Student Loan Debt Market: Too Big To Fail
March 5, 2013
On Wednesday, February 27, 2013, the student loan ombudsman at the recently minted Consumer Finance Protection Bureau (CFPB), Rohit Chopra, declared yet another systemwithin the U.S. economy ‘too big to fail.’ While Sen. Warren is grilling Ben Bernanke on what exactly the Federal Reserve is doing to remedy the unacceptable influence big banks wield on the health and state of our economy, the student loan debt market, comprised of public and private lenders, has shot past $1 trillion and continues its relentless climb.
Last year, students borrowed $117 billion from the federal government alone—our most inexpensive and forgiving education creditor. [Although, if our ever-competent and productive legislators [sic] fail to reach an agreement by July 1st of this year, interest rates on subsidized Stafford loans will be hiked to 6.8%.]But, is this any surprise? The cost of college is increasing at a rate of 8% per year, five times the current national rate. This tuition inflation rate translates to a doubling of tuition every nine years. Of course, tuition is nowhere near the entirety of the cost of higher education. In fact, an investigation by Business Insider estimates an average of $70,000 in additional costs above the tuition sticker price, and that is just an undergrad number.
Some are lucky enough to be able to cover the cost of undergraduate and graduate degrees, but more are unable to do so without incurring debt.As you look toward your MBA degree and the multi-faceted investment it involves, take the time to objectively evaluate where a graduate management degree from your targeted institution(s) have the potential to take you. Do not sell yourself short or the institution, but approach this analysis soberly. It may well be that you conclude that you need to set your sights higher and, therefore, incur even more cost in order to track your future in the direction it needs to go. If you have the drive and are willing to make the commitment to do what it takes to get into a top tier school, then go after it. If that does not make sense for your career path and goals, however, then get what you need at less cost.
The numbers surrounding student loan debt are terrifying, both macro and micro (I speak from experience here). But, just as a fledgling company needs investment to grow and prosper, so do individuals. If you decide to take the plunge, then go all in. Sign up for a GMAT class, take trips to universities, apply for scholarships and grants, accept loans if necessary. After all, where is the reward without the risk? Just be sure to do all of these things prudently and with a clear head. Do not be duped into a system that will not reward your risk.Defaults will hurt us all.
Add Depth to MBA Application Essays by Owning Your Goals
February 5, 2013
When MBA admissions officers read your application, they want feel inspired by your personal statement; they want to feel that you have a strong sense of purpose and that you will aggressively work toward your goals. So, you need to ensure that you are not presenting generic or shallow goals. Although this problem is not industry specific, it occurs most often with candidates who will to pursue careers in investment banking or consulting but do not have a true understanding of what these positions actually entail.
For example, a candidate cannot merely state,
“In the short term, when I graduate from Wharton, I want to become an investment banking associate. After three years, I will be promoted to vice president, and then in the long term, I will become a managing director.”
This hypothetical candidate does not express any passion for his/her proposed course, does not show any understanding of the demands of the positions and does not explain the value he could bring to the firm. We suggest that to avoid these kinds of shortcomings, you conduct this simple test when writing your personal statement: if you can easily substitute another job title into your career goals (“In the short term, when I graduate from Wharton, I want to become a consultant. After three years, I will be promoted to vice president and then in the long term, I will become a managing director.”), you know you have a serious problem on your hands and need to put more work into your essay.
To effectively convey your goals, you need to own your goals. This means personalizing them, determining and presenting why you expect to be a success in the proposed position and explaining why an opportunity exists for you to contribute. For example, a former forestry engineer could make a strong argument for joining an environmental impact consulting firm (Note: This candidate would still need to explain why he/she would want to join one.); similarly, a financial analyst in the corporate finance department at Yahoo! could connect his/her goals to tech investment banking. Although the connection need not be so direct (especially for candidates seeking to change careers), relating your past experiences and/or your skills to your future path is still extremely important. This approach will add depth to your essay and ensure that the admissions committee takes you seriously.
Should Business School Curriculum Be Secular?
