Is an MBA Worth It, or Is the Sky Falling Down on the MBA Degree?
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. hbspt.cta.load(58291, '9bb31be0-3cf6-45f0-be3d-3791cc1bd9bd', {}); 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.