When Is An MBA Worth It—When Is It Not?

Shawn O'Connor is the chief executive of Stratus Prep.

If you may not be heading to a top ten school, is getting an MBA still worth it? How far down the rankings can you go and still see a positive return on your investment? Are there specific concentrations/career considerations that make an MBA more valuable, even at a lower-ranked school?

With the beginning of the business school application season upon us, you may be wondering if an MBA makes sense—particularly if you’re not sure you can win acceptance to a top-ten ranked school.

Given the resources required to successfully navigate today’s competitive admissions landscape, you’ll want to weigh the pros and cons of potentially going to a school outside the top ten early in the application, and assess if your GPA, scores, or work experience suggest that these top programs may represent stretch schools.

No matter what your GPA, test scores, and work experience, I would still advise applying to a number of the top ten schools (even if they seem like near impossible stretches). During my nearly decade in this industry, I’ve seen numerous strategically-positioned Stratus Prep clients gain admission to schools like HBS and INSEAD with GMAT scores in the 500s and GPAs around 3.0. At the same time, it’s critical to objectively assess your chances and, if necessary, consider whether it makes sense to pursue an MBA if you don’t get into a top-ten MBA program.

For most students, attending a school ranked anywhere in the top 25 has a positive return on investment. However, attending MBA programs outside the top 25 may not provide you with sufficient post-graduation earning power in order to assure an adequate return on your investment.

In order to assess the return-on-investment of an MBA program, we first need to consider the full cost of attending business school. Most students consider only the tuition and living expenses of an MBA program—which can top $150,000 at many schools. In addition, however, we must consider that if you were not attending business school, you would likely be earning about $60,000 to $100,000 a year. When including this opportunity cost, the true price tag of obtaining your MBA is approximately $275,000 to $450,000–not including the interest costs on a loan should you need to borrow money. One can now understand why it is so important to carefully weigh this decision and do everything possible to win admission to the school of your choice.

An MBA from a premier program, such as Harvard, Stanford, INSEAD, Booth, Wharton, Sloan, Kellogg, Columbia, or NYU Stern has a very robust return on investment: For example, students graduating from Harvard Business School can expect to earn a starting post-MBA salary of $115,000, and to average $3.6 million in total earnings during the 20 years post-graduation, with many HBS grads earning significantly more (see related story).


While schools ranked between #10 and #25 have slightly lower average earnings, there is little doubt that the ROI for these schools is quite positive as well. For example, Yale School of Management graduates typically leave school with a base salary of $100,000 and earn $2.8 million over the subsequent 20 years. In addition, given Yale University’s strong brand equity, Yale SOM’s reputation and ranking are likely to increase in the years to come. We counsel our clients considering schools between #10 and #25 to most highly consider schools that, like Yale SOM, have a brand value that’s likely to appreciate during their careers, as this could substantially enhance their lifetime earnings.

As a point of comparison, schools ranked in the lower segment of the top 100 will have substantially lower average starting salaries (in some cases closer to $60,000 a year) and average lifetime earning potential under $2 million. Accordingly, I caution most students that, if they don’t receive significant scholarships from one of these schools, they might be better off continuing to work rather than incurring the high costs associated with obtaining an business degree—especially since many of the skills taught in MBA programs could be obtained through less expensive certificate programs.

  • Anonymous

    I graduated making $59K six months out of undergrad (I studied political science). 2 years later I was making $74K. 4 years later I’m making $84K. I decided to grab a second bachelors to meet pre-requisites to earn a masters in computer science. My goal is to work in the tech industry as a manager in the $85 – $150K range.

  • engineeringbeatsmba

    I graduated from a CA state university in 2008 in the greatest depth of great recession at $62,000 starting salary. I studied engineering.

  • freakenbloopie

    I graduated from the University of Nevada, Reno’s College of Business in May. I now make $71,000 a year, not including the $60,000 in Restricted Stock Units I was awarded upon hire. I don’t consider UNR to be a prestigious school. While anecdotal, it’s certainly not hugely abnormal for recent undergrads to make that kind of money.

  • TitusGroan

    My company has asked me if I would like to complete MBA as they would like to develop me as a future leader of their company. They will pay 100% fees etc, however if i leave with in 5 years then i will be liable for the fees on a decreasing basis. I am a qualified chartered accountant ACA, is an MBA significantly different in terms of my knowledge gap to warrant the time and emotional investment. Does an MBA really give you better tools to become a leader or am i better off suggesting alternative leadership programmes?

  • Spartan2814

    That is definitely a pretty impressive starting salary. However, I will make the obvious argument that Wharton is tied as the #1 business school with Harvard and Stanford. What percentage of undergraduate students in business will obtain their degrees from institutions with such clout? Not many. Most will get their degrees at a state university, which is my entire point. This article and the information herein is just not applicable to the majority of business degree holders considering an MBA. It presents too hefty a sample bias.

  • JohnAByrne

    The average Wharton undergraduate last year earned $69,506 to start in salary. The $60K to $100K range, however, is for undergrads who are generally three years out.

  • Spartan2814

    Who the hell comes out of undergrad making $60-100K/year?

  • James

    Hate to pick on one little detail from your comment, but it needs to be clarified. Sure, BYU sends many to GS…but that is only because Salt Lake City has the 2nd largest GS office in the country (world maybe?)….for jobs in Operations. These are not jobs anyone is envious of. I’ve known many that worked for GS in SLC and they hated it there. Their jobs were so boring and they were not paid well. When someone thinks of working for GS, they are thinking of front office jobs. BYU MBA grads get the back office jobs. It is very misleading to say both schools place just as many grads at GS. It’s apples and oranges.
    Side note: at the undergrad level, BYU has recently been placing up to a dozen students a year at front office positions with GS in NY and SF. While somewhat admirable, this has not translated to the MBA program.