January 29, 2013
What is that cardinal rule for the dinner table again? Or is it for visits to the in-laws? Hm, maybe it’s at work… Something about how you are never to talk about politics, religion, or money, right? I know politics and religion are out for sure, but maybe money is supposed to be something else. Maybe it was hockey instead of money. No, that doesn’t sound right. Sex! Maybe that’s it. Now that I think about it, I think it’s politics, religion, and The Great Pumpkin.
Whatever it is, Warren Bennis, a professor at USC and regular blogger for Bloomberg Businessweek, just might have breeched social conventions over the recently passed holiday season when ideating for 2013 blog posts. In a recent post, Bennis asks the question, “Does religion belong in the b-school curriculum?” Of course, such a provocative title deserves a read (isn’t the above title why you read this post?), and read I did.
Setting aside the unanticipated, odd, and arguably off-the-mark direction the post takes in the middle, the question Bennis poses and fleshes out is a good one. Predictably, he is not in support of the advocation and dissemination of specific religions through the course of graduate business education. Rather, Bennis posits that in order to cultivate a more holistic and comprehensive “global mind,” business schools should at least offer courses on the religions of the world. He does not spend a great deal of time discussing the content of this proposed course, but some light mulling offers a pretty intriguing potential design that could have real value to MBAs.
Beyond available courses in Islamic banking, understanding how the culture of particular religions influences how commerce operates in the world’s economies is stimulating. Further, we all know that business is much more than the robotic exchange of goods and services for currency. Business is a social endeavor and without deep and respectful knowledge of cultures foreign to your own the yield of efforts will be anemic, even perhaps calamitous.
It would be interesting to superimpose religious diffusion and contraction with economic flux or to read white papers theorizing about religious influence in economics. If developed, I can imagine a course devoted to the intersection of business and religion to be quite appealing to many business students, particularly those interested in international business.
“There are three things you must never discuss with people: religion, politics, and the Great Pumpkin.”
– Linus
MBA Admissions Myths Destroyed: I Must Write the Optional Essay
January 8, 2013
When discussing MBA admissions, we often mention how challenging it can be to compete against a faceless mass and how one can feel disadvantaged if he/she does not seize each and every opportunity before them. And, of course, we want you to seize each and every opportunity, but not attempt to seize opportunities that do not exist and thus turn them into negatives. So, once and for all…
The optional essay does not need to be written by everyone and, by neglecting to write the optional essay, you are not at a disadvantage.
Many candidates feel compelled to write the optional essay, concerned that neglecting it means that they are sending the message: “I am out of additional fascinating stories.” The truth is that the optional essay is an opportunity for business school applicants to discuss problems that the admissions committee would notice anyway and thus “get ahead of the scandal.” So, if you have an F in a class, one particularly bad semester, a low GMAT score or have been dismissed from a position, you should write the optional essay to simply explain why, and not to make excuses. We suggest that you be as brief and direct as possible, while still conveying all the necessary information.
There are many other reasons to write the optional essay (if you are applying with a partner, for example, or if you have achieved something extraordinary that could not fit as an answer to any of the school’s essay questions), but you should absolutely not feel that you need to write it. Unless you have something vital in your candidacy that MUST be discussed, you should approach the idea of submitting an additional essay with caution. If you have nothing to explain and have generally performed well, you should not submit an essay from a different school just to fill the space or write a new essay repackaging your strengths. If you have nothing to write, you are in an advantageous position and should take a step back and appreciate it, not fret.
MBA job prospects
January 7, 2012
In a recent post, I brought you some welcome news about the 2012 job outlook for MBA hires. Well, good news is a wonderful thing in such an economic climate and WSJ’s MarketWatch threw together some interesting bullet points from GMAC’s report you might want to peruse.
With 2011 behind us and so many of you clamoring to get the GMAT out of the way before the test change in June 2012, it’s sometimes hard to lift up our heads and have a look at what happens after this whole grad school thing is over. Well, now is a good time to do just that ‘cause it sure looks like roses.
Business School Shakeout
December 15, 2011
What happens when a market is oversupplied? One outcome is that supply gets cut—in one way or another. A recent article in The Economist discusses the global competition of MBA programmes (spelling intended) and anticipates a major shakeout of an oversupplied market.
