Need a ‘mini-mortgage’ to pay for business school?

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MBA students are willing to take on debt to finance their degree, according to a global survey of business graduates over the past decade, but anxiety levels vary by region.

The Graduate Management Admission Council reports that 18 per cent of business school alumni in Canada worry about paying off their loans compared with 24 per cent in the United States.

The findings highlight the importance of weighing the investment.

"It is not just about the loan," says Kimberly Yeh, director of program services office for the full-time masters of business administration program at the Rotman School of Management at the University of Toronto. Students "have to think about why they want it [the degree] in the first place."

In addition to savings and scholarships, here are some ways to pay for an MBA:

Entrepreneurship:

In 2007, Les Robertson took advantage of a garbage strike in Vancouver to finance his MBA. He bought a truck and cruised through wealthy neighbours, offering to pick up trash for a fee.

"For those who found garbage rather distasteful during the strike, I started picking up bags and building my contact list of people who needed services," recalls Mr. Robertson, 32.

Impressed with his enterprising ways, some clients later hired him as a consultant on social media.

Despite his success, Mr. Roberstson wanted a business education.

"Being an entrepreneur is generally half the battle," he says. "Getting a sound financial education is the way to go if you want to be a successful entrepreneur."

In 2008, he enrolled at the University of British Columbia's Sauder School of Business, with tuition of $43,000 for the 18-month MBA program. He also tacked on a semester abroad at Copenhagen Business School.

His garbage collection earnings paid for one-third of his MBA, with another one-third from his social media and marketing work. He is slowly paying off the balance, but prefers to invest most of his savings in longboard maker Rayne Longboard, where he is vice-president.

Company support:

The consulting arm of Deloitte offers partial MBA tuition support to between three and five employees a year identified as "top talent."

The program is open to consultants (entry to senior level) who have been with Deloitte at least two years, are seen as consistent top performers and want to study at a high-ranked business school. A panel of senior partners makes the selection.

Once the graduate returns (with an obligation to stay two years), Deloitte reimburses up to two-thirds of the tuition in three instalments.

"They were top talent when they went off to do their MBA and they are even stronger, more diverse practitioners when they come back to us," says Patricia Salverda, associate partner for talent in consulting at Deloitte.

The subsidy is also a "great recruiting tool" on campus, she says, since students interested in a consulting career often want an MBA, too.

Co-op education:

Max Hammoudeh expects to graduate almost debt-free with his MBA in 2014.

That's because he is taking a program at McMaster University's DeGroote School of Business, which offers three co-op work terms lasting four months each. Previous work experience is not a prerequisite of the 28-month program, with tuition of $38,500.

"The co-op program is a perfect way to explore your career options," says Mr. Hammoudeh, 25, who is working at Ford Motor Co. of Canada in Oakville, Ont., as the first of his three industry placements. A member of the "consumer insight" team in the marketing department, Mr. Hammoudeh is learning about buyer behaviour, working with creative ad agencies and interacting with senior management.

"It's given me an opportunity to learn the business from the ground up," says Mr. Hammoudeh, a car enthusiast.

Demand for the program, capped at 135 students for this September, is on the rise, says Denise Anderson, administrator of recruiting and MBA admissions.

On average, students earn between $42,000 and $45,000 from the three work terms, which add up to a year of experience. "It is a great way for them to earn some money to help pay for the MBA and a great opportunity to do some networking and find out what an MBA can do for them," she says.

Interest-relief borrowing:

Business schools often make arrangements with Canadian banks for students to borrow for their MBA at preferred rates, such as prime plus half a percentage point.

Rotman, with tuition of $85,816 for domestic students, goes further by paying the interest (through an arrangement with Bank of Montreal and Royal Bank of Canada) while students attend the two-year program. After graduation, students pay the minimum monthly interest and, one year later, repay principal and interest.

The interest relief "was the cherry on the top pushing me to choose Rotman," says Andrew Crowson, 28. Two years ago, seeking a career switch to brand management, he enrolled in the school's full-time MBA and borrowed fully for his degree.

Before graduating last year, he was hired by Johnson & Johnson for the career he wanted in brand management. Now he's scheduled to begin loan repayment of principal and interest, about $550 a month.

"I had a positive outlook that the investment will pay off and I was prepared to accept the shorter-term pain of taking on a mini-mortgage to pay for my education," he says.