

Stanford MBA price tag hits $185K: Highest in the world - 1337biz
http://management.fortune.cnn.com/2012/12/07/stanford-mba-price-tag-hits-185k-highest-in-the-world/

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citricsquid
The thing that irks me about the cost of college isn't that it costs a lot, it
isn't _ideal_ that the cost can be so prohibitive but if someone can really
get great value from college it can be worth it. The thing that irks me is
that from a very young age we're told that if you want to achieve something in
life, if you want to _be_ someone then you NEED to go to college and if you
don't you're a failure and you're destined to work in McDonalds until the day
that you die. This means that people who won't get any real value from college
end up spending hundreds of thousands of dollars (that they don't have and
don't understand the repercussions of spending because they're a teenager when
they commit to it) and become at a very big disadvantage in life because
that's what they were told they had to do.

~~~
rmrfrmrf
If you're not getting value out of college, you're doing something wrong.
College is a _resource_ , not a teaching facility, and the amount you put in
is directly related to how much you get out of it. There are too many people,
in my opinion, who take the "$120k for a piece of paper" expression seriously
and miss out on the vast number of opportunities that one gets from 4+ years
of uninterrupted study.

~~~
rthomas6
This only works if you have an idea of what you want out of college. The same
group of people that are told they _need_ college to be successful are often
the people that can only take what is given to them, since they probably don't
have a strong internal drive to be there. 4+ years of uninterrupted study
requires a deep interest in some area, and a personal drive to carry out that
study.

~~~
therandomguy
If you don't have an idea of what you want out of college it is best to figure
it out fast. And even if you don't have an idea you are better off in college
meeting a whole bunch of people and attempting to figure it out.

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anovikov
I think MBA from a top school is more of an elitist club so if it's terribly
expensive that's just fine. It limits number of holders just like for any
other expensive stuff. I don't believe in the value of business education,
anyways - i have one (while not MBA) and know it's worthless shit, and i seen
MBAs who don't know how to calculate NPV. And i know an MBA whos job is mostly
replacing printer cartridges.

~~~
sjg007
House of Lies?

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jlarocco
Who cares? Most Standford MBA graduates make that back in no time.

The more worrying thing, IMO, are the people paying a bunch of money for
Journalism or English Literature degrees.

~~~
smsm42
Any data to back it up? I.e. any comparison, ceteris paribus, of Stanford MBA
graduate income vs. other MBA graduate income and non-MBA graduate income that
proves, say, if we define "no time" as 5 years, that 5-year income of Stanford
MBA graduate is at least 185K higher (after taxes, of course, so before taxes,
given federal & California taxes, it'd be around 400K or 80K per year) than
the income of other people mentioned above?

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.

~~~
rayiner
GradPLUS loans = guaranteed to be approved unless you have major credit
problems.

~~~
smsm42
So you're saying you can get 185K unsecured loan with no proof of income to
back it up? I heard in some country they recently got into big problems with
giving large loans to people that couldn't pay for it under the premise that
the property they buy with these loans is going to raise in value so much that
it will cover the loans anyway. But this time I'm sure it would work out just
fine.

~~~
kyllo
It works in America because student loans are non-dischargeable. It doesn't
matter if you are penniless and have filed for legal bankruptcy, the lender
can still keep coming after you and even garnish your wages for the rest of
your life. It is extremely difficult to escape an American student loan
obligation, basically you will pay it off, with interest, unless you die
first.

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.)

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smsm42
Dischargeability does not matter if the person has no income to pay it. You
can't take 2K per month form a person that earns 2.5K per month before taxes.
In fact, unless you have six-figure salary, 2K per month will bankrupt you
very quickly, since you also need to pay for shelter, food, utilities, etc.
and with income that allows to pay 2K per month you will get no welfare. So
repayment of the loan is linked to the person having substantial income.

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?

~~~
kyllo
The non-dischargeability of student loans matters because it significantly
reduces the lender's risk of taking a loss. Even if the student doesn't have
the income to service the loan debt within 5-10 years after graduating, the
lender will still recoup their investment, with interest, if the person _ever_
makes enough income to pay it down in their entire lifetime. And the lender is
near the front of the line for collections (just behind things like the IRS
and child support). So the only case in which the lender takes a loss on their
investment is if the borrower dies before they can pay it off. In the
aggregate this is a very small risk.

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.

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sjg007
The gov't ends up buying the deliquent loan in full and then they chase you
down. Extreme hardship is the only way to get it dismissed and that is very
unlikely.

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.

~~~
kyllo
Forgiven debt is taxable as ordinary income and the lender will send you a
form 1099 for it, _but_ in the case of principal forgiveness plans where "you
agreed to a loan provision requiring you to work in a certain profession for a
specified period of time, and you fulfilled this obligation," that is not
taxable as income.

