“Cost of an MBA has increased year-over-year; after accounting for room and board, the top MBA programs cost approximately $200K.”
An MBA is the most popular Master’s degree in the US and the cost of acquiring one increases on an annual basis. We attempted to assess the overall return on investment of an MBA to assess if it is still worth pursuing the degree. For this session, we will focus on top MBA programs within the US. Listen to the full podcast HERE
Background and Experience
- MBA is a Master’s in Business Administration; MBA students typically learn about a variety of business-related subjects from accounting to management and everything in between.The reason most individuals pursue an MBA is to either change careers or achieve a promotion at work
- Typically most MBA full time programs take two years with an included summer internship. Part time programs are usually year round programs in which students take classes for approximately 2.5 years. Some schools offer executive MBA programs which are geared towards individuals more senior in their career; the program follows a similar model as the part-time program.
- I decided to pursue an MBA in order to join the corporate strategy department of a pharmaceutical manufacturing company I worked in. I realized that most individuals in the strategy department went to top MBA programs and either had an investment banking or management consulting background.
- I applied to five programs: Harvard, Yale, Kellogg (Northwestern), Wharton (UPenn), and Cornell; I only got accepted into 2 of the 5 schools Kellogg and Cornell. Most likely my relatively lower GMAT score of 650 led to the rejection from three schools. My target score was 700.
- I attended Kellogg’s part time program, had a great experience, graduated in 2.5 years with a loan of $125K, setting up a post graduation student loan repayment plan of $1,300 a month for 10 years
Current State
2019 Top MBA programs according to Forbes Magazine:
Cost of an MBA has increased year-over-year; after accounting for room and board, the top MBA programs cost approximately $200K
Pros vs. Cons
Pros
- MBA enables a mid-career switch, for example, a common trend is for engineers to cross over to the business function, and an MBA allows these engineers to make this transition seamlessly
- Individuals based in Africa looking to migrate to the United States can use an MBA application to attend a university in the US and then be recruited by firms such as Deloitte, PwC and McKinsey, which can file for their work permit in the United States
- Higher wage: Many MBA graduates experience approximately 40% increase in compensation post graduation
- Network/alumni: MBA degree expands graduates’ professional network
Cons
- High cost associated with the degree, almost a $200K expense that does not include income lost during the two years dedicated to a full time program
- Short term debt and potential impact on credit score
- Time consuming: In order to experience the full value of an MBA program, one must dedicate time outside of class for group work, networking sessions, and seminars
Deep Dive
To provide some perspective on expectations post graduation, we did a deep dive on Kellogg’s 2019 Employment Report:
Approximately 75% of Kellogg graduates were recruited into three popular sectors:
- Consulting (31%) – Includes companies such as Boston Consulting Group (BCG) and McKinsey
- Tech (25%) – Includes companies such as Google and Amazon
- Financial services (19%) – Includes companies such as JP Morgan Chase
Starting annual base salaries:
- Consulting: $166,000
- Tech: 133,000
- Financial Services: $150,000
Survey results
To get additional perspective, we surveyed a number of Africans who graduated from the following MBA programs within the past decade: Kellogg, Wharton, Booth, and Harvard and asked the following questions:
Why did you pursue an MBA degree?
- The most common answer was to switch careers, the second most popular answer was to pursue a promotion at work and third most common response was to move from Africa to the Unites States
How much was the total cost of the program including room and board?
- Average cost: $170,000
How did you pay for the MBA program?
- The most popular answer was student loans and scholarship and a close second was paid cash supplemented with student loans
What technical skills did you learn in the process?
- There were a variety of answers including: financial modeling, statistical analysis, market research, strategy frameworks, processing mapping and lots more
What soft skills did you learn?
- Negotiation, leadership, communication, networking and lots more
What increase in salary did you experience post graduation?
- The response included a median salary increase of 90%, however this is skewed because over half of the respondents were international students who experienced a significant increase in salary after converting US dollars to their country’s local currency. We noted some international graduates who experienced an increase as high as 400%.
- 100% of respondents responded with a resounding YES
- As of today, the MBA degree for the most part has a positive return on investment. However, this might be skewed towards top programs in the country. With the increase in the number of annual MBA graduates, I am not sure if 20 years from now, the value of an MBA will be as significant as it is today.
- A few schools are taking a second look into the GMAT requirement, however for now, if you plan to get into a top MBA program, I suggest focusing on getting a high GMAT score to increase the chances of getting into your school of choice and earning potential scholarships
- BeatTheGMAT.com is a great resource for studying for the GMAT
- Look into minority programs such as Management Leadership for Tomorrow (MLT) and The Consortium which can connect underrepresented minorities to top MBA programs and also assist in job recruiting post graduation
- If you need help with sample essays and letter of recommendations, you can send us an email at mydiasporachronicles@gmail.com
