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What is The average time to recover $$$ investment in MBA

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venky1979
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 08:39
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What is The average time to recover $$$ investment in MBA

Assuming working in the US post MBA in say IB/Consulting
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kidderek
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 08:46
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venky1979
What is The average time to recover $$$ investment in MBA

Assuming working in the US post MBA in say IB/Consulting
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I think that depends on one's spending habits. If you're single and money savvy, I think you can pay it off very quickly. Those IB/consulting hours will probably work in your favor.
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 08:51
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The Forbes ranking lists an average time to payback for each school.
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venky1979
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 08:53
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One quick related question many schools mention average base salary is around 100,000 USD
What exactly do u mean by base salary ?

Does it mean normal salary minus perfomnace bonus and variable components??
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kidderek
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 09:12
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venky1979
One quick related question many schools mention average base salary is around 100,000 USD
What exactly do u mean by base salary ?

Does it mean normal salary minus perfomnace bonus and variable components??
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I believe it is what you would be paid biweekly as an annual figure.
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Paul
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 09:29
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I believe 4 years is fair but of course, it depends on what field you work in, whether it was a good year for bonuses and your spending habits. I know some ppl who worked in IB and took 3 yrs to pay back a 90k sterling pound debt (for him and his wife).
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 09:54
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also depends on how much you invest n your mba.. for all those guys with full tution scholarships and stipend filled tuition waivers..it would be very very easy to recover the money( if they'd put any :) )!!
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 10:03
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It seems like everyone is looking at this exclusive of opportunity cost. If you stop and think about it, an MBA for $100,000 doesn't cost $100,000. It costs you $100,000 plus two years salary. For some people that might be another $20,000 (indian IT maybe), for some it might be another $100,000 (junior analyst in the US), for some it might be another $200,000 (senior analyst in the US), and for some the opportunity cost might be more like $300,000 (Ibanker).
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 10:06
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rhyme
It seems like everyone is looking at this exclusive of opportunity cost. If you stop and think about it, an MBA for $100,000 doesn't cost $100,000. It costs you $100,000 plus two years salary. For some people that might be another $20,000 (indian IT maybe), for some it might be another $100,000 (junior analyst in the US), for some it might be another $200,000 (senior analyst in the US), and for some the opportunity cost might be more like $300,000 (Ibanker).
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Indian IT range starts as low as 8000$. it does not make much difference to this cadre but it certainly does for an Ibanker with 300K..
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 10:57
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mbadart07
rhyme
It seems like everyone is looking at this exclusive of opportunity cost. If you stop and think about it, an MBA for $100,000 doesn't cost $100,000. It costs you $100,000 plus two years salary. For some people that might be another $20,000 (indian IT maybe), for some it might be another $100,000 (junior analyst in the US), for some it might be another $200,000 (senior analyst in the US), and for some the opportunity cost might be more like $300,000 (Ibanker).

Indian IT range starts as low as 8000$. it does not make much difference to this cadre but it certainly does for an Ibanker with 300K..
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Depends on where the 'Indian IT' is. If the 'Indian IT' is in the US, or as a matter of fact in the UK, surely he/she would be getting much more. I know Microsoft pays about 80-100K (USD) for Software Engine and Software Program Management and there are hundreds of 'Indian ITs' there!
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 11:41
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I didn't vote because the available choices are too limiting. Seriously, only IBankers and people will full scholarships have any chance of recovering their investment in 4 years.

As Rhyme mentioned, in addition to tuition you need to calculate the cost of 2 lost years (you can deduct whatever you make from a summer internship).

Also, I don't think anyone has mentioned that you cannot just add up your entire post-MBA salary and apply it towards the costs. You must figure the difference between pre-MBA and post-MBA compensation, and the difference is then applied to costs incurred in obtaining an MBA.

So, for example, it might look like:

Costs:
150k tuition, fees, travel, job search, new suits, etc.
150k Lost Salary (you actually only lost about 18 months of your life if you do an internship, not two full years).

