Four years ago, the total cost of a two-year, full-time MBA had a hard ceiling at $200,000. That ceiling was cracked the next year by New York University’s Stern School of Business, and by 2016, three more schools had joined NYU Stern in projecting costs greater than $200K for MBA tuition, fees, room and board, and other expenses: Stanford University’s Graduate School of Business, the University of Pennsylvania’s Wharton School, and Columbia Business School.
Now there are nine schools over the $200K threshold, and more knocking on the door.
Harvard Business School signaled its move into the $200K club last year and, indeed, joined four other schools atop the 2017 list: Dartmouth College’s Tuck School of Business, the University of Chicago Booth School of Business, MIT’s Sloan School of Management, and Northwestern University’s Kellogg School of Management. Meanwhile, five more schools cost $180,000 or more: UCLA’s Anderson School of Management, Yale University’s School of Management, Duke University’s Fuqua School of Business, the University of California-Berkeley’s Haas School of Business, and the University of Virginia’s Darden School of Business. If you’re keeping score, that’s three public schools among the top 15 in the dubious distinction of costliest MBA programs. The average percentage increase at those top 15 schools between 2016 and 2017: just under 7%.
So what’s the very costliest? As it was last year, Stanford takes the “prize,” costing $225,594, though NYU Stern ($220,948) and Wharton ($218,900) aren’t far behind. And to paint a not-so-pretty picture of inflation, in 2014 a Stanford MBA cost $202,870.
THE REAL COST OF AN MBA IS A CONSTANTLY FLUCTUATING NUMBER
Stanford GSB is impressively transparent when it comes to breaking down the costs associated with its MBA, to say nothing of the accuracy of its estimates regarding living expenses in ultra-expensive California. The price tag to live in sunny Palo Alto for one year includes $68,868 for tuition, a $34,653 living allowance, $1,518 for books, a $1,155 materials and program fee, $1,005 for transportation, $4,968 for medical insurance, and a $630 “health fee.” But hold on. That’s the cost for a single person living on campus. Get married and your living allowance balloons by $15,000, to $49,920; move off campus and it jumps again, to $51,054. Likewise, transportation costs for a married off-campus student are four times that of a single on-campus student: $4,140. In total, a married off-campus student will pay an estimated $132,333 for one year in the Stanford MBA program, or $264,666 for their degree.
And about those living expense estimates: Stanford is not alone in projecting numbers that likely underestimate the true cost of living in a particular area. Most schools estimate expenses based on a “moderate lifestyle” that may or may not approximate reality. It’s common for a school’s estimated living costs to be between 10% and 20% lower than what MBAs actually end up spending. And there are wide disparities among the elite schools: Does anyone believe it costs less to live in New York City while attending Columbia Business School (official school estimate: $21,375 per year) than it does to live in Hanover, New Hampshire, while attending Dartmouth Tuck (an estimated $28,673)? Living expense estimates range from $34,653 for Stanford GSB students to spend a year in Silicon Valley to just $10,000 annually for students to live in South Bend, Indiana while attending Notre Dame University’s Mendoza College of Business.
But the biggest gap in estimated cost versus reality is the fact that schools don’t calculate lost salary. Take Stanford for example. Most of the MBA Class of 2018, about 20%, came from the investment management/venture capital field, where the average salary is about $90,000 per annum. That’s $180,000 someone won’t be making while they’re getting their degree. Add that to the $225,594 official estimated cost of the MBA and you have a new total cost figure of — gulp! — more than $405,000.
Any way you slice it, getting an MBA costs a lot of scratch. The median price tag of the degree at a Top 25 school is $185,747, up big from about $171,000 last year, which itself was an increase from about $168,000 the year before.
Yet schools are not unaware of the financial hurdle they are asking students to jump; the cost can be, and often is, mitigated by scholarships, fellowships, or other assistance. At Stanford, the average yearly scholarship grant has hovered above $35,000 for the last few years; at Harvard Business School, scholarship support to MBA students hit an unprecedented $34 million in 2016, up from $32 million a year earlier. In 2016, UC-Berkeley spread $5.8 million in scholarship money to its relatively small class of about 250 MBAs.
And there’s also the fact that an MBA is a ticket to boosting income by leaps and bounds. According to new figures from the Graduate Management Admission Council, projected median base starting salary for recent MBA grads in the U.S. is $110,000, up from $105,000 in 2016 and an incredible 83% premium over recent bachelor’s-degree holders, “who can expect to receive a median starting salary of $60,000 in 2017,” GMAC says. Schools love to talk about ROI; some have numbers to back up their case. Stanford GSB boasts about the $140,553 average salary and the $136,000 median for the Class of 2016; UCLA’s Anderson School of Management, the costliest public-school MBA program in the U.S., promises a 137% increase in salary six to eight years after graduation.