Third Of A Million: True Cost of A Top MBA

by John A. Byrne on Print Print

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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  • 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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