Third Of A Million: True Cost of A Top MBA

by John A. Byrne on

Getting an MBA degree from a top tier business school in the U.S. now costs roughly a third of a million dollars.

That’s the rather shocking and unmistakable conclusion of a new analysis by PoetsandQuants that takes into account the opportunity costs of quitting a job to attend graduate school for two years.

The highest total cost is for an MBA from Stanford Graduate School of Business where students are typically leaving jobs that already pay them more than $88,000 a year. If you tack two years of forgone earnings to the school’s recommended two-year budget of $174,162 for a Stanford student, the total cost of getting an MBA is now a whopping $351,662.


Stanford is hardly alone. There are eight U.S. schools where the cost of getting an MBA now exceeds $300,000. They include Harvard ($348,800), Wharton ($326,400), Columbia ($322,590), Dartmouth ($316,200), Chicago ($315,608), MIT ($313,264), and Northwestern ($310,378).

Even MBAs from the best public universities hardly lighten the load. The total cost of a two-year MBA from the University of Virginia’s Darden School is now $279,650, while the University of Michigan MBA costs $271,448. The only relative bargain on this list of top 25 schools is an MBA from the University of Wisconsin at Madison. The total price tag: $195,380, the only school below $200,000.


One reason why the costs have escalated so much is because the pre-MBA salaries of many students are already quite high. Northwestern’s Kellogg School of Management says that MBAs who enrolled at the school this fall left jobs that paid them an average $73,960 a year. At Berkeley’s Haas School of Business, the school said its students had earned $66,345 annually before enrolling in its MBA program this year. And at Duke’s Fuqua, the school said its newest MBA candidates had been making $64.087 a year.

In some cases, the “average” figures (reported in an accompanying table to this story) are even below the median numbers reported by the schools. At the Haas School, for example, the median is $68,000 a year, versus the $66,345 average.

The numbers were recently reported to Bloomberg BusinessWeek by many of the top business schools, along with the budget schools recommended to students who attend their MBA programs. The budget includes tuition, required fees, books and case study materials, as well as room and board. In some cases, schools declined to provide data on the forgone pay of their latest students. Poets&Quants estimated their numbers based on previously disclosed pre-MBA salary data.


Not surprisingly, Harvard Business School MBA students had earned the most money before heading off to Boston: an estimated $90,400 a year. Of the top 25 U.S. business schools, 23 of them have students who earned in excess of $50,000 a year before enrolling in their full-time MBA programs. It’s relatively rare to see the forgone pay numbers of MBA students, but those numbers also are an important measure of the quality of students at a business school.

The larger the bucks, the more likely the candidate left a meaningful job in a demanding environment. It’s also more likely that candidates earning more money have more valuable work experience to contribute to classroom discussion and debate. In any case, applicants to the top MBA programs have to give up a lot when they decide to go to an elite graduate school.

How have these numbers changed over the years? Some 10 years ago, an MBA student at Kellogg left a job that paid $65,000 a year vs. today’s average of $73,960. Back then, the two-year recommended budget for the degree came to $105,066 vs. $162,458 today. The total bill for a Kellogg MBA was $235,066 ten years ago. Today’s it’s $310,378.


And the reward? Kellogg MBAs graduating in 2001 pulled down median starting salaries of $90,000 and median starting bonuses of $25,000 each. MBA’s in Kellogg’s Class of 2011 reported median salaries of $110,000 and signing bonuses of $20,000 each. So over the past ten years, the total cost of getting a Kellogg MBA has risen by 32%, while the starting salary and bonus has risen 13%.

The comparison looks even less enticing against the 54% rise in the recommended budget–tuition, required fees, books, room and board–in the past ten years. The bottom line: What an MBA now spends to get the degree has increased more than four times the starting compensation in the past ten years. It’s yet another look at the diminishing returns of the degree.

It’s not merely costs that has far outpaced the rise in inflation. It’s also a stagnant economy that has kept both pre-MBA and post-MBA compensation down.

(See next page for a table of the forgone income and total costs of an MBA at the top 25 U.S. schools)

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  • gmoney

    This analysis is partially flawed because you only are “out of a job” for 21 months and not 24. To add to that you typically get an internship for 3 months. These internships are around $6k-$8k on avg (consulting is higher). So thats $21k in income. So I would take those numbers and subtract the 3 months of internship pay and 3 months of pre-MBA job pay. Which adds up to about $40k.

  • John A. Byrne


    You’re making very good points here. But I would also say that the recommended budgets by the schools, as pointed out in the article, are generally 10% to 20% below what is needed to do a two-year MBA program. That additional dough pretty much offsets the internship pay. And if you add the interest payments on the debt you’re likely to incur by getting the MBA, the actual cost is far above the numbers cited. Even so, your comments are on the mark.

  • Sandy

    Another very insightful article John. I would believe that the average pre-MBA salary reported is much lower here due to the combining both international student (generally much lower remunerations) and local students into one pool.

    Is there a way we can separate international candidates’ data from the local appliant pool data?

  • gmoney

    Good point. Fair enough. We both agree.

