(Thanks to Patti Connor for revisiting this topic and writing this guest post.)
In recent years, it has become difficult to defend the costs of graduate school degrees, specifically the MBA. We wrote an article in 2012 titled MBA Tuition Doubles; Salaries Flat – Is The MBA Worth It?, in which we explored this issue with an eye on the numbers. At the time, the picture was quite clear: MBA tuition was growing increasingly more expensive, and the degree was doing less and less to guarantee any type of career boost. Strictly from a financial perspective, the idea of paying for MBA education seemed foolish.
But have things changed since 2012? Inc addressed this issue in the fall of 2014 with an updated infographic analyzing the benefits of an MBA from a top-10 program. It’s tricky to address the question specifically from an ROI standpoint while looking only at top programs, but it’s fair to say that the overall picture is at least slightly more positive. According to the infographic , 2014 forecasted a 16% growth in MBA hiring rates. Even more encouragingly, the article looked at “the 5-year MBA gain”: essentially, the net cumulative amount an MBA graduate would earn in five years compared to what he or she would have made with a previous career path. The lowest amount for a top-10 program was just under $60,000, with the highest just under $100,000.
Keep in mind these aren’t total income numbers; they’re the differences between MBA career earnings and pre-MBA career earnings. Those are pretty significant differences, and they make the idea of paying back tuition loans, at least for top programs (where it’s often been toughest in the past), seem more feasible than in previous years.
It’s also worth addressing that the bulk of these numbers, and this conversation in general, comes with consideration of the job market. We’re inclined to measure the value of an MBA by how many graduates are hired and what their career paths offer. But in 2015, that’s not the whole story, as many also seek advanced business degrees for purposes of personal entrepreneurship. Some may argue that a path to personal entrepreneurship makes an MBA even less necessary—why pay $100,000 or more for a degree when you’re trying to start your own company and don’t need to impress anyone with your resume? But for entrepreneurship, it’s important to measure the potential benefits of an MBA from a perspective of personal growth and direction.
In some ways, this aspect of the MBA experience begins even with the application and continues throughout the process of earning the degree. Menlo Coaching, an online service meant to help with the MBA application and school selection process, makes it clear that one of the most significant parts of pursuing a business degree is determining one’s own professional goals and ambitions. The site’s testimonials reveal a number of clients who are grateful for the assistance they receive in realizing and clarifying these goals and ambitions, and many find that this personal exploration ultimately becomes the beginning of a career in business or entrepreneurship. In short, the process of earning an MBA can give students the nudge they need to figure out what it is they truly want to do, and how best to accomplish it. Particularly for hopeful entrepreneurs, this benefit can outweigh any financial concerns.
Similarly, many young people find a benefit in pursuing an MBA simply out of a desire to change course or switch careers. This may sound somewhat flippant to those for whom an MBA is an oppressive financial burden. However, for those who have solid careers and are looking for something different, it’s a valid perspective from which to determine the value of an MBA. In its own analysis of the value of an MBA, Bloomberg addressed this perspective, stating that “many go to business school less for the potential financial return than from a twenty-something desire to change course.” This is a common reason for graduate school in general. Many graduate college, start respectable careers, and find in their mid- or late-twenties that they want to change course. Graduate school, and for the sake of this discussion an MBA, can serve as a valuable catalyst in such cases.
None of this is to completely defend the cost of an MBA. There are certainly many people for whom the wiser course of action is to continue in a career and never bother with the cost of even more education. But the outlook is somewhat better than when we last addressed this topic in 2012, so don’t discount the MBA’s benefits completely.