Are MBAs Becoming Worthless?

Five of the top 10 global MBA programs are now accepting GRE scores in addition to the GMAT from prospective students, and there are now over 190 business schools around the world who accept the GRE, including Harvard Business School.

With the job market still waiting to see the light of day, the class of 2009 is eyeing graduate school as the next logical step in their career progression as their graduation date approaches. And along with these soon to be graduates, many recent grads who are either out of work or looking to get a leg up on their competition are also signing up to take the GRE.

In order to apply into an MBA program, most schools require the GMAT, not the GRE. The GMAT is specific in scoring a student based on their management skills that are learned both through work experience and school, while the GRE covers a range of subjects that are learned at the undergraduate level. It looks as if these programs could be accepting the GRE in anticipation of more students applying right out of college or with little work experience.

This leads us to wonder, between the economy and more programs accepting the GRE, what will this do to the value of an MBA degree?

Tara Nordstrom, a marketing professional, has been in the work force for nearly three years and is looking to take the GRE in hopes of getting into a management program. While Tara agrees that more and more students are looking to further their education, she doesn’t believe it will devalue her degree.

“There is still a lot of work in order to get an MBA- that doesn’t change,” said Tara.

She believes that even if the new acceptance of GRE gives more undergrads a chance to continue their education, the lack of real world experience will hurt them in the long run. Internships help, but a few years on the job can make a world of a difference in the rough job market.

“Once they’re out of school with an MBA in hand, they’re still where they started after their undergraduate,” said Tara.

It is true that an MBA is usually sought after by those with some real world experience, whether or not it includes business or management. But the economy and job market can close a lot of doors for people. Professionals, who are looking to get an MBA after beefing up their resume for a few years, should expect younger classmates to be alongside them as graduate school is seen as a more promising post-graduation path.

Personally, I have told many undergrads to think about graduate school before spending months searching CareerBuilder for their big break. The rise of graduate school applicants was going to happen with or without the downfall of the economy. For our parents, going to college was a privilege. For our generation, it’s a necessity.  And there’s a good chance that soon graduate school will become a necessity as well.

What will make someone an ideal hire in the future is not only a degree, but a diverse resume that includes graduate level education and a few years of work experience. After all, the reason for more management schools accepting GRE scores is to gain more diverse students, not to make it easier to slide into just any program.

As for Tara, her own reasons for going back to school are to “develop an edge”, not because “everyone and their mother is [now going back, too].”

What’s most important, though, is that an education is only worth something if there is real world experience to back it up.  “When you become a bookworm and all you do is study, you aren’t street smart,” said Tara.

**To check out MBA programs that are accepting GRE scores, click here.

Is Going Back to School in the Recession a Good Idea?

Recent attendance numbers at local universities have shown an increasing number of new graduates (and even past graduates) enrolling back into school for advanced degrees or specialty training. Most of this comes from the lack of jobs for new grads, and it seems to be a good way to pass the time during our economic downturn. But is this really a smart way to spend a period of low employment? Read more

I’m Debt Free!

I’m not one to toot my own horn, but I will today because, frankly, I deserve it.  Today I became a card-carrying member of the Debt-Free club.  This beautiful day follows an intense two year period of handing over half of my salary towards debt repay, and I am tickled pink to have finally gotten to the point where I don’t have to throw away my paycheck on crap that I purchased eight years ago.  Read more

Are Student Loans the New Mortgages?

A few days ago, I was digging through the NPR Talk of the Nation archives when I discovered one–featuring NYC-based writer, Melody Serafino–that I found particularly interesting. The topic was Melody’s article in News Week a few months back, Subsidized in the City, which touches on the fact that a good majority of twenty-somethings still receive significant funds from their parents to pay for rent, utilities, and superfluous spending.

A young man had called in to say that times have changed and young adults are coming out of college with $50K in student loans. Those minimum payments tacked onto rent, utilities and other spending was simply putting their expenses over the edge, thus creating the need to rely on their parental units to help pay the bills. This statement bothered me for a few reasons.

College grads nowadays are completely misinformed about their expected post graduation lifestyles. They’re also ill-informed in regards to how adequately choose a school that’s going to be affordable and beneficial. His comments made me realize that this is the sub-prime debacle happening all over again. Young men and women are taking out enormous loans to pay for school and school-related expenses while not having the foresight to realize that paying these off with their proposed career choice may or may not be realistic plan for starting out. And universities, much like many of the banks involved in the sub-prime crisis, are more than happy to take the loanees money–even if they’ll have trouble making payment.

Fortunately, the solution to this monetary pitfall is simple: just like a mortgage or any other significant expense, if you can’t afford it don’t get it. For fear of sounding overly harsh, I’m not saying that all schools are overpriced. There are plenty of institutions that offer affordable educations. However, I do think that a lot of middle class students are far too quick to jump on board with a school asking for a $10K-$15K annual tuition fee rather than a more affordable institution.

Obviously this is all conditional. If you’re going to study finance at an Ivy League, have done your research, and know you’ll be able to start out at 80K a year with a prestigious degree, by all means, go pay Harvard your $35K a year. But, if you’re studying say, general business administration and aren’t sure what industry you’ll want to focus in on, a viable alternative is to attend a school in your native state (if you don’t receive any significant grants or scholarships that will help subsidize some of your costs out of state).

