Is the MBA Still Worth the Cost and the Time?

The short answer: If you can get into a top 10 school, hell yes. Absolutely. Positively. Go for it.

If you can get into any top 50 school, the answer is a slightly more qualified yes. It’s worth your time and the considerable cost.

We know it’s not cheap. Annual tuition and fees at the top schools now approach or exceed $50,000 a year. In 1988, when I created the original BusinessWeek ranking for business schools, annual tuition and fees at a best schools averaged $15,000. Academic inflation has been a killer. And when you toss in basic living expenses today, you can add $30,000 or more to the annual total. Wharton now tells its prospective applicants that tuition, fees and living expenses for the first year of its two-year MBA program total $81,100. At Northwestern, that number is $75,194. Tuition at Stanford for the 2010-2011 academic year is a whopping $53,118, although Stanford advises that you should budget an additional $30,000 to $47,000 per year for “living costs, books, and other expenses.”

Then, you need to account for the earnings you are giving up to go to a top school. To get into a highly ranked MBA program, you have to be in a fairly good job that could very easily pay you close to six figures already. Add it all up and the total cost of a Harvard MBA now approaches $350,000. It exceeds $300,000 at such places as London Business School, Columbia, Wharton, and MIT. Other than buying a home, it could be the biggest investment you’ll ever make for yourself.

If you work the averages, however, you’ll graduate into a job that should pay a starting salary and bonus in excess of $150,000. The total first-year compensation of a Stanford MBA in 2008, for example, was $209,407, according to BusinessWeek. At Harvard, it was $205,659. These calculations change dramatically, of course, depending on the school that grants you the degree and the job you get once you’re an MBA. In most cases, simple back-of-the-envelope calculations will tell you that it might take a good number of years before you recoup your investment in lost earnings and tuition. Nonetheless, research has shown that the economic advantage you immediately gain from a full-time MBA program is usually maintained throughout your career.


The last couple of years of economic turmoil have led some to rightly question the return-on-investment. The Graduate Management Admission Council (the organization that administers the GMAT) annually surveys MBA students around the world a few months before graduation. In 2010, 5,274 students responded to the survey from 147 business schools. So the data is less about the Harvard, Stanford, Wharton and the other elites than it is a more general statement on MBA education and its value. Some 73% of the 2010 responding students were attending a B-school in the United States.  Here’s what the survey found–even in the most troubled job market for MBAs in history: Those that received a job offer by graduation were able to command, on average, a 64% increase in salary over what they had been earning prior to attending business school. The median $68,000 pre-MBA earner who received a job offer by graduation was set to earn, on average, $112,000. Those numbers largely exceeded expectations, despite the fact that the increases occurred in this more inclusive survey of business schools (not merely the elite group at the top) and in the depth of a recession that brought comparisons to the Great Depression of the 1930s. The GMAC study found that MBA students who left jobs earning salaries of between $37,001 to $52,000 expected a 61% increase in salary upon graduation. Those in the $52,001 to $71,000 salary range expected a 47% rise, while those in the highest bracket expected a 33% increase in post-degree pay.


There was some less than positive news in this latest report, of course. Job offers to MBAs fell to 1.3 on average from 1.7 in 2009 and 2.3 in 2008. When the survey was conducted between Feb. 10th and March 10th of 2010, fewer graduates seeking employment also had either job offers or jobs to start by graduation. In 2010, the percentage of MBAs with jobs or job offers fell to just 40%, down from 50% a year earlier, and 62% in 2008. The numbers for MBAs who were graduating from one-year programs were much worse. Only 27% of them had job offers or jobs at the time of the survey, down from 29% a year earlier and a recent high of 47% in 2008. The reason for the discrepancy: probably because one-year programs give students less time to get a good job and also because many of the very best schools with the best pay and job offer numbers do not have one-year programs.

For a moment, though, let’s put aside the monetary cost-benefit analysis. There are far more reasons to get an MBA than what it will do to your earning power. The degree will more likely give you a better chance at interesting work, better chances for promotions, clear responsibilities, friendly co-workers, better job security, challenging problems to work on, and a network of alums who can be remarkably supportive of you throughout your career. In fact, the professors and fellow students you meet and get to know will probably be the most valuable contacts you will ever have in business. You also can’t feed into a spreadsheet the increased confidence and psychological comfort an MBA might give you as a business executive or a manager. I’ll never forget the Harvard grad who once likened the investment to a vacation in Europe. “Can you justify the payback? No. But does it broaden your horizons, give you a new perspective on the world? Is it valuable? Of course.”


Indeed. Probably the single best study of the degree’s value was done by BusinessWeek in 2003 when the magazine surveyed nearly 1,500 alums of the Top 30 business schools in the Class of 1992. The goal: to see if MBA grads ten years out thought their investment in the degree was worth it. Their answer? Same as mine: absolutely. Some 89 percent told BusinessWeek they would go for the MBA again if they had to do it over. Nearly 80% said they would actually attend the same school. The study, now seven years old, showed that the average salary for the Class of 1992 was $155,200—nearly three times as much as the $56,600 each earned on average in their first post-MBA job. But salary only tells part of the story. On average, each member of the class also reported making $232,400 in bonus and other compensation.

