Is an MBA Worth It, or Is the Sky Falling Down on the MBA Degree?

"When is the MBA worth it?" Listen to our podcast interview with Linda Abraham, founder and president of Accepted!

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Accepted founder Linda Abraham discusses when pursuing an MBA justifies its cost [Show Summary]

Linda Abraham, Accepted’s founder and president explores the latest headlines about the value of an MBA. This is a must-listen for anyone trying to decide whether or not to get an MBA degree.

Why we’ve been asking the wrong question about the value of the MBA [Show Notes]

Headlines scream “Is an MBA Worth It?” and frequently conclude, as did an editorial in the WSJ in the fall, that an MBA usually isn’t worth it in an era of low unemployment, high tuition, and declining enrollment for U.S. business schools’ flagship, two-year, full-time MBA programs. Other articles conclude differently and trumpet that the MBA is almost always worth it because of the value of the MBA education and network. In my opinion, they’re both asking the wrong question. The right question is:

“When is an MBA worth it?”

This is not a categorical question, or one that an op-ed can answer across the board for everyone or even “most.” It’s something that individuals must assess and analyze individually. If you’re a prospective MBA applicant trying to decide if you should apply or attend if accepted, ignore the headlines (for the most part). Approach the question, with this maxim in mind.

The MBA is worth the investment in time and money when anticipated benefits – both financial and non-financial – exceed anticipated costs.

That sounds straightforward, but let’s unwrap it. To analyze the situation, record in a spreadsheet your anticipated costs:

Out-of-pocket tuition, fees, travel expenses
Opportunity cost – lost salary for the time spent in school less the amount you anticipate making during your summer internship.

Don’t include living costs that you would have regardless of whether you work or attend school. You do need to budget for them, but they are not part of the cost of the MBA. My next point is really important: When considering costs, realize that the stated tuition and costs may be more than you will actually pay. Many schools, especially elite, private MBA programs, offer significant amounts of scholarship money. In 2018, the Wall Street Journal reported that while stated tuition has increased steadily, schools have also increased both the total dollars offered and the percentage of students receiving scholarships and financial aid. In fact, the article states that “61% of this year’s students are receiving scholarships based on merit, financial need, or a combination of the two.” The same article reveals that the average fellowship award cut the cost of Harvard tuition in half, and that total monies available for scholarships at the school have more than doubled since 2009. Dartmouth Tuck reported similar stats. Our clients who joined the MBA class of 2021 received 40% more in scholarships than those who joined the class of 2020. So far in this application cycle, we have several clients who have received full rides in round one, and two who have received two full ride offers each. What’s driving this generosity? Business schools are competing for top applicants in a shrinking applicant pool. HBS announced its second annual decline in application volume – down 6.7% in 2018-19 and 10.8% total since 2017. Dartmouth Tuck applications plunged 22.5% and Yale SOM dropped 15.6% year over year. With employment and job growth so strong, it’s understandable that some potential applicants ask themselves, “Why should I leave my job and go to the trouble and expense of getting an MBA?” The answer: The benefits of the MBA may be worth it. Let’s look at average total comp for 2019 grads at some of the top U.S. business schools, which are usually among the most expensive: Forbes surveyed 17,500 b-school alumni for its 2019 rankings. Forbes’ conclusion: “a degree at a leading business school is still incredibly valuable and pays for itself in roughly four years. Graduates from the Class of 2014 at the top 25 U.S. programs increased their earnings from $73,000 on average before school to $193,000 last year. Earnings have increased 10% annually since graduation.” Their survey shows that a top MBA can cost a jaw-dropping $350,000 in foregone income and out-of-pocket expenses – if you pay full freight – but pays for itself in roughly four years. Any increased salary after that is gravy and return on investment. In addition to the financial reward, MBA grads usually are seeking and enjoying more satisfying work. GMAC data shows overwhelmingly satisfied alumni. Financial and non-financial benefits propel people to invest in the MBA. The education, network, and credential that you acquire by earning an MBA all enable the financial rewards and personal satisfaction that last a lifetime. With achievement of those two goals as your North Star and your spreadsheet of costs keeping you grounded, you can determine at what point the benefits outweigh the costs. At that point, the MBA is worth it for you. Notice I have spoken very little about rankings, immigration policy, rising tuition, or any of the factors that create headlines. However, one headline, declining application volume, does benefit you, the applicant. With fewer applicants vying for spots at top-tier programs, your chances for acceptance and financial aid improve. The reduced application volume and increased financial aid can make all the difference in your decision to attend business school or not.

Another common question: Is an MBA worth it if you can’t attend Harvard, Stanford, or Wharton?

The star status of Harvard, Stanford, and Wharton, or H/S/W to their friends, blinds many would-be MBAs to the strengths of other programs. They assume it won’t be worth their while to attend “lesser” programs. This is frequently false. H/S/W do boast outstanding programs, brand value, name recognition, networks, placement centers, and salaries upon graduation. However, the table below shows that they aren’t the only programs whose graduates sport stratospheric salaries.

