Educational Investments (ISAs) for Business School Students

When it comes to graduate degrees in business, ISAs have still not been explored as a financing option. However, the proposed framework for a business education ISA is essentially identical to that of college and trade-school ISAs, in that a student would agree to pay a set percentage of their future earnings, for a fixed term, to an investor in exchange for that investor financing their education. Yet, while the structures are identical, there are many factors which differentiate business education ISAs from others.

The timeline for business graduate education is longer than simply completing a bachelor’s. A full-time MBA program typically lasts two years, though there are many accelerated full-time MBA programs that only last a single year, especially at non-U.S. business schools, where this fast-paced type of MBA is common. Part-time and executive MBA programs vary in length, depending on how many credits a student enrolls in each academic semester or quarter. Both executive and part-time MBA programs are designed for working professionals who are attending school while maintaining a full-time job.

MBA programs generally offer a range of concentrations or specializations that allow students to acquire expertise in a specific aspect of business, such as finance or technology. So, when modeling business school ISAs, it is important to consider which specialties are most likely to increase your job opportunities. MBA graduates with in-demand specializations are paid higher wages than their peers who focus on less-marketable disciplines.

Starting salaries and bonuses vary greatly among MBA graduates, with alumni of highly ranked business schools in the U.S. earning notably more than their peers who graduated from lower-ranked schools. Among the highest ranked business graduate schools (per U.S. News) where the average salary and bonus were highest, the overall average compensation was $166,999. By contrast, at the 10 ranked business graduate schools where the average salary and bonus were lowest, the overall average compensation was $53,464.

Data shows that pay among MBA grads depends on which sector they enter. Those who work in the consulting sector are paid an average salary exceeding $130,600, while those who work at a nonprofit typically earn less. The average newly minted MBA who works at a nonprofit earns slightly more than $57,500.

In a similar fashion to college and trade-school ISAs, a business school ISA would define upper and lower wage boundaries and the graduate would only share their income when within these boundaries. Because of the variation in projected incomes, the lower boundary would prevent recent graduates from having to share their income if they end up in lower paying positions or become unemployed for any reason. The upper boundary would be much more specific to the graduate’s industry, but could soundly be set at around 150 percent of the average annual income for each specialty.

These factors could make business school ISAs a possible method for students to achieve an education that would have been otherwise financially unattainable, while also giving investors a reliable ROI.