Total to recoup: 300k

So, your first year out, if you take a good general management job, you might make 100k + 20k bonus. Compare that with a pre-MBA salary of 75k and you're 45k ahead. Deduct out taxes (because I don't believe student loans are tax deductible) and figure in any additional "necessary" costs of having an MBA, such as interest on loans, more expensive beer, meals, rent, car, etc., and that is how much you can apply to paying off the costs of an MBA - say 10-15K in this example.

The hope is, of course, that an MBA will set your career on a totally different track, so after 3 years in a general management job, you can be 50-75k per year ahead compared to no MBA. And hopefully, things will continue to improve after that.

So, I really think that given an average pool of costs and an average job, it will take most people at least 7-8 years to recoup the costs of an MBA. It's easy to see why a lot of people decide to take the big money from consulting or the bigger money from Ibanking for a few years after graduation, even though working conditions are not ideal in either case. They can't afford not to.
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 11:53
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If you are a top talent in the Silicon Valley with around 5-7 years of experience, you can easily make 125K+ excluding bonuses and options.

sm176811
mbadart07
rhyme
It seems like everyone is looking at this exclusive of opportunity cost. If you stop and think about it, an MBA for $100,000 doesn't cost $100,000. It costs you $100,000 plus two years salary. For some people that might be another $20,000 (indian IT maybe), for some it might be another $100,000 (junior analyst in the US), for some it might be another $200,000 (senior analyst in the US), and for some the opportunity cost might be more like $300,000 (Ibanker).

Indian IT range starts as low as 8000$. it does not make much difference to this cadre but it certainly does for an Ibanker with 300K..

Depends on where the 'Indian IT' is. If the 'Indian IT' is in the US, or as a matter of fact in the UK, surely he/she would be getting much more. I know Microsoft pays about 80-100K (USD) for Software Engine and Software Program Management and there are hundreds of 'Indian ITs' there!
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Mark4124
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 12:38
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Making 50k in the US is a joke... I would expect the opportunity cost to be at least 100k for nearly all US applicants.
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johnnyx9
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 22:51
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I think most schools report the average salary of entering students, and the overall average is like 60K, for top schools I think it's more like high 80's.

I agree with Pelihu, the voting options are too limiting. I think the overall average is probably something like ten to fifteen years, but for top schools probably closer to seven or eight years.
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biggamejames
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What is The average time to recover $$$ investment in MBA 01 Mar 2007, 22:56
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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.
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I make less than 50k a year right now and I'm in the US.

Why would you think nearly all US applicants would be making 100K?

I would think most applicants are going to school to start making 100k.
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venky1979
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What is The average time to recover $$$ investment in MBA 02 Mar 2007, 07:07
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I thought the options were reasonable
infact I had read the Forbes rankings which are based on 5 year gains (Compensation after graduation minus the sum of tuition and forgone compensation)
5 years gains in 1000USD is as follows
Harvard 149
Columbia 147
Chicago 145
Dartmouth (Tuck) 139
Yale 137
Pennsylvania (Wharton) 134
Stanford 133

Forget the ranking aspect :) Its a bad way to rank, I feel.

Doesnt this indicate that the number of years would be roughly 0 to 4+?

Again as in my first post I am referring to conulting/finance profiles only (not non profit and other industries)
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johnnyx9
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What is The average time to recover $$$ investment in MBA 02 Mar 2007, 07:15
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I don't get what Forbes is saying. "Compensation after graduation minus the sum of tuition and forgone compensation" What does that mean? The numbers listed just look like salary figures to me (in thousands).
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venky1979
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What is The average time to recover $$$ investment in MBA 02 Mar 2007, 07:22
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johnnyx9
I don't get what Forbes is saying. "Compensation after graduation minus the sum of tuition and forgone compensation" What does that mean? The numbers listed just look like salary figures to me (in thousands).
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It means that the maoney you accrue over five years minus tution (without scholarship) minus forgone salary estimated at 150K USD
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venky1979
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What is The average time to recover $$$ investment in MBA 02 Mar 2007, 07:42
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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 ???
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What is The average time to recover $$$ investment in MBA 02 Mar 2007, 07:43
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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.
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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.
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