MBA Prestige May Not Matter That Much

MBA Prestige May Not Matter As Much As You Think

For many MBA applicants, the prestige of a school’s name matters most. But experts say there is a difference in the value among business schools where prestige isn’t as important.

US News and World Report recently released data that suggests earning an MBA from a lesser-known school may bring a better pay off.

“There’s a wide variety of business schools that offer people – depending on their career – a choice that’s not limited to three or four schools,” Jeff Thomas, CEO of New York-based Stratus Admissions Counseling, tells US News. “There are dozens of schools that pay off for people in terms of the value to their career and pure earnings power.”

Not surprisingly, prestigious schools tend to charge higher tuition. This means earning an MBA from a lesser-known school may offer a greater return on investment, or ROI. A return on investment for an MBA education can be calculated by using the salary-to-debt ratio – comparing the starting salary post-graduation to debt.

Why is ROI important for MBA applicants? A higher ROI sooner means many MBA grads won’t be bogged down by heavy debt. This gives graduates more flexibility and mobility in their decisions. Essentially, they can start reaping the fruits of their labor sooner.

The table below shows 14 of the top-20 schools from US News’ rankings ordered by salary-to-debt ratio.

Take Emory University’s Goizueta Business School. Despite ranking outside the Top 10, Goizueta grads outpace nearly all comes, earning $1.60 in pay against $1.00 in debt out of the gate. That’s a better ratio than stalwarts like Berkeley Haas or Yale SOM, which are considered – at least in the public eye – as more prestigious full-time MBA programs. Better yet, 7 of the 10 highest-ranked programs in terms of ROI are ranked outside the Top 10, including 17th ranked Texas McCombs, which achieves a near 2:1 pay-to-debt ratio to start.

Attending a moderate MBA school may offer students better financial payoff, but that doesn’t mean that prestige is out the window.

US News found that schools ranked in the bottom quarter actually showed lower starting salaries of about 50% of those in the top quarter. In other words, the higher pay at the top end schools will eventually yield a higher return as debt dissipates.

There is no one-way to guarantee financial pay off with an MBA. But one of the biggest strategies to increase ROI is to choose a school that can offer scholarships to combat pricey tuition.

“There are a number of schools, depending on your GMAT scores, that can take quite a bit off your tuition bill,” Thomas tells US News. “Often times this might not be the top three schools, but if you look down to the top 20 schools where they are trying to attract very strong candidates, you can attend a great school at a reduced rate.

Sources: US News, Quartz

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