M7 Business Schools: What It Really Costs To Get An Elite MBA

Harvard Business School across the Charles River

Harvard Business School across the Charles River

Dollar SignDon’t faint or break into a cold sweat. But we are about to tell you something that is truly shocking.

The total cost of getting an elite MBA from one of the M7 schools is now between a high of $297,650 at Stanford University’s Graduate School of Business and a low of $270,002 at Northwestern University’s Kellogg School of Management. Those sums include the opportunity costs of lost income from leaving a job to attend school for two years, but not the interest you might have to pay on your student loans. No matter how you cut it, the costs are scary high.

Of course, everyone knows that getting an elite MBA degree is a highly expensive proposition. That’s why there are so many articles on the web about whether it’s worth it. All the analysis should put that question to rest: The MBA degree is definitely worth the price of admission.

Some people, however, believe that you need to get an MBA at a highly selective and highly ranked business school to see the best return on investment. Truth is, many of the business schools at public universities offer significantly better immediate ROIs than many of the most elite business schools. But those numbers fail to account for the long-term differences in career advancement and compensation–which can be considerable.


In any case, the cost of going to one of the super elite M7 business schools has never been higher. The first big surprise is that the MBA students entering Stanford, Harvard or Wharton MBAs are leaving behind average salaries of $80,000 gross a year. So quitting those jobs to attend a two-year MBA program immediately results in an opportunity cost of $160,000. Among the M7 schools, in fact, the smallest opportunity cost is at MIT Sloan whose students walked away from $70,000 a year salaries or $140,000 in all. We subtracted out the taxes on the income for our analysis at a tax rate of 25%, which significantly lowered the opportunity costs.

Still, these numbers don’t include a pay increase that these young professionals would most likely have gotten in between those first and second years of business school. Even a conservative 5% bump, would add another $4,000 in lost wages, or $3,000 after-tax income, for the person who was making $80,000 a year. The same analysis is true of tuition which typically rises about 5% between the first and second year prices–resulting in another $3,000 or more in costs.

Then, there is the two-year cost of tuition which varies from a high of $136,420 at Wharton to a low of $122,450 at Harvard Business School. On top of that are the costs of housing and food–which you would have expended anyway–and fees for everyone from medical insurance to books and supplies and international excursions. The fees and living expenses estimated by the schools come to a high of $75,120 at Stanford to a low of $57,908 at Kellogg. But they obviously include food and housing which you would incur anyway so we then subtracted out of the estimates $20,000 a year or $40,000 total.


In any case, these estimated budgets provided by each school are typically too low by 20% to 30%, according to people in the know. In fairness to the schools that put these estimates together, the budgets are apparently limited by federally mandated guidelines. If you live with roommates, eat only the food put out by corporate recruiters who come to campus, and completely avoid the bar scene, you might get closer to the school’s estimate. But it’s highly unlikely that you’ll want to live a Spartan lifestyle.

Going to an M7 school, moreover, increases the odds that you’ll be taking some international trips with classmates, even over a couple of long weekends. You’ll spend time decompressing in local hangouts and restaurants on a weekly basis. You’ll buy a couple of coffee drinks every day from Starbucks. And you may want to buy a new suit or two for recruiting events and interviews. These are investments in your future as well because they are important to your networking and job opportunities.

And all these costs quickly go up if you’re not single, if you decide to live off-campus, if you have children, if you go on a longer international travel excursion, or if you have a protracted search for a job. Stanford University’s Graduate School of Business, for example, says that the total estimated annual budget for a single student living on campus is $99,435, not including as much as an estimated $4,000 for an international study trip to fulfill the school’s global experience requirement. That’s $103,435 total for the low ball estimate. If you’re married and live off campus, Stanford bumps up this number to $124,534–an additional $21,000.


Good luck finding housing in Silicon Valley that won’t set you back a great deal more. Those estimates for a married couple living off campus include an annual $45,261 in living allowances which includes rent, food, and personal expenses for what the school terms “a moderate lifestyle.” Here’s the clue that you’ll spend a lot more. Stanford essentially estimates the cost of living off campus to less than $4,000. That just isn’t going to cut it in one of the most expensive housing rental markets in the world.

Given the high costs, you may wonder why so many still want to attend business school, especially an M7 school which tends to be among the most highly selective in the world. The reason: It still pays off. Estimates of the payback periods for M7 degrees range from a low of 3.7 years for the MBA from the University of Chicago’s Booth School of Business to a high of 4.1 years for Stanford GSB. Harvard, Wharton and MIT MBAs have payback periods of 4 years. Kellogg is at 3.8, and Columbia is just a tad higher at 3.9.

(See following page for our analysis of all the costs to get an M7 degree)

  • JohnAByrne

    I totally agree with you. And let’s not forget the actual knowhow and skills given to students in the best MBA programs from the leading thinkers in finance, accounting, strategy, leadership, etc.

