We talked about CFA vs MBA previously, but this is more fundamental. “Is an MBA worth it” is one of those classic questions that always end up with “it depends”.
I do get why lots of people say “it depends”, as the question is so broad and cannot be generalized for each person’s individual circumstances.
But what should you consider? Wouldn’t it be great if you could take a self-assessment to figure out whether an MBA is the right path, specifically for you?
That’s what we’ve created here – an organized framework of assessment questions (and matching research data) that will show you whether an MBA is the right choice for you.
Let’s take a look!
The first part of deciding whether an MBA is worth it for you is the cost. For a two-year full-time MBA, the costs are:
And in addition to this, it is important to set a budget for a few discretionary items. Business schools loathe to discuss it, but no one wants to be the one student who doesn’t go on the international trips or doesn’t attend the social events like skiing holidays. There are a gigantic number of small expenses that will quickly add up.
MBAs are more expensive than ever: Cost of top MBAs have been rising 7% per year for the past 15 years. MBA students who enrolled in 2012 paid 62% more in fees – up 44% in real terms – than those who began their programmes in 2005, even though the increases in post-MBA salaries remained in line with inflation.
In a sign of continued interest in MBAs despite the difficulties faced by many prospective students, average tuition fees rose by 3% in dollar terms at the business schools which were ranked both this year and last. A quarter of the schools increased fees by more than 5%.
On average, the total all-in costs (fees, modest living expenses, forgone salaries) of a 2 year top MBA program is around $275k to $325k.
Beyond this, you will be giving up your salary for the better part of two years. Your time is worth a lot! Depending on your pre-MBA compensation, two years of foregone salary and bonus could range from $150,000 to $500,000+ for a highly-compensated private equity investment professional at a large fund.
MBA scholarships may help pay for your MBA, if you’re successful in snagging one. Your employer could also have a program that helps pay for an MBA, so that’s definitely worth checking out.
Many business schools and private organizations offer awards to incoming and current MBA students, but it’s a messy field to navigate. As MBA scholarships come in many formats, do your research on what you’re eligible for and what applies to you – for example, to qualify for need-based scholarships, students may need to show low earnings.
Graduate Management Admission Council’s (GMAC) annual Corporate Recruiters Survey shows that of more than 700 global corporate recruiters, 3 in 4 reported that employees at their organization with a graduate business school education tend to earn more than those without.
Recruiters from Fortune Global 500 companies were especially likely to agree (85%), as were recruiters from the health care (90%), products/services (80%), technology (78%), and consulting (77%) industries.
OK, so we know that MBA graduates earn more money. On aggregate.
But how much more?
More importantly, you should also consider that the financial value of business school is not only about that first, post-graduate job. It’s important to consider the lifetime value of MBA.
Recent research done by Poet & Quants and Payscale shows that the lifetime premium of an MBA degree can be as high as $5 million. That’s $5,000,000 more than if you didn’t get an MBA, over the course of your lifetime.
| Degree | Lifetime Median Cash Pay | 20-Year Median Cash Pay | Early Career Median Pay | 20-Year MBA Premium | Lifetime MBA Premium |
| Top 3 MBA Degrees | $8,330,000 | $3,700,000 | $138,000 | $2,220,000 | $5,010,000 |
| Top 10 MBA Degrees | $8,045,000 | $3,500,000 | $133,000 | $2,020,000 | $4,725,000 |
| Top 50 MBA Degrees | $5,655,000 | $2,500,000 | $93,500 | $1,020,000 | $2,235,000 |
| All MBA Degrees | $4,110,000 | $1,830,000 | $68,000 | $350,000 | $790,000 |
| All Bachelor’s Degrees | $3,320,000 | $1,480,000 | $55,000 | – | – |
Predictably, the lifetime premium of an MBA varies quite a lot depending on the quality of business school. Although the lifetime earnings premium of MBAs from top 3 schools exceeded $5,000,000, the lifetime premium across all analyzed business schools is just $790,000.
But considering that the cost of an MBA averages around $300,000, an MBA could end up being a pretty good investment – at the right school, under the right circumstances.
The Financial Times (FT) global MBA rankings for 2023 features the world’s top 100 full-time MBA programs.
