What is The average time to recover $$$ investment in MBA Assuming working in the US post MBA in say IB/Consulting

Yeah, top 5 *only* ... people out of Chicago and Columbia don't make any money....

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kidderek

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02 Mar 2007, 10:30

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I wouldn't count opportunity cost, it is bogus. Why would you include two years salary when you're not working during those two years? The only debt you incur is the bottom line. If you slum it, you can pay off the 80k within a few years and you're golden.

Of course, that's if you're single or attached to someone who is independent.

Mark4124

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02 Mar 2007, 10:40

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I said 50k is easy to make. I said the opportunity cost should be at least 100k. B-school is 2yrs, not one...

2 X 50k = 100k

I never said anywhere that I was making, or I expected that everyone would be making 100k...

Read what I wrote people. I said the opportunity cost for b-school... THATS 2yrs of lost salary... not 1.

pelihu

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02 Mar 2007, 10:47

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venky1979

Hypothetical case of a MC from top 7 B-school salaru in 1000 USD

Year Net Anual Salary
Year1 100
Year2 160
Year3 210
Year4 260
Year5 320

Total = 1050 USD
Now we will progressively reduce the costs

With 40% decutions Tax etc 630
150K average Salary Forgone 480
150K MBA Tution + living cost 330
180K Living Expenses for 5 years in US 150

So End of 5 years he has made 150K USD
Dont the figures look reasonable atleast for top 5 colleges ???

Your numbers only show salary forgone during the 2 years of business school. You are assuming that people would make $0 without an MBA during the 5 years afterwards. Assuming that they have reasonable jobs, and earn reasonable raises for work experience, the different would be much lower.

rhyme

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02 Mar 2007, 11:47

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gmatclb

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Mark4124

Making 50k in the US is a joke... I would expect the opportunity cost to be at least 100k for nearly all US applicants.

Until I got my big bad raise this fall, our household income was around $45k. Only now are we finally breaking through the $50k mark, but not by a lot. BTW - we're homeowners and don't feel pinched. Nope, very little art on my walls, but we have no credit card debt. And we're not living off our parents at all.

There are a lot of people out there who don't make tons of money - many of whom do it on purpose. Ithaca is filled with simple-livers -- people who decided that growing a garden, spending time with their kids, and avoiding that burgeoning ulcer was more important that making gads of money. These are people with PhDs who simply opted out of the rat race.

Now I doubt that many of these folks are applying to business school - or would ever event want to. The opportunity cost might very well be closer to $100k, once you've thrown out international applicants. But as for the non-MBA types out there, if you don't live in NYC or have a passel of kids, I wouldn't say that living on $50k in the US is a joke.

If you're already making 100K, then going back to school would probably be a bad decision. Full-time, that is.

Coming out of b school, (non IB and MC) average salary is less than 100K.

I would disagree. It really depends on what you want to do. A lot of US based engineers pull down near 100, and I myself pull down about that figure.

I know that when I go to school I wont be making that much more than I am now - but there are a few key differences.

1) I'll change industry. Out of IT. COMPLETELY. That alone is worth it to me.

2) The options and long term earnings potential I will have so far exceed those in my current industry its not even funny.

So, in your case, if you make $100K its not worth it. In my case, it is. The lost income is a b1tch sure - all told I'll loose out $200K in salary and $100K in tuition, for what will amount to a $10K salary increase. My payback period, if you look at it that way, is 30 years.

If however, you consider that I've been making about $100K for the last 3 years, and I can't seem to get a raise above that - it makes sense.

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02 Mar 2007, 11:54

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venky1979

Your numbers are insane. You don't get 60,000 raises per year. Nowhere near it.

Here's a more reasonable table taken from actual salaries at a consulting firm where I worked. SA I is typical post MBA starting role.

Year 1: Senior Associate I - 105K
Year 2: Senior Associate II - 115K
Year 3: Senior Associate III and IV - 135K (assuming a quick promotion)
Year 4: Manager - $150K (could get here by year 3 if a top performer)
Year 5: Manager II - $175K

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02 Mar 2007, 11:56

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I totally agree. Perhaps most importantly I want to attend university again, be a student, feel young and generally get away from the drudgery of a 9-6 life for a couple of years.

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02 Mar 2007, 11:57

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I think the best way to calculate how long it takes for an MBA to pay for itself is to project income and expenses for two scenarios: (1) The path you would follow if you did not go to business school (2) The path you would follow if you went to business school.

For those two scenarios if you calculate income and subtract expenses for each year, many years into the future, at the point where scenario 2 gives you a higher number, it can be said that that is the point where an MBA has been paid off.