With Bachelor degrees as commonplace as they are, I don’t see any reason for someone to spend 50K for a college education. There are plenty of good schools – mainly state schools – that are far more affordable than private colleges. It seems to me that students are rapidly choosing schools based more on status and stigma rather than on financial viability, and it’s hurting them greatly after graduation. There’s nothing special or impressive about being $60K in debt. High schoolers, and their parents, must not become so enraptured in attending a “prestigious” instituion if it will put the student in a major hole that will impact the next decade (or more) of their lives. We have got to start making financial education a priority with our students. Otherwise, we’re just doing our students a disservice.

Personal Story: Two Years to a Debt-Free Existence

In a new monthly feature we’re going to call “Personal Story”, we’re going to publish our own and reader’s personal finance stories. We’ll focus on how we got into debt, how we’ve worked (or working) our way out of it, and how we keep ourselves on track financially. The hope is that we can all get ideas and encouragement from each other to find ways to live within our means, stick to budgets, and save for a rainy day. It’s hard to stick by these plans by yourself, so we want to try to build a community that encourages these principles. I’m going to kick things off by talking about my own debt story.

I moved to NYC about four years ago, straight out of college. I had a nice little bundle of student loan debt, although nothing compared to some of my friends who owed $30-$40K in student loans, and a couple of low-balance credit cards. All in all, I was in pretty good financial shape. I was bunking with a friend of a friend who lived in Washington Heights (Manhattan). It wasn’t the greatest setup since I was crashing on a living room sofa, but I ended up staying there for about four months until I got settled in. Around the time that I was planning to move out, my friend found out that she was eligible to purchase a studio apartment in one of those rare, somewhat mythological middle class housing projects. Since she had to move quickly to take advantage of it, I was left with the apartment if I wanted it. Needless to say, I was pretty psyched about having my own place, especially considering that it came without all the hassles of a broker’s fee and moving expenses. The major downfall was that I had to sign a new lease and the previous $875/month shot up to around $1,100/month. For a lot of people in New York, this would still be considered a bargain. But since I was fresh out of school with no real work experience my full-time job was bringing in around $26K a year.

Like most people fresh to New York City, I had conjured up my ideas on what my life in the big apple would be like. It was primarily based on what I saw on television and was a far cry from the way that I could even remotely afford to live. In my attempt to stake out the perfect little urban utopia I had imagined for myself, I decided to keep the apartment – even though it was well over the amount I could afford to pay. I got my father to co-sign for a personal loan which I used to furnish the new place and pad my checking account for a little while. I lived decently for the first six months or so, somehow managing to still have a few dollars left over to occasionally grab drinks and eat out with friends. But like all free money, my loan finally ran out and my lack of cash started to catch up to me. My answer to the problem was credit cards. I began funding my burgeoning social life with them and eventually took to paying all of my monthly utilities with credit for well over a year.

Since I was using my entire paycheck plus some to pay my rent and my credit cards to pay my utilities, I had little cash left over to buy anything else including food. I reverted back to my college days, buying Ramen by the boxes and filling up on cheap bagels. I was fine with this because food was something I was willing to scrimp on in order to have some cash on hand to play with. After about a year, I reached a point where I couldn’t afford to keep living in the one bedroom by myself, so I found a room for rent in the city and moved into a tiny bedroom on the Upper West Side. I stayed there for a few months and then continued to hop around from place to place.

Fast forward to a few years later, I found myself at a new job with a better title with a higher salary. And not even two months after securing the job, I had found a new apartment to move into – a two bedroom that I shared with a roommate for $2,100. My share was $1,050. This move was basically a reaffirmation to make me feel like I had “made it” in the big city – even though it was taking a nice, fat chunk of my earnings away each month. This kept on for about a year and I continued to struggle to pay my bills. By this time, my credit cards were completely maxed out and I was being moderately harassed by creditors

My moment of realization came two years ago when I was still living in the overpriced Lower East Side place. After buying a laptop on credit and not making payments on it for well over a year, I was threatened with a law suit for negligence to pay. After many a phone call with a shark lawyer who represented the company, I started rethinking my financial situation. I sat down with a close friend and hashed out a budget. I joined Consolidated Credit and let them take over sorting through my debts, and this was probably the single most effective thing I have ever done in managing my finances. They did a fantastic job at getting creditors off my back and negotiating fair interest rates. Realizing that I couldn’t possibly keep paying a huge portion of my rent for a bedroom in Manhattan, I decided to downgrade my living arrangements. I found a nice room in Brooklyn for $600 a month in a much larger space.

Fast forward a few more years, I’m still here, and in November I will be completely debt free. It would have never happened without me making some drastic changes to my lifestyle. Once I started to focus on myself and what I needed to do to be able to live well, I was able to stop focusing on trying to impress other people and get myself on sound positive financial footing.

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Submit your own “Personal Story” to lauren@lifestylermag.com. If your story is chosen for our monthly feature, you will receive a $30 Amazon gift card and a by-line.