The ranking has 20 different criteria. Some factors influencing the rankings include:
Here are the top 20 schools ranked: please refer to the the FT’s top 100 rankings for the full list and details.
According to Graduate Management Admissions Council (GMAC) – the business school entrance test administrator – total MBA applications in 2022 fell by 3.4% compared to 2021. This is partially due to the post pandemic Great Resignation and improved compensaiton packages for retention.
According to Graduate Management Admissions Council’s (GMAC) 2022 Corporate Recruiters Survey, MBA hiring is expected to be increase greatly in the next 5 years.
Here’s just a few ways how an MBA can help further your career:
“I have so many examples of career pivots that would seem extraordinary, but really attest to the power of this degree for complete career reinvention: A Peace Corps volunteer who pivots to management consulting. A teacher who transitions to big tech. A veteran who goes into venture capital. An accountant who moves into sports marketing. A financial analyst who becomes an entrepreneur. There is no other degree that provides the launching pad to many different possibilities to chart your next career destiny. It’s incredibly empowering.”
Barbara Coward, founder, MBA 360 Admissions Consulting
Business school is a great time to gain exposure to peers, faculty, and a network of alumni from many professional backgrounds — as well as class projects and case studies that dive deeply into different industries and sectors.
Exploring new industries or job roles is consistently one of the most cited reasons among MBA students for taking the plunge. Research from TransparentCareer also shows that MBA graduates are indeed switching industries and functions at breakneck rates:
| Area | Switching | Staying |
| Industry | 78% | 22% |
| Function | 77% | 23% |
| Either | 87% | 13% |
| Both | 69% | 31% |
Top schools like Stanford and Dartmouth also agree that switching industry or function is the strongest interest among MBA students.
A solid MBA course will imbue you with the necessary scrappiness, determination and leadership skills to pursue a career change – although obviously an MBA is not necessary to get all that. What an MBA can uniquely provide, however, is a strong network among your MBA classmates and professors, all hailing from different industries and specializations.
It seems crazy to be paying top dollar for, among other things, introductions to the right people, but sometimes that could be the best thing for your career.
Getting an MBA used to be a ticket to huge and sustainable salary boost. With that promise waning and the skyrocketing costs, is MBA still a worthwhile investment?
To tackle this question, a good starting point is to think about the objectives of getting an MBA and evaluate if there are better alternatives:
#1. Level-up your work experience and credibility: with the abundance of MBAs and degree inflation, I’d argue that employers would value actual work experience more as a signal of quality. For example, you could take up a risky or demanding project within your firm and work your ass off to knock it out of the park. Anyone can buy an MBA these days, but no one can buy the work experience and knowledge from doing the job itself. This certainly applies to me when I hire a junior in my team.
#2. Improve your skillset / knowledge: you learn best on the job. No amount of theory could prepare you for the practical skills needed. Plus it looks good on your CV too. Identify what skills or knowledge of a specific job you would like to obtain, then try to get a job in that area. Just like anything (even MBA applications), you need to be proactive to search and ask for the job you want experience in. At least you still get paid, practical work experiences and not end up with student debt.
#3. Power your way up/across: Why do an MBA, incur $300k for 2 years, only to change jobs? Why not try to do it now? Ask for the internship, work for free even for a short time to gain valuable experiences for your CV to diversify and land the job you want, now.
#4. Create your own network – It’s true that you have more time to meet new people, attend events and meet up for coffee when not working full time. But this shouldn’t be your sole reason for taking up an MBA, as you can make time for this and start tapping and expanding your network now. Join societies, clubs or events post work or on weekends and off you go.
#5. Have a good time / find yourself – The desire of a guilt-free career break or search for new direction is a common reason (subconscious or not) for taking an MBA. Given the high cost and additional work involved in this demanding course, I’d say it’s better to take at least 6 months off to travel the world, meet people or spend time with family. Not only it gives you the battery recharge you desperately need, I’m confident that you will learn more about your true likes and dislikes during that period of idleness, to give you a better sense of direction and purpose for your next phase.