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02 Mar 2007, 12:07

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pelihu

venky1979

You are right

But I am not considering difference in life with without MBA
I am interested in costs of paying of loans
I am considering loss of salary in thoise two years as you are jobless and without an income. Note MBA does not just give you a Job. It gives you better opportunities in the field u wanna be which is not true or very difficult if you do not have a MBA. So this part of the benefit cannot be weighed in Money

Example take my case I am totally frustrated in my Job even though I am a Project manager in Indian IT Big 3. I want to switch over to MC or a general management kind of Job. Thats the reasoning behind not considering the fact that post mba the salary would be 0$

Also being in India My salary would at max touch 20000 USD and would never earn something like 75000 USD which is the pre-MBA average

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02 Mar 2007, 12:08

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Yeah definately... I haven't even thought about raises and promotions...

I find it completely moronic to say... "if you are already making 100k a year" going to business school would be a bad idea. I should say that I don't make 100k... but if I gave myself a few short years I would be... but I don't like the line of work I am in and isn't that worth something too? Isn't important to do something you enjoy and find intellectually stimulating?

venky1979

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02 Mar 2007, 12:10

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rhyme

venky1979

whoops eye opener rhyme but I gt this data from a careers in consulting website where the salary projection for IVY league MBA is 200K + in 3 years.
so I assumed some data on calculations

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02 Mar 2007, 12:42

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venky1979

You may be you save 150K in say 5 years if from H/S/W and say around 120K if from Kell/Mit/chic/columbia/Berekeley and the numbers drop steadily

I mean going back to the original question doest it look reasonable that u are debt free by end of 3.5 years in top 5 and increase to 6 years as u go down the ranking???
I expect a plateau un the trends in the elite and trans elite because these schools offer scholarships to offset the costs

ok we are getting ridiculous. Unless your debt is $3,000 there is no YEARLY difference in payoff between Top 5 and Top 7.. because the average salary difference is only $3,000, not even a drop in the $150,000 debt bucket.

Lets take a look:

Overall BW RANK - School - 05 average starting salary and bonus

2 STANFORD $117,456
3 PENN $116,882
1 HARVARD $116,730
9 DARTMOUTH $116,380
7 COLUMBIA $113,184
6 UCHICAGO $113,024
4 MIT $112,632
5 NORTHWESTERN $110,435
13 NYU $108,790
12 UMICH $108,231
14 UVA $107,546
8 UC BERKELEY $105,848
11 DUKE $104,081
17 CORNELL $104,010
20 UNC-CH $100,272
15 YALE $100,108
10 UCLA $100,004
36 GEORGETOWN $99,768

As you can see, even the difference between #1 and #10 is less than $10,000. Bottom line, you will be measuring the difference in pay-off rates in *weeks* not years if you are applying to any of the top schools.

rhyme

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02 Mar 2007, 12:45

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venky1979

rhyme

venky1979

whoops eye opener rhyme but I gt this data from a careers in consulting website where the salary projection for IVY league MBA is 200K + in 3 years.
so I assumed some data on calculations

Well, I hope you are right cause that suonds great. But I doubt it.

The average salary for GSB grads 3 years post graduation was $143K - that sounds more in line with what I'd expect.

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02 Mar 2007, 14:39

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kidderek

I wouldn't count opportunity cost, it is bogus. Why would you include two years salary when you're not working during those two years?

I second this. I think some of us will agree that even if the MBA's effect was neutral from an ecomonical point of view, we would go anyway for several other reasons, including, but not limited to, not working for 2 years.

Cheers. L.

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02 Mar 2007, 15:57

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Let's not forget that we have a lot of international applicants here. For them, the possibility of post MBA employment in the US and possibly a green card later, it is absolutely PRICELESS. It is their chance of a lifetime.

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02 Mar 2007, 16:40

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cbreeze

Maybe you meant for SOME of them, the possibility of post MBA(...)? I'm an international and please count me out of that group.

I do, however, acknowledge that the prospect of working in the US (or Western Europe) may be the main or sole motivation for some applicants.

Yet, for some other international applicants, the fact that getting a US MBA will not make financial sense unless you are willing to spend at least 5-10 yrs away from home, is actually a deterrent. I have lots of friends with good credentials who'd love to go for a US based MBA. But when they factor in the "being away from home" issue, they prefer to go for the local options. I've met several GMAT takers with 700+ scores who prefer to stay home and never apply to any US or European school.

Other internationals get full sponsorship from their employers, so there's no actual cost for them. And the opportunity cost in this case is debateable, since you'd probably would not want to reject a sponsorship offer unless you are willing to quit.

Cheers. L.

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02 Mar 2007, 17:05

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OK, I stand corrected. I should have put "For SOME" , but I bet there are lots of "SOME".

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02 Mar 2007, 17:10

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cbreeze

OK, I stand corrected. I should have put "For SOME" , but I bet there are lots of "SOME".

I guess you are right. There are probably lots of "SOME".

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