Is Your MBA Worth The Debt? The Truth May Surprise You

It’s no secret that thousands of graduate programs at universities all across America leave students with mountains of debt and mediocre incomes. Many master’s students have gotten themselves into debt beyond what their incomes will easily support once they graduate.

Analysis of federal data on borrowers typically finds that graduate degrees in such fields as history, social work, and architecture put students behind the eight ball when it comes to debt. But what about the MBA degree? As always, it depends on where you earned it and how much money you had to borrow to get the degree.

Using publicly available data from the federal government, an analysis of earnings and loan repayments two years after graduation shows a wide variety of returns. Three of the best MBA experiences based on debt and earnings are Stanford Graduate School of Business, Dartmouth College’s Tuck School of Business, and the University of Pennsylvania’s Wharton School.

Debt-To-Income Ratios Tuck, Stanford & Wharton MBAs Among Lowest

At Tuck, MBA graduates borrowed a median of $41,000 and had an annual median income of $167,295 two years after the program, the data on recent borrowers show. Those numbers lead to a debt-to-income ratio of just 0.25, equal to Stanford’s MBA program and among the best MBA programs in the U.S. At Stanford, the median debt among MBA grads was $41,000 as well, while the income after two years was $163,337. Not surprisingly, given the substantial scholarship aid handed out to Harvard MBAs, Harvard Business School had the lowest debt-to-income ratios of any MBA program: 0.24. 

A ratio above one means a typical student would graduate with more debt than income two years after graduation. A ratio below one means the typical graduate has income greater than debt. Debt counselors generally counsel students not to borrow more than they will earn right out of school. By and large, almost all MBA programs meet that criteria, based on salary data for graduates from the 2015 and 2016 classes, the latest available.

Wharton grads did exceptionally well on this ratio. MBAs borrowed a median of $47,275, yet earned a median income of $175,674, for a debt-to-income ratio of 0.27. And there were a number of unexpected surprises. MBA grads at or near the one-third ratio include Johns Hopkins University (0.32), Wisconsin Business School (0.31), the University of Massachusetts at Amherst (0.31), Rice University (0.32), Texas A&M (0.34), and Michigan’s Ross School of Business (0.34).

MBA Programs Posting The Lowest Debt-To-Income

School Debt-To-Income Ratio Median Debt Median Income
Harvard Business School 0.24 $41,000 $171,907
Dartmouth (Tuck) 0.25 $41,000 167,295
Stanford GSB 0.25 $41,000 $163,337
Arkansas (Walton) 0.26 $27,800 $106,421
Pennsylvania (Wharton) 0.27 $47,275 $175,674

Only A Few MBA Programs Left Their Graduates With Onerous Debt

There are some glaring exceptions, of course. At Hult International Business School, for example, the median debt of $78,837 against only $67,420 in annual income led to a 1.17 ratio, among a handful of business schools with the least favorable outcomes. Claremont Graduate University MBA graduates did even worse. They borrowed a median of $80,616, yet earned a median income of only $61,020 two years after completing the program. The debt-to-income ratio: 1.32. The New School’s MBA in New York City wasn’t much better. Management grads of the New School went into hock for $65,548 but earned only $56,788 annually two years after graduation for a ratio of 1.10.

Also surprisingly, Howard University, the historically Black university in Washington, D.C., got as close as you can get to a debt-to-income ratio of one. MBA grads from Howard borrowed a median of $75,985 while earning just a tad more, $76,460, two years after graduation. That brought Howard’s ratio to 0.99.

Of course, the numbers only capture part of the picture. It’s hard to fully evaluate income prospects a mere two years out of school. Plus, these numbers fail to capture elements of pay, such as stock options, that are more difficult to quantify. They also indirectly reflect the generosity of some schools in providing scholarship support or the recruitment of students who have saved enough money so that they don’t have to borrow very much if anything to pay for their MBA degrees. And there is one other hitch: Figures are only for graduates who borrowed federal loans.

MBA & Management Programs Posting The Highest Debt-To-Income

School Debt-To-Income Ratio Median Debt Median Income
Presidio Graduate School 1.40 $59,622 $42,682
Claremont Graduate University 1.32 $80,616 $61,020
Dominican 1.21 $67,373 $55,840
Hult International 1.17 $78,837 $67,420
The New School 1.10 $65,598 $59,788

Grad Students Expected To Borrow As Much As Undergrads Last Year

Typical of all data sets, you’ll find some quirky results in some of the numbers. According to the federal data, Northwestern University’s Kellogg School of Management MBAs earn more than any other MBA graduates two years after completing their degrees: $189,565. That would seem unlikely based on school employment reports of starting salaries and bonuses at graduation.

The debt and income numbers, moreover, often bear little resemblance to debt levels of MBAs at graduation. That’s because those debt levels apply only to students who actually borrow money and not those who don’t. And it’s also because many graduates may use their sign-on bonuses, which in consulting can approach $35,000, to pay down a good chunk of their debt.

Even so, the analysis–done by The Wall Street Journal off of the federal data–provides an insightful look at how much MBA students borrow and how that debt figures into their income levels a couple of years out of school. While much has been made of booming undergraduate debt, students who borrow to finance their graduate degrees have amassed significant levels of indebtedness. In fact, for the first time ever graduate students are now on track to have borrowed as much as undergraduates in the 2020-21 academic year, according to federal loan data.