Before going down the MBA rabbit hole, it’s worth asking yourself that if there’s an alternative qualification that can serve your purposes. Here are a few common alternative considerations:
The CFA charter is world-renowned in the investment management sector, and increasingly the “gold standard” for portfolio and wealth managers, investment and research analysts, and others in investment decision-making roles. It is a Masters / post graduate level degree focused on building expertise and real-world skills in investment analysis.
Here’s our ultimate beginner’s guide to the Chartered Financial Analyst (CFA) designation.
If you’re keen on a career in risk management, consider the Financial Risk Manager (FRM) program by by the Global Association of Risk Professionals (GARP): a two-part, self study set of examinations with global recognition.
Read our comprehensive guide to the FRM certification and exams here.
According to Blackrock, their institutional clients currently allocate an average of 25% of their portfolios towards alternatives, which is expected to rise to between 30-40%, whereas ordinary investors will increase their alternatives allocation from 3% to 25%. The demand for alternative investment managers is likely to continue to rise in the foreseeable future.
If you’re considering a career in alternative investment management, the Chartered Alternative Investment Analyst (CAIA) designation is worth looking into.
You can learn more about the CAIA designation and exams in our guide here.
Including ESG, financial modelling, coding, data science, languages and wellbeing, there are many alternatives you could be considering.
Our list shows 17 of the best qualifications that you can complete from home.
Ask yourself: Do you want to spend $300,000 on an MBA, or invest that money in starting your own company? It’s not for everyone, nor the faint of heart, but you could potentially everything you need to know about business, and make money doing it.
There is no better way to learn business than by doing it – just be ready to make a lot of mistakes.
Starting up – at any level – requires management, leadership, planning, financial responsibility, and tech savvy, and it’s a trial by fire. You’ll learn lots – whether you want to, or not 😁
So, what have we learned?
Thoughts? Is an MBA worth it to you? Let us know what you think about MBAs in the comments below!
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I have to be honest, I've never strived for an MBA. I can't justify the amount of time or the ridiculous cost when I could gain experience in the working world. That's just me, though. I'm sure there are others with more specific goals who could justify their own - and kudos for making it through!
Thanks for sharing your viewpoint Dona Collins! My thought process was similar and hence I thought its becoming less worth it in my eyes ...
I just saw that I have posted over and over again :P . The website gave me an error thrice but finally duplicated my posts. Someone please erase the extra comments :)
Whoops. All sorted Aj Finance, no worries. You're nearly there being a L3 candidate, just a little more hard work will pay off. I always thought a CFA is a Masters equivalent, certainly a graduate level program. Not sure about a Masters of Finance coverage area, but I believe they generally have electives that cover the specific Fixed Income areas you're interested in. Given the specificity of that area of interest, it may be worthwhile trying to get a role in there? I know I learnt derivatives very quickly after a summer internship long long time ago... paid dividends when I took the CFA!
Thanks Sophie. The masters I have looked at do seem to have those electives. But having said that, if I do get a role within that area without it, then there won't be any point in me pursuing it.
Hi Jay, the network effects are there, true but the future impact is highly uncertain, as you said. The numbers though, are based on 2 years worth of after-tax forgone salaries of individuals who are of 3-5 years experience, of which around 50% of them come from private equity, venture capital, finance and consulting. Typical backgrounds in terms working experience and pre-MBA sectors (e.g. check out HBS'), that probably explains the differences in assumptions. Those forgone after-tax earnings are reasonable for those profiles.
I think the article is roughly spot on for the majority of MBA programs. However, if you attend a top school (top 10 roughly), I think the analysis changes a little. There are alot of other benefits to attending Harvard Business School for example that dont exist even at the number 25 business school. For people who want a career change however, business school is sometimes the only option. Take a computer engineer who wants to get into finance. A finance “internship” after work + recruiting in something relevant to his industry MAY get him into let’s say sellside equity research in an industry related to computer engineering, but that is unlikely. To the engineer, the cost may be worth the career switch. It’s often hard to quantify what that value is to that individual. For people who go to business school just to go back to their same or similar careers though, I would agree, people often waste their money. At an investment bank I interned at, for example, one guy left after being an associate to attend business school and then came right back to investment banking as an associate and was shortly promoted to vice president. I also think that the $275K is a little bit of an overestimate, but the point is still roughly correct: there is an opportunity cost financially to attending business school that may not be surmounted by some business school attendees. I actually made a spreadsheet a while back with income increase assumptions to figure out when I would break even financially from the cost of business school vs. if I never went to business school and stayed in my field. Pure NPV analysis of course. It was 8 years after business school based upon my assumptions.
