Why The MBA Beats The MD & The JD

mba degree pay off

The cost of getting an MBA degree can be staggering, leaving students with heavy debt burdens after graduation. But the perennial question every new generation of MBA applicants have is, does the degree still pay off in dollars-and-cents terms? A new return-on-investment analysis on graduate education shows that the MBA continues to beat all other degrees when it comes down to value.

The study by San Francisco-based Priceonomics to determine which advanced degrees produced graduates with the most (and least) student debt and how that compared to post-degree income immediately after graduation. The study is based on data supplied by graduates looking to refinance their debt from Earnest, a financial services company. Average student loan debt includes debt acumulated in both college and graduate school.

Researchers crunched the numbers for a wide variety of graduate degrees besides the MBA: MDs (medicine), DDS (dentistry), Pharm D (pharmacy), JDs (law), Masters in Science or Engineering, Masters in Arts, and other masters degrees. They also examined the impact of a university’s brand on a graduate’s earnings.


The winner? MBAs, by a long shot. Dividing a graduate’s average student debt by their self-reported income, Priceonomics calculated a debt-to-income ratio for each group of students. Debt-to-income ratios below one mean these degree-holders make more than they paid for their degree in one year. Values over one mean the degree cost more than what the typical graduate makes in a year.

The study found that MBAs enjoy the lowest debt-to-income ratio, just 0.71. That compares with medical professionals’s debt-to-income ratio of 1.41, master’s of arts at 1.07, or law at 1.0. “These (MBA) degrees are relatively affordable and confer high earning power, the researchers concluded.

Not surprisingly, medical professionals incur the most average debt, a chart-topping $191,200, followed by law graduates at $139,900 (see below table). The average debt for an MBA was $89.900, considerably more than the $62,800 incurred by students who went for the master’s of arts, but substantially more than med and law students who have to go to school for longer periods of time.


The upshot? Even though medical and law graduates outearn most MBAs starting out, their debt loads are considerably higher, diminishing the immediate payback of their degrees. “Medical professionals take on the most debt – even when their high salaries are accounted for – while MBAs enjoy a low debt burden relative to their income,” the study found.

The analysis, moreover, tends to underestimate the MBA’s value due to a number of factors the study fails to take into account. For one thing, the stated first-year income for MBAs of $127,200 is substantially below the actual figures for graduates of the top schools. Last year, the median total compensation package—including sign-on bonuses and other guaranteed pay— for MBAs at two dozen of the most highly ranked institutions exceeded the reported average in the study. In fact, the total pay for MBAs at Stanford, Harvard, NYU, the University of Virginia, and the University of Michigan topped $150,000, with Stanford GSB grads making a record $163,827.

The analysis also understates the value of an MBA because employment rates out of business school tend to be substantially higher than they are for law school grads and many other master degree holders. Finally, leading business schools tend to be far more generous with scholarship aid than many other graduate schools. At Harvard Business School, for example, roughly half of the school’s MBA students currently receive fellowships, which now cover more half the cost of the annual tuition of $61,225. Last year, HBS doled out $34 million in scholarship aid to not much more than 950 students. While this generosity would lower the debt burdens in Priceonomics calculations, the study wouldn’t capture graduates with full rides or substantial awards who wouldn’t need to borrow any money at all for their education.

  • Observations

    This is a rather difficult comparison to make. The average age of students entering med, law, and other graduate schools tends to be lower since most students do not get an MBA straight out of college. This means that many MBAs may have already paid off some or all of their undergrad loans and have additional years of experience straight out. As noted MDs and JDs out earn MBAs straight out and are more likely to have debt (haven’t paid towards undergrad and longer programs) but also be younger. In the end do what will make you happy, the different degrees do not need to compete.

  • johnbyrne is a fool

    agree, this is poorly written with little data. i’m an mba and with a top consulting job and even i can recognize is the typical drivel john byrne writes to prop the mba and this stupid website up. only ended up here because someone sent me a link to it but prospective mba’s would be better served studying for the gmat than wasting time here

  • Law Grad

    Law will be skewed as many take public service jobs that pay very little, and debt payback schemes significantly reduce the debt burden for many graduates who do not take high-paying jobs. Of the JD, MBA, and MD crowd, I believe that JDs are more likely to have lower incomes due to public service and government jobs and a higher debt load. But as stated, these graduates will likely not have to pay back these large loans due to payback schemes such as public service forgiveness.

    I would be interested to see an analysis conducted based graduates who go into private practice (for JD, MBA, and MD), where debt-forgiveness schemes popular in law and medicine do not come into play (having $200k in debt and making $60k isn’t as large a concern if you only have to make minimum payments for 10 years before the outstanding debt is forgiven).

  • Averages

    A lot of the highest earning MBAs are probably in the top 10% of all MBAs in general. In the long run, the average doctor probably makes more than the average MBA. Most of us will be average, so it makes sense that some people might see medicine as a more stable/ predictable career path than business. Then again, you need a stomach for medicine. Probably requires more natural aptitude than business.

    Can’t speak to law, don’t know enough people in that profession to make a guess.