There are plenty of other impressive stats from the same study that will make you want to fill out those applications forms. On average, each MBA from the Class of 1992 oversaw 93 people. As a group, they have started hundreds of companies that have created nearly 100,000 jobs. Over the ten-year span, each grad had three different post-MBA employers, along with four promotions. About a quarter of the class was able to successfully switch fields since their first post-MBA jobs.

What’s important to remember is that these are very positive and optimistic results and they are from graduates of the top 30 schools. It’s safe to assume that if you have a degree from a school that is not highly ranked, you’re apt to be far less satisfied. That’s why my answer to the question “Is an MBA worth it?” is an unconditional yes if you can get into a rated school. It’s much more complex if you can’t.

Bottom line: The monetary payback of the degree is important, but there are far less tangible yet possibly more profound rewards. A good business school is an energizing marketplace of ideas, filled with people who want more for themselves and others. On a random day at any b-school, you could walk into a classroom and hear a deeply passionate debate over corporate responsibility or stroll into a lecture hall to listen to the CEO of a global corporation concede his or her mistakes and what he learned from them. Those experiences will both inform who you are and who you will become. You can’t always put a price tag on an enriched life.

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  • Bill

    The borrower is slave to the lender. – The Bible

  • sgl

    Top 10 MBAs are worth it? Are you sure? I graduated from MIT Sloan in 2008 and still don’t have a job! That’s 4 years. They just take your money that’s all. Stay away from B-schools!

  • steve

    “Josh pointed out that many people do not need MBA’s (or college degrees, either) such as Michael Dell, or famously, Bill Gates”

    Jon, the only problem with this statement, is Dell and Gates are “entrepreneurs” and Gates was smart enough to get into Harvard. I don’t have an MBA, but have been debating the pros and cons. I think the contacts alone could be worth it. However, unlike most of the kids getting MBA’s with very little corporate experience (5 years) is very little, I wonder the payoff for those of us with over 16 years corporate experience with management experience.

  • JON

    I agree that for some professionals, an MBA is a great tool to have, but I had a cousin who nearly went bankrupt because she could not obtain a job for two years after her MBA degree. I also think, let’s use stock picking as an example, that some skills cannot be taught. If I can pick a winning stock, and I do it without an MBA, intutitively, then I don’t need an MBA since I already have the skill. I am also skeptical when I drive by the local MBA mill parking lot and see it full. How many of those people really know why they want the MBA? Or, are they following each other like lemmings? Further, I am also going to mention one other issue: The higher the income, the more likely a layoff. Look at Lehman, Bear Stearns, etc. Where are those MBA’s now? The debt remains, but the individual may not remain employed.

    I think, in summary, that while the potential payoff of an MBA is intriguing, the downside is that the bigger they are, the harder they fall. The article seems to assume that business does not change, that business leaders and companies will always be relevant. Not so. However, the cost of the MBA remains whether the individual is employed, or not. Josh pointed out that many people do not need MBA’s (or college degrees, either) such as Michael Dell, or famously, Bill Gates. I think the idea that the MBA is a cookie cutter cure all for salary issues bothers me the most. The irony is that many successful business people do not have MBA’s, while others are pursuing the degree, blindly, and without independent thought. That fact runs counter to the tenet of an MBA as some magic bullet for executives.

  • Kracjac

    I am almost 26 now and YES – as Sam puts it the economics will take care of it and you would regret not having the experience and the contacts and the intangible benefits and the doors it will open up.

    Already on the median salary specified in the article. I am looking to get into LBS for 2013, looking into the GMATs and the application essays, etc.

    As the title of one of Richard Branson’s famous book – ‘F*** it, Lets do it ! ‘

    Good luck all.

  • MrAlloftheLights

    I am late in commenting on this article since we are in January 2011. I shall delve in right away. I have been flirting with the idea of getting an EMBA, starting in the last quarter of 2010. I have looked at a few programs and one that has now caught my attention is NJIT, I am wondering if this institution may be one that is is considered a B-School. It costs about $57K and I am 30 years old. Is it worth it to enroll in such a program? I have quite a few years of experience in the corporate world (about 5 yrs), I am afraid that my employer will not see the value and fail to recognize my achievement ( I have worked there for 4 yrs, and I can say that there is 75% probability that my statement is correct, if I were to put a number on it). I am simply concerned that after 18 months and given the current economy, how would my EMBA degree be received 2 years from ? It is quite expensive and I would like to have some certainty that this investment will actually give back. Any feedback will be sincerely appreciated.

  • Phil

    What do you think about jd/mba. I have an opportunity to do A&M’s MBA program in a year in b/t my JD (from a tier 4 school, but in very top of class). My prospects in the law field are not comforting (at least as to what I was hoping for going in). I’m hoping the MBA will allow me a way out, but then I face the problem of having no business experience. If opp. cost were not a factor what would you do? Any thoughts? So many people think its a waist of time to do jd/mba as neither one substantially contributes to the other as far as employers are concerned.

