Rising MBA costs have caused some to question whether the return on investment justifies pursuing such a costly degree. Getting an MBA has traditionally been seen as the gateway to financial and career success. However, in the current economy, some would-be students may decide pursuing this prestigious degree is cost-prohibitive.
Is the MBA Priced Out of Reach?
According to an article by Poets and Quants, the cost of an MBA degree is rising, but salaries for those who possess MBAs are not increasing comparatively. Poets and Quants found that the cost of obtaining an MBA from one of the top-tier United States business schools could cost more than $300,000.
This number is based on the cost of tuition, combined with the expense incurred by attending school on a full-time basis. It is estimated that prospective students would leave jobs with a median salary of $68,345 to pursue full-time studies for two years.
Among the MBA elite, Stanford leads the pack with rising MBA costs totaling $351,662. Harvard comes in second place at $348,800, while Wharton and Columbia are both over $320,000. Dartmouth, Chicago, Massachusetts Institute of Technologuy and Northwestern range from $310,000 to $316,000.
Public universities are not far behind. The total cost of an MBA from the University of Virginia is $279,650, followed closely by the University of Michigan’s $271,448. The University of Wisconsin at Madison, with a $195,380 price tag, was the only one of the 25 schools to come in under $200,000.
Disparity Between Cost and Reward
So how much has the cost of a highly sought-after MBA increased? As an example, Poets and Quants notes that 10 years ago, the price tag for an MBA from Northwestern’s Kellogg School of Management was a little over $235,000. Now, that cost has skyrocketed to over $310,000, which in an increase of 32%.
At the same time, a decade ago, an individual leaving full-time employment to attend Kellogg would have missed out on a $65,000 a year salary. Now, they would be leaving almost $74,000 a year on the table.
However, this increase in tuition cannot necessarily be parlayed into a lucrative post-degree salary. A decade ago, Kellogg’s MBA grads had median salaries of $90,000, with $25,000 bonuses. By contrast, a survey of last year’s graduating class reveals that their median starting salaries have only increased to $110,000 and their signing bonuses actually dropped to $20,000.
Weighing an educational cost that has risen by 32% against a 13% increase in the post-MBA starting salary and bonus leads many to question the return on investment for pursuing what was once a sure thing. Even for students who don’t attend school on a full-time basis, the disparity between the price of an MBA and the measly anticipated pay increase has given many would-be students pause.
One bright spot: A survey by the Graduate Management Admission Council revealed that 76% of employers say they will hire MBA graduates in 2013, up from 69% in 2012.
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