Source: [http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-
Debt...](http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-
Act-and-Debt-Cancellation-)

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jasonmw
You could do a lot of things with $185,000. You could live off of the $185,000
for at least a few years testing minimal viable products.

~~~
MattRogish
The MBA is more of a credentialing and marketing expense than an experiential
one. For example, some big accounting/finance firms only hire "top MBAs". No
amount of garage-startup experience is going to get you in there; remember
that not every educational/experiential endeavor can/should be viewed via the
"Is this good for a startup?" lens. Don't underestimate the network effects of
high-powered rich people who all went to the same school: many companies are
unfortunately not meritocracies.

~~~
jasonmw
I agree with you. I'm not sure if I could justify spending 180k to work for a
company that views credentials with higher weight than experience. If I worked
for such a company, I would always be worried about the new hire coming in
with even higher credentials.

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lunchladydoris
Is this the sucker price and most people somehow get around paying all of this
or is this what people actually pay?

~~~
AustinGibbons
I am a Stanford, but not in the MBA program. My understanding is that many
students do pay full tuition. Graduating with an MBA from the GSB guarantees
that you will find a high paying job that makes it well worth it. To put it
one way, my one friend asked an MBA student friend "how does everyone in the
GSB afford such nice cars while paying MBA tuition?" "When you are already
paying 200 grand, whats an extra 50 thousand?" I think its very revealing of
the mindset. Another interesting stat : 40% of incoming MBA students say they
want to found a startup. Ultimately only 2% do. The reason for the
differential not being for failure to do so, but for being unwilling to turn
down lucrative job offers.

~~~
stupandaus
Your analysis of the situation is a bit off. The vast majority of MBA students
have worked some amount of time since graduating from their undergraduate
institutions. Not only that, many were working in highly lucrative industries
like investment banking/consulting. It's really not far-fetched that they
purchased these cars prior to entry into the program.

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.

~~~
zzleeper
He is right though. Many MBAs have to relocate, and they buy the cars just for
the two years of their program.

(About the 2%, the sample is very different so that should explain the
difference with the report)

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goatcurious
Cost break up for 2 years: Tuition 115K; Rent & personal: 50K; Books & stuff
8K; Study trip 4k; Health 8k.

~~~
usarin
That's not factoring in the opportunity cost. Which to me would out weight the
185K sticker price.

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d3ad1ysp0rk
Record setting MBA programs are not shocking to me as income inequality
continues to grow.

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dudurocha
Guys, I have a doubt: Is it commom to companies to pay MBA for their
employees? Here in brazil is a fairly common habit, but MBAs here are weekly
or two times a month, on the weekends. Not something you have to commit so
much.

~~~
debacle
I was able to parse your question, but I would have written it as:

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...

~~~
dudurocha
Thank, debacle. I have a fair good reading comprehension, but my written
skills are not so good.

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salimmadjd
_The median total compensation for a freshly minted MBA from Stanford this
year was $185,000_

That's great if tax laws allowed eduction deduction. A bit like stock losses
can be offset annually.

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redwood
Just another reminder that our top business leaders are taught on a
fundamental level to leverage. Whether this is good or bad it certainly
separates a lot of the rest of us from those in the driving seat: they are
willing to take on massive debt obligations for themselves and for the
companies they run, and understand the world of leverage and all it
entails/empowers.

~~~
michaelochurch
The vast majority of them have parental funding.

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.

~~~
travem
In my experience the amount of work experience and intelligence are actually
switched around. There is usually some filtering for intelligence as a result
of the GMAT while their experience can often be quite limited.

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.

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danjmckee
How can Stanford even begin to justify this cost? Apart from boasting that
graduates earn an average of of X dollars per year, how is the education
itself worth the price?

~~~
sjg007
supply vs demand?

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tomrod
I believe just pointing out costs is a false measure. What is the expected
wage/cost ratio, and how does THIS measure compare?

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sakopov
How long does it take for a Stanford MBA grad to pay this off? I'm going to
guess not very long.

~~~
qdpb
At a median salary of 125K in a high-cost location like California or New
York, quite a while.

~~~
foobarqux
That salary figure is misleading since only base is reported. Moreover, total
compensation for the type of careers pursued by Stanford MBAs increases
rapidly, especially in finance. VPs (achieved in your late 20s to mid 30s) at
Lehman brothers were making 600k on average.

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larrys
In the "watch and learn" department here is what the comments below are
missing about this story.

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?

~~~
prakashk
I am not sure what you're getting at.

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.

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larrys
To answer my question about why John Byrne is important enough to get a story
on CNN.com here is the reason:

[http://observer.com/2010/08/john-byrnes-poets-quants-
starts-...](http://observer.com/2010/08/john-byrnes-poets-quants-starts-
business-school-smackdowns-tiny-media-feuds/)

Interesting though that this history (if true I haven't verified it) would be
omitted from his "about" page.

