Employer Funding for MBAs: Myth or Reality?

New data show that a substantial number of MBA candidates are being paid by their employers to pursue a pricey graduate business education, but are there strings attached?

Funding an MBA is a huge personal investment, with tuition fees for top-10 programs six-figure sums. Unless MBA aspirants have substantial savings tucked away, they will need to draw on other funding sources to cover the cost of their studies, especially those on full-time courses without a salary. 

Historically, many employers were willing to foot the MBA bill in return for increased motivation and loyalty, as well as the enhanced skills and knowledge gained from the degree. But with the concept of lifelong careers now alien to many western workers, employer funding has been harder to come by. 

However, new data suggest there are still bright spots. Of 1,484 MBA students who returned to work at their previous employer after graduating, 35 percent had at least 75 percent of their tuition fees paid by the organization, according to Bloomberg figures. Of those graduates, 57 percent were funded by consulting firms, financial services groups or the government, mostly the US military. Many had their living and travel expenses covered too. 

At INSEAD, a top business school in France and Singapore, 15 percent of MBA students are funded fully or partly by their employers, up from 13 percent five years ago. In addition to the usual consulting, finance firms and government departments, airline and cosmetics companies are also sponsoring INSEAD students. 

“Clear benefits” of employer funding

Virginie Fougea, INSEAD’s global director of admissions and financial aid for degree programs, says there are clear benefits for employers and staff alike. “Sponsored employees can be encouraged by how their employers value them, and be motivated to excel and contribute further,” she says. Committed employees may become advocates for their firm, encouraging other MBA students to apply to work there. 

MBA students who are backed by their employer also don’t face the same pressure on performance, finance and recruitment as their peers at business schools do, as they have financial and job security. Fougea says employers may offer sponsored staff more leadership roles after their MBA, which prepares them to step up in their career.  

[See the Top 10 Business Schools for MBA Employer Funding]

Yet employer funding often comes with the condition that MBA students return to the company after graduating, sometimes remaining for a few years. This explains why part-time or Online MBA candidates are more likely to receive employer funding than full-time students, according to Graduate Management Admission Council (GMAC) data. The former can continue working, applying what they learn directly in the workplace. 

But sponsorship can limit career opportunities post-graduation, and signing a lengthy employment contract is a downside for students who want to try their hand in a new industry or function, says Shelly Heinrich, associate dean for MBA admissions at Georgetown University’s McDonough School of Business. 

“Pursuing an MBA opens the doors to many different opportunities. If you decide to pursue them, you may have to repay your sponsored tuition,” she says. It is important to understand these terms prior to signing a contract and to weigh your options, she says. 

However, MBA degrees retain their value for years and come with well-established alumni networks, says Heinrich. These networks can be leveraged to change careers further down the line, even if you return to an employer for a few years so as to pay back their investment in you, she says. 

Six percent of the McDonough school’s incoming MBA cohort has partial or full employer funding, up from 4 percent in 2014.

So how and when is employer funding granted? 

Some companies pay directly to business schools, seeking accountability. Others reimburse students directly after their courses finish, sometimes dependent on whether they receive a certain grade. In other cases, tuition is defrayed from employees’ salaries once they return to the organization on graduation. 

The timing of payments is important, because schools may have different tuition due dates. At the McDonough school, fees are due on the first day of classes, for example. This means students expecting employer funding may have to come up with a substantial amount of money themselves upfront, for instance a loan from a bank that can be repaid once employer funding comes through. 

Is employer-funded MBA tuition “nearly extinct?”

When it comes to doling out substantial funding for MBAs, consulting firms are the most prolific, according to the Bloomberg data. That’s because there’s a strong history, even an expectation of funding at these firms, whose greatest asset is their people. 

Deloitte is one of the most generous on this front. It’s Graduate School Assistance Program pays for MBA tuition, with consultants paying all upfront costs and Deloitte reimbursing them via taxable year-end bonuses at the end of their first and second years back at the firm. 

The program offers more than a free education, says Stacy Blackman, an MBA admissions consultant. She says other perks include access to top MBA admissions teams: Deloitte runs a Graduate School Symposium, a chance for employees to rub shoulders with the top business schools from around the world. 

Schools may perceive sponsored staff as attractive MBA candidates, given the competitive process to secure an investment in an employee’s long-term future. 

But outside a handful of industries, Blackman says employer funding is “nearly extinct”, having been decreasing in the years since the economic crash in 2008. This is because the pace of career movement is so fast among fresh MBA graduates today, says Blackman. “Professionals rarely stay at a firm long enough to warrant employer sponsorship.” 

She advises prospective students to “create a proposal that makes the employer see the business value” of an MBA, which includes a global mindset and a strong network, in addition to the management and leadership skills one will acquire. 

Brandon Kirby, director of MBA admissions at the Rotterdam School of Management, says that Indonesia, Korea and Japan are the most common countries with companies which sponsor MBA candidates. This may be because it’s more common to spend a larger portion of your career with one company in these nations, especially Japan. 

“Retaining top talent is one of the biggest reasons we see companies sponsor students,” says Kirby. “It's a way for a company to demonstrate that they see a future for their employee and that the employee is a critical part of that future.” 

Yet only five percent of full-time MBA candidates at the Rotterdam school are sponsored. Because employer funding is scarcer than previously and is competitive to win, it’s important that employees apply as early as possible, sometimes months or years in advance of starting at business school, and sometimes even before knowing they have been accepted onto an MBA. 

Yet some employers may be convinced to provide money halfway through a course. For example, MBA students who successfully complete summer internships and receive full-time job offers may also receive an offer to pay some or all of their tuition fees, or receive a substantial sign-on bonus earmarked for the same purpose. 

Ultimately, MBA aspirants have to weigh the pros and cons of seeking employer sponsorship. It can drastically lesson the financial burden of pursuing an MBA, and lead to brighter career prospects.

But few sponsorships come without strings attached. 

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