I don’t know about you, but I can’t go a day without seeing, hearing, or otherwise being pitched some ad about some school’s MBA program. Billboards, newspaper ads, radio spots, search engine pay-per-clicks… anyone can get an MBA at a seemingly endless list of places—both virtual and brick-and-mortar. But, is one MBA worth the same as another? Inevitably, no.
We all know that pedigree matters (and I think we all know it matters a little too much). That is not to say that one cannot receive a very high quality education at institutions not included in a top 30 ranking, but it is to say that an MBA from DeVry is not held with the same regard as an MBA from Dartmouth.
In this Economist article, the magazine posits that with such an influx of MBA programs in a very competitive global marketplace, those mid-ranking b-schools are in for some bloodletting. Programmatic offerings around the world are increasing rapidly—there are now 13,670 institutions worldwide offering a business degree. At the same time, the costs of those programs are rising and post-MBA compensation is stagnant. Now and into the future, b-students will need to distinguish themselves from the pack more and more. One way to do this is to gun heavily for a spot at a top-ranked institution where brand equity sows huge rewards in the job market.
What are the mid-ranked schools offering quality education to do? One option offered by The Economist: develop a niche. What are some others? What does a flood of MBA degrees mean to the value of the degree to the individual? Let me know your thoughts…
Executive MBA
December 14, 2011
Do you remember the first time you said aloud, “I think I’m gonna go to business school and get an MBA.” Hearing those words spill out of your mouth can be pretty jarring. I know it was for me. How long had it been since you made the decision before you actually told anyone? Everybody has a story.
That statement, as you all now know, unleashed a torrent of work. The research, the prep, the GMAT, the letters, the applications… Why again did you decide to do this? Fundamentally, all of has have reached a point in our lives and careers that it just “makes sense.” However, that point is different for all of us. Depending on what you’ve been up to since undergrad, you may well be looking at the traditional, professional MBA versus the Executive MBA. Is the latter right for you? Have you thought about it? Do you know what it is?
An Executive MBA (EMBA) is both very similar and very different from the “regular” MBA most of us think of when we picture b-school. The major similarity is that the degree you receive will be a Master’s in Business Administration regardless of whether there’s an ‘E’ at the beginning of your program’s handle. Much of the coursework will also be the same and the faculty delivering that coursework will spend most of their time working with your three-letter compatriots.
It’s really the differences that influence an individual’s decision to go the executive route. From one document released by UT Dallas, those differences are really housed in four core areas: audience, delivery method, focus, and price.
In short, an EMBA is specifically designed for mid-career executives and managers rather than those closer to the beginning of their professional lives. While the duration of the program is on par (approx. two years), it comes every other weekend and rarely, if ever, holds a class during the work week. Inevitably, the focus of the curriculum will be different for a room full of seasoned, successful business men and women than for a group of individuals still trying to make their mark and accelerate their careers (think leadership over general management knowledge). And, finally, an EMBA is more expensive (but, many companies reimburse or otherwise cover those expenses).
Some good information resources are the EMBA program websites at the business schools you are thinking of attending and The Executive MBA Council website. If you are interested in having a look at EMBA rankings, here’s a link to WSJ’s Top 25.
5 MBA Myths Debunked(?)
December 5, 2011
The Business section of the Huffington Post ran an article on Nov. 2 entitled “5 myths about MBAs.” Naturally, such a provocative title got me reading. I find the title provocative for a few reasons: (1) I have an MBA; (2) based on personal experience, it is very hard to find neutral or otherwise indifferent feelings regarding the MBA as a degree and those people who possess one (M-B-A is a polarizing three-letter combo); and (3) a lot of the stuff I’ve heard, read, and even thought myself before getting the degree was/is pretty darn far off the mark. So does this article help? Well, you be the judge, but here’s what I think:
People use heuristics to filter through a perpetual information barrage that would otherwise leave us drooling on the floor. These mental shortcuts allow us to make quick judgments and decisions in order to move through the sea of stimuli we continually face every minute of every day. One go-to heuristic for assessing people is stereotyping. We all do it. We take a broad brush and use it to paint a monochrome picture of groups of individuals whom are lumped together based on some shared aspect/characteristic/attribute.