  • toddwriter
  • John

    Source said CASH compensation while this article said TOTAL compensation. There us a huge difference! For most higher level corporate jobs, options, for example, are much larger than cash compensation.

    Also, when you compare two scenarios, you compare what is DIFFERENT between them. Whether you get and MBA or not, you will have living expenses, and thus this cost doesn’t matter. For me the cost was $100k tuition plus $160k lost earnings (80*2) or $269k total cost.

  • Davis

    I am considering Northeastern University in Massachusetts. Any advice? I will not get into any of the top 25 schools because i scored low on the gmat. I have asked and was told that i should take the exam again, which I will not waist more time on such a useless test.

  • Becca

    Kenan Flagler’s online MBA, the MBA@UNC:twitter 

  • Brett Suddreth

    With the economy being what it is today, this really is a conundrum for me. I have thought about going back and finishing my masters, but I am not sure it would be worth it in terms of the debt I would take on. If I knew my company would increase my salary when I was done, then I would certainly do it, but fewer and fewer companies are doing that now-a-days. I posted an article earlier in the month about this very topic, http://www.mbaalliance.com/is-an-mba-worth-it/

    Feel free to give it a read as well. Thanks for the article and I will check back to see some of the quality comments that are coming in as well.

  • Macias

    I think the key equation is MB = MC. The “top 25” is rational for those funding their MBA w/ debt. However, if your company sponsors you and you get a degree outside of the top 25, then the data is the data.

    HBS MBAs, forgo earnings and take out loans, yes the brand is there vs. a free MBA working full time and 100% pre paid tuition, the ROI is comparable, especially when you factor in retirement savings and the time value of money.

    For instance, I was on scholarship at Arizona State in the Supply Chain Program #2 in world, total cost $300-500. My corporation Intel is paying my full tuition to Washington State (not a top 25) but it’s a free MBA and I am working making good money. So – my total investment is $500 for a B.S. and my MBA, while not a sexy brand, I kind of have a hard time understanding going into debt and forgoing salary for just prestige alone. Most of my senior management think I am going to UW anyways.

    Outside of the top 5, an MBA is an MBA – what employer would stick his or her nose up at a strategy of free MBA vs. sinking 150-200K for a top 25 MBA? That’s such an easy sell in an interview.

    The real key to success in business is your ability to network well and your experience, looks plays into the equation as well, if you are an ugly top 25 MBA, you will lose to the attractive ones (human nature 101). Overall the rankings are scam to sell papers, remember the media makes money on giving you advice based on short memories of readers, not taking it.

    The best approach to an MBA is to gain skills and separate yourself from others. If you can get it for free, then I’d take that any day over hashing out the equivalent of a home loan.

    THe golden rule I live by is MB = MC no more no less.

  • AGH

    I went to a state university that was (at the time) ranked in the top 30, maybe they were 22-29 in 2003. I had 8 years of work experience and was making around $50K per year before I went. I had a scholarship that covered about 90% of tuition and living expenses while in school and came out with about $27K in loans. My total cost (incl. lost wages during school) $127K and my starting salary post-grad was $90K. Six years later I’m making $125K per year. Total payback: 2-4 years. Couldn’t beat it with a stick!!!

  • Timmy

    I think you have a fundamental problem on your hands when you start talking about rankings and earning potential. The problem is that every student has different career goals (We don’t all want to work for Bain) and each school is better at some things and not so good at others. So unless you have no idea what you want to do with your life going into business school (which everyone advises against) you are comparing a bushel of apples and oranges to a bushel of apples and oranges.

    For example, I have a friend who wanted to work in marketing and chose to attend Wisconsin (ranked #30). He got a job with a top marketing firm working along side guys from Kellog and HBS. They all got the same job and make the same amount of money, so which school is a better marketing program. The rankings say HBS is. The prevailing wisdom says Kellogg is. But when it comes right down to it, the best business school is the school that can get you the job you want. So, if you want to work for Goldman Sachs you could go to HBS or you could go to BYU. Both schools sent the same number of grads to GS so your ROI is just as good at BYU.

    Bottom line – I wish P&Q would stop talking about business school in these braod contexts and compatmentalize a little bit.

  • Dan

    Nice article. I’d like to get your take on UCLA.

  • David

    Great article. You spoke of schools with brand names likely to appreciate such as Yale. Which other schools outside of the top 10 (specifically still in the top 25) do you think are also likely to continue to appreciate?

  • I believe the numbers for 20-year ROI that were used for this story came from PayScale and were originally published by Bloomberg Businessweek, and in at least one instance are wrong: the 20-year ROI number at Harvard Business School is $3.6 million, not $3.4 million. To put those numbers in context, you should know two things. First the 20-year period is 20 years of experience, pre- AND post-MBA. So if you graduate from college, spend 5 years in the work force, then get your MBA from Harvard and spend another 15 years in the workforce, $3.6 million is the amount you might have earned during the entire 20-year period (5+15). Also, please keep in mind that these numbers are backward looking. In other words, they are what someone with 20 years of experience and a Harvard MBA in 2010 might have earned over the preceding 20 years (in 2010 dollars). It’s NOT what someone getting an MBA from Harvard today might expect to earn over the NEXT 15-20 years, which is no doubt much higher. So as you’re calculating ROI, please keep that in mind. Thanks!

    Louis Lavelle, Associate Editor, Bloomberg Businessweek