The Class The Loans Fell On

Unfortunately, an MBA doesn’t hold much weight in entertainment. He landed a “foot in the door” job for ColumbiaHouse.com. “Starting in the mailroom” may be a time honored tradition in Hollywood, but it’s a much more difficult proposition when you’re carrying tens of thousands of dollars in student debt. Schraga’s job paid half of what he needed to make his $1,500 loan payments every month. So he moved into an apartment with four other people and went on a strict budget. Three years later, from the same shared apartment, he published a warning on the Internet to MBA hopefuls. “Business school,” wrote Schraga, “is a big risk. Should you choose to enroll, the only certainty is that you will shell out about $125,000. Such a figure correlates to… a ten-year period of time in which you will not be able to save a red cent.”

Much of the debt is eagerly taken on because students don’t think through the full costs of borrowing, believes Mark Kantrowitz, publisher of FinAid, a website that helps college students with financial aid. “They don’t really think about it,” says Kantrowitz. “If you have a dream, you sign whatever piece of paper is put in front of you to enable the dream. You think you’ll figure out how to pay it back later on.”

And if it’s a school as prestigious as Wharton, it’s hard to imagine that the investment won’t payoff. “People want to go to Wharton because it’s one of the best schools in the world and people go for the gold,” adds Kantrowitz. “So they ignore the costs that it will take to get the degree. They have blinders on. MBAs are having difficulty getting positions now and there is a little bit of a glut going on. But everyone hopes for the rich life so they ignore things.”

THE DEGREE ISN’T AS RARE AS IT WAS AND COSTS A LOT MORE TO GET

For the Harvard Class of 1949, of course, the rich life was easy. They ascended the ranks of business in the Go-Go years as the U.S. bestrode the world as an economic colossus. When they graduated, there were only 2,300 other students getting MBAs that year—and only 50,000 living MBAs in the entire U.S. Today, roughly 250,000 people in the U.S. alone are enrolled in MBA programs, which pump out more than 100,000 MBAs a year. There are some 40,000 living Wharton MBAs alone.

Bottom line: The degree isn’t as rare as it was, it costs a lot more to get, and the rewards for having it have fallen as well—even at Wharton. Just take a look at what has happened in the last decade alone. In 2001, Wharton recommended that applicants budget $59,728 a year to attend or about $120,000 for the two-year MBA program. Graduates from Wharton in 2001 reported median base salaries of $95,000 a year.

Ten years later, the median starting MBA salary at Wharton was just 15.8% higher, at $110,000 for the Class of 2010. But the recommended budget was up 40.6% to $84,000 a year or some $168,000 for the two years. Translation: In the past decade alone, the costs of getting a Wharton MBA has risen nearly three times as much as the initial financial rewards of having the degree in the past decade.

For the Class of 2013, however, these calculations are likely to get scarier. Wharton is now recommending an annual student budget of $89,200—a sum that does not include the school’s global immersion program, which typically costs between $4,000 and $5,000 more. That brings a student up to $94,200 for the first year alone, or $183,400 for the two-year program.

Most observers, however, believe school budget recommendations are about a quarter less than they should be. Carrie Shuchart and Chris Ryan, authors of Case Studies & Cocktails, figure that the official Wharton budget underestimates what a typical MBA would spend on clothing, cell phones and Internet, entertainment and travel. All told, they believe a more “reasonable” budget would be 24% higher. So tack on an extra $44,000, which brings the recommended two-year budget above $225,000, not including the foregone pay a person leaves behind to attend the program.

About the Author...

John A. Byrne

John A. Byrne is the founder and editor-in-chief of C-Change Media, publishers of Poets&Quants and four other higher education websites. He has authored or co-authored more than ten books, including two New York Times bestsellers. John is the former executive editor of Businessweek, editor-in-chief of Businessweek. com, editor-in-chief of Fast Company, and the creator of the first regularly published rankings of business schools. As the co-founder of CentreCourt MBA Festivals, he hopes to meet you at the next MBA event in-person or online.