The Real Cost Of An MBA

By Marv Dumon AAA

Given economic uncertainties, professionals who have been laid off or consider themselves to be underemployed are contemplating whether or not to pursue a Master of Business Administration (MBA) program. While such a route offers potential career flexibility, enhancement and advancement opportunities, it can also come with a steep price tag.

Higher education costs in the United States have outgrown the rate of inflation, and getting an MBA has associated tuition expenses along with rent and book costs. MBAs, especially those who go to private business schools, can accumulate between $100,000 - $200, 000 in debt and expenses in just over a two-year period. Fortunately, for those that are highly motivated to secure an MBA, there are alternative options one can explore in order to both receive the degree as well as minimize the costs. 

Advertised Costs Vs. Real Costs
Business schools market their programs in order to jockey for competitive positioning, mostly by way of attempting to secure higher rankings among peer groups. Professionals view the degree as providing greater career flexibility, such as opening the door for a new function or industry. Employers can look at an MBA grad as holding management potential. It is important, however, to assess a program beyond tuition rates.

A yearly tuition rate of $40,000 can easily be augmented with $20,000 in additional boarding and book expenses, depending on your location. Additionally, many programs require the purchase of laptop computers as well as costly overseas tours or trips. It is conceivable that such "peripheral" expenditures can lead to a total semester cost of twice the tuition.

Some professionals may want a "win-win" situation that allows them to earn an MBA at an acceptable cost. While attending a private business school can saddle an individual with low six figures in educational debt, programs at public universities offer a less expensive option. Exploring the full menu of public school MBAs allows professionals to possibly cut their debt in half. 

Part-Time Programs
In addition to the real costs associated with tuition rates, room and books, professionals who undergo a full-time MBA generally must forego at least two years of salary income. There is an additional exposure of graduating at a time of an economic or industry downturn that can establish or prolong the unemployment period. Assuming a professional earns $60,000 a year, a full-time MBA program can tack on an additional $120,000 in lost income and opportunity cost. Additionally, he or she will have lost two years of work experience subject to possibly greater visibility within the organization and promotions.

So summing it up, $80,000 for tuition, $40,000 boarding and books, $20,000 peripheral expenditures brings the total MBA cost to around $140,000, while the lost income brings the tab to a whopping $260,000. That figure amounts to more than four years of salary at an annualized income rate of $60,000. And this is an average school. If you are thinking about attending a more prominent business school, the costs shoot up. According to US News & World Report, in 2013 the average cost of the top 10 business schools in the U.S. was $111,418 for tuition in a two-year MBA program. 

Professionals can undergo a part-time or evening MBA program that allows them to retain their full-time jobs. Such programs typically take three or more years to complete. However, business training in an academic environment can supplement one's learning experiences on the job; a newly minted MBA who took such a route would have a well-regarded degree along with three years of additional work experience and exposure within the organization.

Work for a Major Company and Get a Free MBA
Some companies, especially major Fortune 100 corporations, can assume partial or the entire cost of an MBA program (assuming one earns satisfactory grades). This is an ideal situation for many professionals. To be sure, many would jump at the opportunity to continue earning a salary, get an MBA and have it paid for by one's employer.

Those that can wait a couple of years or so before starting the program should seriously consider this route. The company might also pay for a master's degree in accounting, a master's degree in finance or help pay  to pass the CPA or CFA license. Those with family, however, should exercise caution in undertaking a full-time job as well as an intensive part-time MBA program. It can be a difficult challenge to find time and attention for loved ones, let alone having a social life. One can easily dedicate at least 70 hours per week on work and academics. 

Professionals that want an MBA at less cost can consider one-year MBA programs. This can reduce overall educational expenditures as well as allow the newly-minted MBA the opportunity to start earning a salary one year early. One should undertake diligence and ensure that the quality of the one-year program matches your expectations. You are, after all, a consumer/ customer of the program and the business school is the supplier.

The Bottom Line
Given that an MBA program is a capital-intensive endeavor, carry through with a level of diligence as if you were purchasing a home. It costs that much. Finally, various vendors offer online degrees including an MBA. Undoubtedly, such a route generally entails the least amount of expenditure. However, one should take a serious look at the credence employers give to online MBA programs. You might end up shelling out a few thousand dollars without tangible monetary rewards on the back end.

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