  • Ben Franklin

    A top-MBA is substantially more valuable than these numbers suggest. Here’s why…

    Out of simplicity, you had to analyze costs and benefits using monetary terms only. However, the soft benefits are 1) earning a master’s degree from a top school, 2) self-confidence booster, 3) network building and alumni access, 4) personal and professional credibility, 5) the ability to be considered for the most elite positions at the world’s best firms, 6) lifetime continuing coursework (for some MBA programs), etc.

    How can you quantify such soft factors? And, how much of these benefits should be attributed to the short-term “payback period” calculations? I’d submit that payback periods are substantially lower (i.e. 2 years, not 4) – assuming that the soft factor benefits should be recognized in an evenly spread out fashion over one’s lifetime.

  • 2cents

    The assumption you are making here is that people leave work, head straight to school and start immediately upon graduation. The safer rule to use is July 1 – June 31 calendar, with people quitting and starting earlier/later. Two years is definitely the right use. The numbers above actually seem a Bit high. Personally I left a job making mid 70s, paid more rent and went out a lot more in school and travelled, still ended up net a good bit less than above with summer internship and signing. Having debt financed the whole thing I’m keenly aware of this too 🙁

  • JohnAByrne


    Thanks to the feedback from readers, I decided to subtract taxes from opportunity costs and food and housing from school estimated expenses. Thanks!

  • JohnAByrne

    What I meant to say is that information iOS rarely made public by the schools and is generally not a vonsideration in admission decisions.

  • Consultant

    “Most schools have no idea how much their applicants make.” Not true. I’ve applied to 7 schools this last season and every single one asked the applicant’s salary.

  • Caio

    John, I believe Travis has made a valid point and you should that it under account next time. Additionally, is the considered salary after taxes? If not, taxes should be excluded also.

  • JohnAByrne

    TO OUR READERS: For what’s it worth, I’ve taken the feedback to heart and have adjusted and updated the numbers in this story. The new estimates adjust opportunity costs for after-tax income and also subtract out $40,000 in food and housing costs that are in the school-estimated budgets on the grounds that you would incur those base expenses anyway.

  • JohnAByrne

    That’s a valid point. The tax rate for a single person making $80 is about 25%. So for Harvard, Stanford and Wharton, that alone would shrink the opportunity cost to $120K from $160K, a savings of $40,000. If you then subtract out living expenses, as some of our readers suggest, then you also can take out roughly $20,000 a year, or another $40,000. Factor in summer internship pay, which as we note in the article would come to about $20,000 gross, or $17,000 after taxes and you could shave $97,000 off these bottom line estimates. Get a scholarship for a third of the tuition and you can save another $40,000 for a total of $137,000.

    On the other hand, let’s say you don’t get a scholarship. You still live at home with your parents for free or in a significantly less expensive locale. You missed the raise you would have gotten on your $80K salary by being away. We didn’t account for the 5% increase in tuition and other fees in your second year. Nor the costs of moving from wherever to start school or moving to wherever to start that new job. You also take several weeks off after graduation before starting your new job so the pay doesn’t kick in for another month or more.

    Again this is all directional and varies by person and school. But I think I would subtract out the taxes in opportunity costs. Fair enough.

  • A Nony Mous

    This calculation is off because you are combining pre-tax salary with after-tax out-of-pocket tuition.

    What you actually forego is after-tax salary and after-tax savings/loans used to pay tuition, room, board and supplies.

  • JohnAByrne

    For sure, this is a rough approximation of the costs. As we’ve said before, the precise cost of the degree will vary wildly for each person based on where they are coming from, whether they get scholarship aid or whether they are single or married, their lifestyle and preferences (dorm life vs. an off-campus apartment, etc.), the size of the loans they take out, or the difficulty of finding a job or deciding to take much of the summer off after graduation before starting a new position. There is just no way to account for everything.

    Here’s the important takeaway: We’ve thrown this out there and put in lots of detail for our logic, explaining all the variables involved. At the end of the day, each person must then look at the information intelligently, deciding what applies to them and what doesn’t. If you think the opportunity cost for you at Stanford is $75K less, than discount our number by that amount. By being completely open and transparent about the information and the calculations, we are allowing the reader to leverage the info for his or her own best and worst case scenarios.

  • Travis Mahoney


    Unless I’m missing something here, salary does not equals opportunity cost, savings after living expenses equals opportunity cost. If you use the same estimates for living expenses as business school (though this is a heroically pessimistic estimate), your opportunity cost at Stanford would be 75k lower. Including living expenses or full salary is effectively double counting.

  • AP

    Thanks John!

  • With Devil0508

    Your math is off. For a two year MBA, the curriculum lasts 18 only months. We work during our 3 month summer. So if salary is $80k/12 months, the forgone salary for 18 months is $120k. Plus whatever raise you would have gotten in the second year is more than offset by the increase in earnings in your summer internship over what you made before b-school.