  • Sam,
    That’s really a perfect way to look at it. Thanks for adding some very good sense to this ongoing debate.

  • Sam

    If you are 25-30 years old and are wrestling with the question of whether to attend a top MBA program, the economics will take care of themselves. Yes, you will take on a lot of debt, but you will be surprised how quickly you are able to pay it off. Instead, I would recommend you focus on this one question: At the end of my career, looking back, will I regret not having had this experience?

  • Hi Handi,

    Able to get an MBA from a top school is so wonderful. I agree with John that you need to invest in your education at a b-school which is “worth”. If you think you definitely, absolutely are able to get job offers or jobs after graduating and paid back, then go for it. Otherwise, do NOT waste $350000 for the MBA.

    If getting an MBA is your dream, put it on a paper and plan it out and have a strategy to execute it. It’s also my dream. 🙂 I’d love to apply for MBA program at Standford, but I am not ready.

    Good luck

  • Handi

    My main motivation and goals for an MBA is to be a successful entrepreneur. I talked alot about in my current application essays. From what Josh is saying, this seems to be a bad idea and even worse, might actually hurt my admission chance? His points are definitely disheartening to a certain extent, implying that MBA grads should just stick to the conventional destination (consulting/i-banking), so what happens to those that want to pursue their dream and have more interests in other industries/function

  • Josh,
    Very good points. I’m looking forward to our conversation tomorrow. Will be fun.

  • Excellent research, John.

    I’d add one more caveat to your “unqualified yes” – it’s only worth it if you have your heart set on becoming a management consultant, investment banker, or Fortune 50 corporate manager for the rest of your career. In that case, attending a top school essentially amounts to buying a $150,000+ interview – it’s pretty much the only way to get past the HR screen. (The other is undergraduate cooperative education programs, which is how I became a corporate manager.)

    If you have any entrepreneurial aspirations at all, the debt incurred from completing an MBA program is a massive detriment, not a benefit. Student loans also make it extremely difficult to change your mind if you find you don’t like working in Big Business. Since consulting, i-banking, and corporate management are the only jobs that will pay you enough to pay back your student loans, you may be forced to continue working in jobs you hate just to stay solvent.

    Since most MBA students don’t have experience in Big Business before enrolling in an MBA program, the chance of not liking your new situation is a massive risk that can’t be mitigated. If you find (like I did) that corporate life doesn’t suit you, tough luck – student loan debt can not be discharged.

    There are many professionals that need business skills, but not MBAs: entrepreneurs, programmers, engineers, salespeople, and creative professionals. For these individuals (the majority of business learners), MBA programs are an absolute waste of time and money. You’re far better off learning economically valuable business skills on your own time, using readily available books and non-degree training programs.

  • Ronald,
    Unfortunately, it is hard to have a fair comparison between U.S. and non-U.S. schools. The good news, however, is that there are quite a few very good programs outside the U.S. today. Ten years ago that was less true. Good luck.

  • Ronald

    I read your article about “Ranking the MBA rankings” after I wrote my initial post. That article pretty much answers my concern about the validity of some publications of MBA rankings. However, if I take your argument about Global MBA rankings that often inflate some European schools, I will be faced with a fact that it is hard to have a fair comparison between US and non-US MBA. I know that one should not pertain too much on the rankings and that it is better off investigating how each program will fit one’s purpose, but I think those rankings still somehow give one confidence to make the first selection.

  • Ronald

    Does your analysis (the ROI, experience, …) apply to international (non-US) MBA program?
    When you said “Go for top 10 or even top 50”, do you consider non-US rankings?
    Some say that while the US MBA rankings are pretty much valid, the International MBA rankings, combining both US and non-US programs, tend to overestimate the quality of non-US, mostly European, MBA programs over their US counterparts.

  • When you get an MBA at a “Brand X” kind of school, you’re going for the education–not for the door-opening potential of the degree, the big-time recruiters who come to campus and hire MBAs by the boatloads, the power and influence of the alumni network to help you throughout your career, and the immediate cache it can provide at work in terms of better assignments and projects and greater mobility. For many people, acquiring the MBA skill set is worth the money. To others, it makes little sense, without the other advantages I cited. That’s why so many people want the big brand degree.

    As for your last question, it depends. If you went to a full-time, two-year MBA program and this is your first job at the company, two years in the same job isn’t all that bad, especially in this economy. If you went to an EMBA or part-time program, got your degree, and nothing has changed after two years, I’d actually have greater concern. Why? Because your employer failed to recognize your achievement in getting the MBA and doesn’t see its value.

    Hope this helps.

  • DS

    What if you went to a “Brand X” type B-School for the MBA? What if the school doesn’t rank or when you tell someone: “I went to _______ for my MBA.” They are like “Huh?” Does it matter if even after 2 years post program you are working at pretty much the same job that you were at before, does that fit into the mix?