Median total compensation for 2019 MBA grads*

School Name	Median Total Compensation
University of Pennsylvania (Wharton)**	$175,000
Stanford University	$187,760
Harvard University	$172,090
Massachusetts Institute of Technology (Sloan)	$173,670
Chicago Booth	$168,060
Columbia University	$177,970
Northwestern University (Kellogg)	$165,080
University of California–Berkeley (Haas)	$162,147
Yale University	$157,990
Dartmouth College (Tuck)	$170,000
Average	$170,977

*Data is from several articles on Poets & Quants. **Total compensation for Wharton graduates is P&Q’s estimate. Let’s put it this way. If you are in the elite group already advancing quickly in your careers, making post-MBA salaries, listing Ivy League degrees on your resume, and enjoying the luxury of achieving your goals without the MBA, you may be in the “H/S/W or bust” camp. If, however, you are a more typical above-average achiever who doesn’t enjoy an elite’s advantages and seeks the increased salary and career satisfaction that your North Star will provide, you still enjoy excellent options among the so-called M7 (H/S/W, MIT, Kellogg, Chicago Booth, and Columbia), as well as the Top 10 – which, due to multiple rankings, includes about 15 schools – and depending on your circumstances, outside those 15 programs, too.

A good question: How do I decide where to apply?

Assess your qualifications for each program, as well as each program’s ability to help you follow your North Star, the realization of your short- and long-term, post-MBA goals. For each school that you consider, evaluate the following:

Employment reports. Does this school place a significant percentage of grads in the industry and job function that you find most attractive at a salary that makes your MBA worthwhile? For example, 19% of Vanderbilt’s 2019 MBAs went into healthcare, making that school a smart target for applicants interested in this space. 37% of Yale SOM’s 2019 class went into consulting.
Curriculum and educational approach. Will you perform better in a highly structured program, or a flexible one? (Darden has a one-year core curriculum that all students take. In contrast, Chicago Booth has only one required course and a flexible core.) Do you want a program that is case-based? (Darden and HBS) Highly experiential? (Ross, Haas, and MIT Sloan) Or a mixture of case, lecture, and experiential? (Kellogg and Yale SOM)? Do you want to concentrate or perhaps earn a certificate in a specific area relevant to your goals? For example, do you seek a globally focused program (INSEAD, anyone?), or one that offers advanced courses in a specific area? Duke Fuqua excels in Energy Finance courses; Georgetown McDonough is strong in the intersection of business and government; and UCLA Anderson, USC Marshall, and NYU Stern are all known for their Entertainment and Media offerings.
Extracurricular opportunities. Important learning takes place outside the classroom. Look for special programs, competitions, events, treks, and other opportunities where you would like to contribute and learn.
Personal factors. Do you have a significant other or children? Do you thrive in big cities, or in smaller communities? Can you handle snow? Or oppressive heat? If you visited different campuses, where did you feel at home? Where could you really envision yourself being for two important years of your life?

After you study what each school can offer you, turn the question around: What do you bring to the table? Even in a slightly less competitive environment, admissions committees will be carefully looking at your qualifications. They need assurance that you have the academic chops and credentials that show you can thrive, or at least survive, in their programs. Does your professional experience (and perhaps volunteer work) demonstrate that you will be both a leader and a team player, eager to contribute? Can you show in your application that you share your target programs’ values and mission? Cultural fit and common values are important to b-school gatekeepers, who tend to be proud of their communities. Finally, what makes you distinctive personally? Where is the “wow” factor in your personal story?

Another good question: What if I’m not competitive at the schools I’d love to attend?

You have three options:

Improve your qualifications. Take classes in your areas of weakness, especially if business-related, and earn A’s. Prepare again, retake, and raise your GMAT/GRE. Look for opportunities to expand your responsibilities and impact at work. Assume leadership roles off the job. Obtain international exposure.
Look at other programs with an open mind. Find programs that can help you realize your aspirations and where you are more likely to get accepted. Your dream program may be a stretch, but give it a try! No need to reject yourself, but also apply to programs where you are competitive and that support your goals.
A combination of 1 and 2.

The MBA is worth it to some and not to others

While the blaring headlines may be attention-getting, you should base your decision whether and where to apply for an MBA on a solid foundation of self-reflection, research, and analysis. Done properly, this process should be deeply purposeful and even gratifying. For today’s MBA applicants, declining application volume means you are a buyer in a buyer’s market. Even elite programs are wooing applicants with bigger fistfuls of scholarship dollars, helping you achieve a richer ROI. The MBA may be in an era of retrenchment, but it is hardly toast. In fact, if you go after your MBA thoughtfully and purposefully, you could someday eat the lunch of those who focused on the sky-is-falling-down headlines and unwisely chose not to apply to a program that could enrich the rest of their professional lives and is enriching yours.

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