Studying for an MBA is a considerable investment, but is it worth the cost? The economy is in trouble, jobs are scarce, salaries have dipped and students are scrambling simply to find summer internships, let alone full-time positions. So does it make a difference where you study your MBA? Is there clear value in a Harvard or other Ivy League institution MBA? And how long might it take you to recoup the cost?
TUTORIAL: Financial Careers: Introduction
The Best of the Best Schools
An MBA from Harvard or Stanford, or from any number of the elite business schools, has long been the dream business qualification, regardless of the amount of money you had to borrow to make it happen.
However, Bloomberg Businessweek has published a study which may make people stop and think before making this kind of investment in the future. New analysis suggests that it can take a Harvard or Stanford MBA graduate more than 10 years to fully recoup his or her investment in the degree. Businessweek uses the following criteria to measure the return on investment (ROI): pre-MBA salaries, post-MBA salaries and cost of attending business school.
So why is the return on these elite MBAs so slow? Well, one theory is that these schools generally have the highest tuition costs, and they are also likely to attract applicants with high pre-MBA salaries, which mean they will not fare well in this ROI calculation. (For related reading, see The Best Designation For Your Financial Education: CFA, MBA Or Both?)
Which Schools are Delivering the Best ROI?
What Businessweek's study has highlighted is that some schools offer a much quicker return on the tuition investment - but they are not the ones that are most commonly regarded as the best. The schools outside of most of the "Top 25" lists give students faster returns on their investment than the recognized leaders in graduate business education.
Businessweek's report shows that Texas A&M had the fastest return of any U.S. based program, with the investment recouped in just under three and a half years. Texas A&M's Mays Business School, is one of the few U.S. programs that is a year and a half in length, costing just under $70,000, so its fees are considerably lower than at most other schools.
Other U.S. MBA programs at the top of the ROI list include: Michigan State's Broad College of Business, the College of Business at the University of Illinois, and Penn State University - which all have ROIs of under four years.
Long Awaited ROIs
Unfortunately Chicago's Booth School was ranked last among 71 schools, with a long wait of 14.3 years before your initial investment comes to fruition. However, somewhat confusingly, as well as ranking last on ROI, the University of Chicago's Booth School of Business simultaneously ranked first in the "most influential of all the MBA programs in the U.S.," which does call into question the validity of the ROI rankings.
Is Return on Investment Worth Measuring?
So the results seem confusing. How can a school be last on one list and first on another? And if Harvard is coming in at 69th out of 71 MBA programs for ROI, is this an investment worth making?
Well, that really does depends on motivation. If your primary motivator is a fast return on your investment, then attending one of the 'top' academic schools may not be your best bet.
The fees of these schools are extremely high, and they attract candidates who already have very high salaries. Texas A&M's Mays Business School graduates will earn back their investments more than three times faster than Harvard grads, which is a striking statistic.
TUTORIAL: Financial Careers: Finance Employers
The Bottom Line
But is there more to be measured than just ROI? It is likely that there is, and of course this ROI analysis fails to consider starting bonuses, year-end bonuses, relocation allowances or tuition reimbursement plans. It also fails to figure in the value of pay rises or performance bonuses through those ten or more years that a Harvard MBA is supposedly waiting for the payoff of the degree.
We can conclude that ROI investment is not necessarily a fair criteria on which to solely judge and the value of an MBA from an elite institution is certainly still significant. (Though an MBA is the most known graduate degree, that doesn't make it the best. For more, see Traditional MBA Or Business Graduate Degree?)
ProfessionalsObtain information, both general and comparative, about the best available financial modeling courses for individuals pursuing a career in investment banking.
ProfessionalsLearn what credit risk analysts do every day and how much money they make on average, and identify the skills and education needed for this career.
ProfessionalsLearn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
Financial AdvisorsLearn techniques for emphasizing your CFA Level I status in the Skills and Certifications or Professional Development section of your resume.
ProfessionalsLearn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
Personal FinanceLearn 10 good reasons for switching jobs, such as major life changes, ethical concerns, job description creep and upwards mobility.
ProfessionalsLearn more about the career of financial analyst, along with specific potential interview questions and answers for this type of position.
ProfessionalsIdentify some of the most common job interview questions asked of business analyst candidates, and learn the responses that will make you stand out.
ProfessionalsLearn some specific questions often asked in interviews for private banker jobs, and what a job candidate needs to stress during an interview to land the job.
ProfessionalsExplore some of the most commonly asked questions in an interview for an investment banking position, along with suggestions for winning answers.
The short answer is that one loan program still exists (Federal Direct Loans) and one was ended by the Health Care and Education ... Read Full Answer >>
Mutual fund managers get base salaries, which vary greatly depending on the size and pedigree of the fund company. They may ... Read Full Answer >>
The cost of a college education now rivals many home prices, making student loans a huge debt that many young people face ... Read Full Answer >>
If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
If you are over 59.5, or separate from your plan-sponsoring employer after age 55, you are free to use your 401(k) to pay ... Read Full Answer >>
Opinions vary based on which publications you consult, but the best MBA programs for a career in corporate finance are at ... Read Full Answer >>