?
  • Do you plan to travel with the class? If so, how much does it cost?
  • How much money is required to provide for a family?

I must say that I plan to go to business school with my wife and child, so my expenses will be higher than those of a single student.

The calculations of Stanford already take into account the cost of accommodation, food, clothing and entertainment with a moderate lifestyle. But insurance for your wife is not included – another $ 5 thousand per year. And another 5 thousand dollars for the child. At the same time, Stanford considers significant personal expenses – more than $ 5,000 per month per family. According to my friends living in California, you can live more modestly (2-3 thousand US dollars).

Let’s add to the expenses the cost of buying a car – about $ 5 thousand at a time. According to my experience in Minnesota, I know that living in the United States with a family without a car is almost impossible.

I do not plan to travel with the class, apart from the Global Study Trip. First, it is expensive. Secondly, my interests will be concentrated in California – being there, one must take advantage of the moment and not waste time on traveling.

I got more than 149 thousand dollars in the first year and more than 136 thousand dollars in the second year.

Total – about 285 thousand dollars for two years.

Расчёты затрат на обучение в Stanford GSB, затраты на MBA, стоимость MBA

Calculations of the cost of studying in Stanford GSB

 8. Loan

  • Is a loan available? What is the available amount and the interest rate?
  • Is there a chance to get a discount on tuition fees? How big can this discount be?
  • When do loan payments begin? What is the loan term? What is the amount of a monthly payment?

MBA funding sources can be (1) university scholarships/discounts, (2) external grants, (3) own funds, and (4) loans.

(1) University scholarships/discounts

The fellowship discount is granted by the university to MBA students and may vary from case to case. Harvard is distinguished by its generosity – it can make a discount of more than 50 thousand dollars a year. In addition to financial needs, it takes into account many factors, up to the candidate’s height (for some reason, Harvard loves tall girls and short men). In addition, some universities, in order to attract a candidate, may offer him a discount of up to 100% tuition.

Unfortunately, this policy does not apply to Stanford. GSB issues one type of scholarship – due to financial needs, which is determined by taking into account all the income and assets of the student. At the finance webinar, Financial Aid Office staff reported that 50% of GSB students receive some kind of financial support, and that, on average, it is $ 35,000 per year. In reality, I did get a discount from Stanford, but significantly less than the average.

(2) External grants

As for external sources of grants, every source has limitations. For example, you need to be a US resident, as for Soros grants, or an Indian/Arab/African. There are scholarships for women. There are scholarships for sexual minorities, where I also do not fit. Thus, the search for an external source of grants for me was not crowned with success.

(3) Owns funds

Part of the education costs will be covered with my own funds but the sum is much less than it is required.

(4) Loans

There is only one source of financing left – a loan. However, an MBA loan, how quickly the newly enrolled students from Russia will find out, is also not easy to get.

Loans in the company-employer

Previously, MBA loans were actively provided by companies, especially consulting. So, it was possible to get funding from McKinsey or Bain, and the debt to the company was forgiven if the graduate returned to the company and worked there for two years. However, there are also difficulties with this method of financing:

  • The need to return to the company for two years reduces the usefulness of the MBA. And if you do not return, you need to pay a huge interest on the loan (up to 15% in US dollars in Bain)
  • Сonsulting companies in Russia have tightened their funding criteria. As a result, loans are confirmed to fewer people now, and it is no longer worth relying on it
Loans in Russia

Students from other countries often receive loans at home, and at a favorable interest rate. In Russia, loans for expensive MBAs abroad are not granted.

Foreign loans

If in the country of study you do not have a person who is ready to be a guarantee for your loan (and pay it if you cannot), then the option is only one

Loan for 10 years in US dollars, at the rate of US Libor + 5.25%. The maximum amount is 80% of the Cost of Attendance defined by the university (in the example above, 80% of US $ 103,418 per student on campus). Payments begin in 6 months after graduation.

This option is used by the majority of students from Russia.

I made simple calculations, I found out that in my case the payments would be $ 2,515 (176 thousand rubles) per month for 10 years.

Loans in a bank cooperating with the university

Stanford, like several other universities, has an affiliate credit organization issuing loans to foreign students (including from Russia):

A loan for 20-25 years in US dollars, at a rate of 6.75 – 7.25% (floating rate tied to Libor or another index). The maximum amount is 115 thousand US dollars per year.

Most Stanford students traditionally use this option.

In my case, the payments will amount to $ 1,800 (125 thousand rubles) per month for 25 years.

Расчёты выплат по кредиту

Calculations of loan payments

 9. Lost profit

  • How long does the program last – one year or two?
  • Cumulative net lost income during study? How much money could you save if you stayed at work and did not go to an MBA?

The MBA program at Stanford lasts two years. As for the lost income, everyone will calculate for himself. Do not forget that the lost profit does not include all earnings, but only one that you could save. The part that you would eat should be excluded.

 10. Lost time

  • What else could you do during all this time instead of MBA?
  • What are the things you will not be able to do after MBA?

Instead of MBA, you can directly try to get an interesting job or start your own business. The latter is extremely difficult to do if you have a loan of 20 million rubles hanging over you.

* * *

The above-mentioned arguments are applicable both to make a decision on obtaining an MBA degree in general, and to select/compare the programs. For example, if the benefits of the two programs are approximately equal and the costs of the second one are significantly lower than the first, then it is reasonable to make a choice in favor of the second. At the same time, if in your case the costs of any MBA program exceed the benefits, then you should not go to the MBA.

Choose the best for yourself.

Thanks for attention.

Viktor Rogulenko

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