Is an MBA Worth It?

The price tag of an MBA and the rising debt of newly-minted business school graduates could make anyone stop and second guess their plans to return to business school, leaving them wondering, Is an MBA worth it? It’s important, however, to consider the cost of business school an investment—it’s certainly what the top MBA programs do, emphasizing the “investment” factor over the price of tuition. Frankly, we agree.

While you can’t ignore the $42,000 in debt that the average MBA grad accumulates, you can weigh that initial investment against future earnings and career trajectory to make an informed decision about how the return on investment (ROI) of an MBA figures into your future. Here are some things to consider about the ROI of an MBA that will help you answer the question, Is an MBA worth it?

The ROI of a top-10 MBA program

A recent Poets & Quants commissioned analysis shows a staggering advantage to attending a top MBA program at a school like Harvard Business School or Stanford Graduate School of Business. The analysis shows an historical 20-year earnings of more than $3,000,000 for business school graduates, compared to $1,301,000 over 20 years for bachelor degree holders.

In addition to these findings, the study, using conservative salary estimates and not taking into account stock-based compensation and other benefits, highlights a difference of more than half-a-million dollars over the 20-year earning period between graduates of top 10 business schools and alumni of all other MBA programs.

To gain admission into these highly selective schools, you need above-average credentials: strong undergraduate performance, an upward career trajectory, leadership experience, and a killer GMAT score.

The average GMAT score at these top MBA programs is over 710, which is in roughly the 92nd percentile. When you consider that GMAT test-takers already comprise a comparatively high-achieving candidate pool (as opposed to an entire high school class taking the SAT), gaining admission into these MBA programs is extremely competitive, even for the best applicants.

Maximize your investment

Of course (and statistically), not many people—not even many applicants—gain admittance to Sloan or Wharton. Still, as the Poets & Quants analysis suggests, there are plenty of ways to get the highest ROI out of your time and cost of tuition.

After all, the best business school is not necessarily a top 10 business school. It’s the school where you will be the most successful and where your career goals will be nurtured.

In budgeting your MBA finances, first do some addition …

You’re going to crunch numbers in your MBA program anyway, so might as well start now by gathering the pertinent figures: what are your target schools’ tuition and fees? Don’t forget to account for cost of living and related expenses, which can vary drastically.

For example, attending business school in a large metropolitan area like New York or San Francisco will be significantly more expensive than getting your MBA in certain other parts of the country. If you have a family, the price of your MBA will impact your family members, too. Where will your spouse work or children attend school?

Then do some subtraction …

One of the best ways to maximize the ROI of your MBA tuition is to reduce the ‘I’ as much as possible. Explore scholarships and fellowships available to offset the price, and apply early, preferably in Round 1, to ensure you can also apply to (and be considered for) all available scholarships, student loans, and other forms of financial aid.

Next, make a case to your employer for providing tuition assistance for all or some of your MBA. If your employer does kick in something toward the cost of your MBA, keep in mind that you may need to enter negotiations with him or her. This often involves some kind of commitment on your part to remain with the company for a year or more post-graduation.

If you’re planning on pursuing a full-time MBA, factor in the lost earnings potential of two years of full-time work. How long will it take you to get that money back at your post-MBA salary? While two-year MBAs offer the most financial aid and have some of the highest ROI, the best solution for you may lie with a hybrid program, part-time, or executive MBA (EMBA), which will allow you to continue earning a salary while studying.

Add it all up!

You can’t calculate the ROI without the ‘R’, so you might need to venture some educated guesses here. How will your career change after graduating from business school, and what is your expected earning increase? Are you going from real estate to finance? From finance into the nonprofit world?

As you’re narrowing your potential business school list, look at industries in which graduates end up working, and the average salaries of their positions. More importantly, when you’re looking for a great fit, make sure that the recruiters who come to your chosen schools are in fields that correspond to your post-MBA goals.

For example, if you’re interested in high-tech startups, a school that graduates primarily financiers or bankers might not be the best investment. Lastly, think long term and consider where you’d like to live and work. New York City salaries don’t go as far when you consider New York City living expenses, but smaller towns may not give you opportunities you desire.

Don’t forget related returns and investments

It might not be easy to place a price on the knowledge you acquire or the people you meet, but these are valuable aspects of pursuing higher education in general—and an MBA specifically. The skills you’ll learn in business school—management, marketing, finance, project planning, and analysis—are yours forever and are translatable across many industries.

The connections you’ll make in business school are just as valuable. You’ll meet colleagues, industry professionals and recruiters you wouldn’t have met otherwise, and you’ll have months and years to build these relationships. Also, keep in mind that business school is one of the few places where employers come knocking on YOUR door instead of the other way around.

So, is an MBA worth it? What is your personal ROI when thinking about your MBA education? Share with us in the comments.

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