Most commonly, race comes to mind whenever the word stereotype enters the conversation. However, that is far from the only instance in which we stereotype our fellow humans. For example, what do you think of people who work for Google? Thoughts on the Occupy Wall Street protesters? How about Tea Partiers? The Y-Generation? Baby Boomers? Teenagers? Old people? The poor? The wealthy?
While heuristics are helpful, they can give way to unfounded, unsupported, non-representative, erroneous conclusions about large swaths of humankind. The article, “5 myths about MBAs,” attempts to reveal truth and dispel assumption. This is a good thing, especially in light of some of the stuff happening around the world right now.
What’s important is that we avoid making generalizations (and taking the bait when they are made about us), particularly insidious ones that cultivate contempt. What’s also important is that those of us in the “MBA Club,” make sure we unfailingly add credibility to the education and what we do with it.
This is my new favorite article. I am sad that it took me half a year to stumble across it (was originally published in April 2011), but I will now be assigning it to all of my undergrads for the foreseeable future. In fact, it will be the first thing they have to read in any class I teach.
I will revisit some of the content and issues the author of this article brings up, but one fact you might find interesting is “when business students take the GMAT, the entry examination for M.B.A. programs, they score lower than do students in every other major.” Want an anecdote?
Last week, a student in my MGT330 class (Recruitment & Selection) approached me at the break. He says: “Hey, yeah, so I just wanted you to know that I was interested in understanding some of the stuff I’ve been confused about in here, so over this past week I actually read some of the textbook and things make a lot more sense now. Anyway, I just wanted you to know that.”
I was dumbfounded. The only return I could muster was, “Great! I’m really glad you did that! If you need any more clarification on some of the concepts that you’re struggling with, please let me know. I’d be happy to talk with you about it some more.” Then, because I couldn’t help myself, I lightheartedly added, “Who would have thought actually reading the textbook would have been so useful!”
I winked, he laughed. We have three weeks left in the semester.
Read the article I linked at the top of this post and send me some feedback on your thoughts and experiences. Business education is a topic I’ve tackled in the past and one that I will continue to write about in the future. To get caught up with and weigh in on some of my other ideas regarding the topic, here’s an incomplete but relevant selection of five posts for you to read:
- The MBA and Woody Allen: 50/50 and showing up
- Go Get your Letters
- Going to Business School with an Open Mind
- Part-time Business School Student / Full-time Professional
- Certified Managers, right?
Certified Managers, right?
November 23, 2011
While I was in business school my wife was pursuing a graduate degree in psychology and my sister was pursuing a degree in medicine. My alma mater’s GSB is right next door to its school of law, and a cousin of mine became a newly minted motorcycle mechanic just as I was beginning my second year of b-school. Being in close cognitive proximity to these professions while I was endeavoring to nurture my own led me to question the value of the education I was receiving in terms of concrete evidence that I would actually be recognized as management material when I was done.
Physicians, psychologists, lawyers, and mechanics are all tangible professions that are replete with defined processes for education, practical experience building, testing, certification, and practice. From these processes, society is assured that the mechanic they are taking their motorcycle to or the physician they are asking to mend their child’s broken arm will be able to do it, and do it well. In fact, these professions have erected governing bodies comprised of a set of respected peers within the profession that oversee their members’ compliance. Not only does the profession promise competence, but also that its practitioners “will conduct themselves with high standards and integrity.”1
In the early 20th Century, when the identity and influence of corporations was integrating itself into society, the “leaders of the business school movement proposed to ensure that the large corporation would be run in the interests of society by turning the occupation of management into a bona fide profession, with the educational underpinning, certifications, and code of conduct that go along with it.”1 As we all now know, these noble intentions never instigated much in the way of follow through.
I may well have been challenged while pursuing my MBA, but a missing rigor was not lost on me. While family members and academic colleagues worked toward becoming something, I plainly understood that I was not going to be automatically recognized nor assumed by a default virtue of my education to be a “manager.” What’s more, I was also aware that large swathes of society did not trust me or my classmates to do much of anything except fill our pockets at the expense of whatever got in our way.
All of this I found unfortunate. I still do.
1http://hbr.org/2008/10/its-time-to-make-management-a-true-profession/ar/1