  • John A. Byrne


    I didn’t think of that but you’re right. Unfortunately, it’s hard enough getting this data. It would be nearly impossible to slice and dice it in a way to get at the international difference. By the way, I’m currently working on a story that you would probably find very compelling about international applicants to U.S. business schools. I expect to publish it over the weekend.


  • Jeff

    Good article. But you also need to subtract the expenses that will incur whether or not you enroll in an MBA program. For instance, you would need to pay for the rent/mortgage, utilities, food, etc. In addition, you will not pay income tax when you do not have an income… So the Opportunity Cost is not as high…

  • Sandy


    Your work is always very intriguing and simply dissects through many well established myths in this MBA business, so I am certainly looking forward to it.

    As far as this article is concerned, I can confirm that I know of folks whose cost of foregone salary is about $300K ( I am not kidding). That puts the cost of an MBA in the $450K bracket.

  • A Kravitz

    I believe the overall point still holds but worth noting that the schools’ recommended 2-year budgets include room and board. Since you’d be paying these whether or not you attended school, shouldn’t it be left out of the analysis?

  • Linda Abraham


    While I suspect the total will still be eye-popping, including living expenses, which one needs to pay whether in an MBA or not, weakens your point. Shouldn’t those numbers be left out?

  • John A. Byrne


    Possibly. But without a steady paycheck, those expenses loom very large in the equation. As you know there are all kinds of factors not in this particular analysis.

    On the positive side, we’re not including fellowship grants from schools, income during one’s summer internship, the fact that as one reader pointed out we’re subtracting two years worth of income instead of 21 months, and the cost of meals and a room which a person would have to pay, anyway. On the negative side, we’re not including interest payments on loans which could run into the tens of thousands of dollars, and we’re going with the actual school-recommended budgets which most people know are 10% to 20% below the actual costs due to overseas trips, entertainment, and overspending in general once you hang with the MBA crowd at a top school.

  • Joan

    John, Great website. Can’t wait to see the article about internation applicants.. (especially the part relating european ones). I have always wondered what is the best for an european candidate, whether to stay in Europe or go to the US…

  • MBAClass2013


    Great article. Are the forgone pay numbers you are using only base salary or do they include year-end bonuses as well.

  • John A. Byrne


    The numbers were provided by the business schools. I assume they represent only base salary and no bonuses.

  • Alois de Novo

    John and Sandy, tuition, room and board, and other cash expenses are paid for after tax. The opportunity cost, the two years of forgone income, is pre-tax. It’s not quite as big a deal as you guys say it is.

  • M.

    Nice job getting cross-posted on CNN! Glad to see P&Q getting some main-stream media attention.

  • Birchtree

    Given the burden of losing 21 months of income when combined with the economic uncertainties of the day, will this result in materially more prospective applicants considering top-tier/strong part-time or EMBA programs in order to maintain income?

  • Sandy


    Yes, it is not that big a deal in the grand scheme of things and a Top 5 (may be 10) MBA is still worth it, but the price tag of nearly $400K is still a reality.

    Birchtree – there are a lot of companies that have their own MBA and leadership development programs. For eg – Schlumberger has a special MBA program tailored for its future talents that is taught at INSEAD. So, if you are in any such companies that offer career track positions and responsibilities, an EMBA/PT MBA are very good options (if you still need them, that is). A lot of companies like the oil companies have their internal employees running the company. Likewise, a firm like P&G does not hire outsiders for senior/mid-tier management roles ( I have only heard, might be wrong).
    However, if you want to switch your career completely, then there is no better means to doing so than by pursuing a FT MBA from the 10 of the Top5 schools. John – your thoughts?

  • Suhel Banerjee

    However it should be pointed out that Kellogg has an accelerated 1 Year program (June – June) which costs much less, at $72,000 and offers the exact same full time degree. The program accepts around 85 students per year and the student’s have an average work experience of 5 years at the time of starting school.

  • Gosh

    I am very surprised about the Tuck figures. Tuck is by no means a TierOne MBA…

  • MBA Aspirant 2012

    @Gosh, some may differ from your opinion. Tuck is ranked on the lower side of top 5 US B schools, and its post MBA pay over long term is comparable to the H/S/W class (slightly lower though).

  • Sandy

    @Gosh – Tuck is as ivy as it gets. Yes, the brand is not as well known in Asia (if that’s what you are referring to), but the school was ranked #1 by Economist (the no-nonsense UK publication) this year. Take every ranking with a pinch of salt, anyone applying to Wharton would not (or should not) apply to Tuck and vice vera. Very different schools and very different “school fit” case.

  • Chris

    Obviously this article focuses on MBA/Grad programs in the US, but does anyone have any experience with grad schools outside of the country? Clearly exchange rates come into play but just wanted to get any ideas on the thought of doing a MF/MBA abroad (HongKong, Europe, UK?)

  • Regrets

    I went to one of these top schools. In addition to forfeiting the income, taking on the loan to get the MBA I ended up unemployed for two years after. I absolutely have no clue how I’m ever going to pay it all back because even though I have got a job not it doesn’t pay me close to the median of my class.
    Think hard before getting an MBA. Don’t let the marketing and hype fool you.

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