  • Broke MBA

    Agreed. Moreover, you should account for taxes. Basically, the way i account for my opportunity cost is = what i would have saved + cost of attendance. So, say i would have saved 20k (after expenses and taxes) + 200k(cost of attendance) My opportunity costs is really only 220k.

  • Peter

    Dear John Byrne,

    You have now fallen back to your BW days of simply doing the Harvard vs Wharton etc stick, M7 silliness. Reality is these programs are way over priced and just fancy brands. I looked at a Columbia 10 day program and it was 25k. How about a story analyzing tuition from say 1990, why the grotesque increase given low inflation? Professor salaries and admin costs have not skyrocketed where does the money really go ? Then there are the bad actor programs that are skimmed by their university while having adjuncts teaching! Or a story on AACSB accreditation re. just how easy it is, both it and GMAC are like FiFA ! The MBA industry needs exposed and regulated better, you know it but simply choose the what’s good for the goose is good for the gander approach. You are making a living off the dysfunctionality rather than exposing it, you play programs against each other to heighten readership and play on applicants insecurity. Reality at decent programs there is not much variance in quality, recruiting yes due to the branding arms race!

  • Esuric

    You’re right. It’s a sunk cost.

  • JohnAByrne

    I posed your question to our expert financing columnist, Cory Pollock, who regularly entertains questions from readers o our homepage. Here is what he has to say:

    “The maximum aggregate potential amount in student loans that can be borrowed is equal to the cost of attendance provided by the school. To the extent a student’s expenses exceed the cost of attendance, the difference can be funded in many different ways including savings, summer internship net income, signing bonuses, corporate sponsorship programs, family help, home equity loans, 529 plans, etc.”

    So you can borrow unto the estimated costs by the school, which as we point out tend to understate cost of a program by 20% to 30%.

  • JohnAByrne

    Good question. No, these are median numbers so half the people who provided them are below the number and half are above it. Your pre-MBA salary has no role in admissions. Most schools have no idea how much their applicants make. The data we cite is from a survey of MBA alumni by Forbes magazine which measures return on investment in its biennial ranking. More important to admissions is where you worked, what you do, and your record of accomplishment and progress in your job. Every school seeks a wide variety of students from all backgrounds. So don’t let these numbers scare you away. In fact, if you’re below them, you are very likely to be given scholarship help at many top business schools.

  • Alex

    Hi Jon-

    I understand the the actual cost of attendance exceeds the figures the school gives. Are you able to take out student loans in excess of the amount. Say the cost of attendance is 200K is it easy enough to get loans totaling 250K? Or do people need rely on savings and credit cards to cover the difference?


  • AP

    John, Sandy – I have a question.

    The opportunity costs that articles like these assume is always high. So my question is, do all the people who get in have jobs with salaries this high? Conversely, does your pre-MBA salary have any role in the admissions? And do schools look unfavourably towards candidates who honestly, don’t make a lot, particularly international candidates?

  • devils0508

    That’s not my point. My point is you’re double count living expenses in your total figure. You’re counting it in both opportunity cost and in the living expenses column. You’re basically saying “You give up $75k per year to attend business school in salary” and “You have $30k a year in living expenses while in business school” You need to sutrace the 30k from the 75k opportunity cost, since you’d have to spend that whether or not you’re in business school. You mention that in the article, but your math doesn’t reflect that.

    You’re over-representing the total cost cost of attendance by around $60k.

  • JohnAByrne

    As the article points out, the actual cost of the degree will vary significantly from person to person and from school to school. So the bottom line numbers we present are directional but pretty much right on average. There are a lot of other costs, for example, that we did not include, from the cost of picking up and moving into a new place, breaking a lease on an apartment, relocating to a new job, flying off for interviews and job fairs, or borrowing a lot more because you didn’t get any scholarship aid.

    As for including housing and food, I can assure you that the numbers included for those core items by the schools are the bare minimum. Consider Columbia Business School’s estimate for housing and food: $20,700 a year. Well, the latest rental numbers by Citi Habitat show that a one bedroom in Morningside Heights, Columbia’s neighborhood, costs $2,658 a month. That comes to $31,896–more than $11,000 over Columbia’s total estimate or $22,00 more over two years–without a single hot dog off a New York City street cart. Even a studio goes for $2,116 a month, or $25,400, significantly more than the school’s estimate for housing and food.

    If you’re moving from just about any other place in the country, you are bound to pay considerably more in New York, the Bay Area, Chicago, Los Angeles, and any number of other cities. And, of course, some students might still be living with their parents for free. So these costs are very real for them.

  • devils0508

    Your math is wrong.

    If you’re going to include opportunity cost, you only include tuition…not tuition + expenses. Reason being, you were going to need to pay for food, rent, etc whether you went to school or not. Your calculations double count all these expenses.