Jay, thanks for sharing your insightful thoughts. It's great to hear the flip side of the story (I'm assuming you took a MBA?). I agree having the top 10 or a HBS MBA offer is tempting and prestigious, but I believe the fees are one of the highest too. Agree that a career change makes a better argument for business school, whether it's more or less 'worth it' is on a case-by-case basis. I think MBA is also an easier and safer means to change career, vs. the slog and uncertainty of using that 2 years to find and get relevant work experience. Fair enough. The $275k-$325k range was an estimate that includes tuition fees, living cost and opportunity cost of forgone salary. Taking HBS as an example where its tuition fees plus reasonable living cost $180k, adding 2 years forgone salary would be on average those figures, depending on individual... Hehe, nice one on NPV analysis. Well done!
I didn't do an MBA, but my thoughts are from networking with people who have done a top 10 MBA. I'm actually only a year out of my undergrad degree. I just did the analysis around the time that I first started working full time as a part of my education of whether an MBA was in the cards in the future. I’m a CFA level II candidate. My thought process behind the top 10 MBA idea is that certain careers or goals are just much harder without a top MBA. For example, if you want to raise your own hedge fund in the future (let’s say when you’re 40 years old, 10 years removed from your MBA program) having a Stanford MBA may pay its worth with just one pension fund allocating some funding to your hedge fund because the head of the fund was a Stanford MBA too. Of course, I’m describing a very unusual position a post-MBA professional would be in. But my point is that I’m not sure that kind of a benefit would happen if you went to a lesser MBA program or even if you didn’t go to business school. These networking external effects can really compound at the top schools due to the concentration of talent and benefit business transactions and activities greatly, especially if you need to do any personal marketing or sales processes in the future. Only reason why I think the analysis was high is that the increment over the $180k cost should be the amount that an MBA candidate would have saved of his income from those two years, not his full salary even after deducting taxes. Living expenses is a sunk cost in that respect. I think that most MBA students spend roughly the same amount during those two years in living expenses regardless of whether they’re in the program or not. That’s the key assumption. So then the $275k-$325k estimate is saying they would have saved $95k-$145k in those two years if they didn’t go to business school. Not realistic when factoring taxes and the average savings rate of individuals, even at a higher pay scale. At least that was my thought process when considering NPV analysis.
Very well written. You can't help but appreciate the introspective thought process behind it. The "Reason" behind pursuing an MBA degree is perhaps the most important of all questions to look at. It always helps to look at both the sides of a coin. In my opinion, whatever skills one tries to equip themselves with, whatever academic pursuit one might want to take up, it only works best when you actually "need" it. When you do that, more often than not, you also find reason and clarity.
Thanks Aj Finance. I'm sure tons of us went through the MBA evaluation and it's great to hear so many view points. Did you do an MBA then Aj Finance?
Well I wanted to do an MBA initially, since the time I completed my Bachelors. However, I gradually realised that my reasons for doing an MBA weren't concrete. I decided to do CFA instead (Level 3 candidate). I still don't have a masters though. So an MBA or Masters would definitely be on the cards for me. But my only reason for opting any masters would be to learn something that the CFA hasn't taught me already, or deep dive into a particular area. Well, I personally like Fixed Income, but within that structured products and distressed security investing. And I quite identify with the post, given the fact that I left my job a couple of months back, and I must say that this introspective period has given me quite a few insights into what I want, what I like, or where I would like to be. It won't make sense for me to do a 2 year MBA because of my personal situation and priorities. Also, I would not want to take a 2 year break from work. Add to that break the sky high costs and prospective student debt after the course, made me think hard if I really want to do an MBA right now. Still weighing in my options, but I must say that I have much better clarity now than ever.
There's an article in the WSJ that also reaches similar conclusions: https://online.wsj.com/article/SB10001424127887323884304578328243334068564.html I've decided against the MBA myself - that was a few years ago.
Hi kira, that's an interesting article, thanks!