MBA Costs $500,000 -- Worth It?

That is not the cost for everybody. Some people take offers with scholarship and I would argue more than half, probably 3/4ths, of applicants aren't making 150k.

I'm going to go from making 80k per year to hopefully (probably 75%+ odds) 250k+ all in and with full scholarship... pays off pretty quick. Even if I didn't have any scholarship, 3x'ing my income makes going worth it regardless.

That being said I agree its not for everyone.

There have been numerous posts about what an MBA costs, and a lot of them overestimate these numbers. Doing your budget pre, during and post-mba would give someone a better view on what they spent in total.

The truth is you are not losing 150k a year in salary (that would be pre-tax anyway). But let's say you make 150k salary + 100-150k bonus a year (then you would have 150k net). Still, what you're really losing is the amount of money you save for two years. Because you still have to pay for food, rent, and trips when you're employed.

For me, the total cost was somewhere in the range of 150-200k (I went to school in Europe and my pre-mba salary was not great - Big4 Advisory). I took me 2.5 years after MBA to pay all my debts and get back to my pre-mba savings. But I am left now with a job I really like, a great network and a strong brand on my CV.

You also work for a summer and then get a signing bonus for signing FT. Still an outrageous sum, but you do have some income during that time.

Doesn't seem worth it to me, but everybody's situation is different

Or, if you can balance it, you can do a part-time/executive MBA program and not have to worry about losing out on salary (and also use your income to pay for room and board).

Don't get wrapped up in the opportunity cost, that's simply putting way too much pressure on the situation and you are looking at it as a long-run opportunity. Like, 30 years worth long run. There are factors involved that you cannot put a price tag on, and if you had to find a way to make some $$ during the 2 years, you would.

An MBA is worth it for a career pivot. For that which you cannot get to without the reset. Because that's what it is. A reset.

If you plan to (or now start to) network, maybe you can choose a program that costs less. You have to network anyhow, you need the grades to match the degree, and there are no guarantees even if you come from a top school. I think companies are becoming more and more open to interviewing students from a range of schools. So maybe you have some latitude on the cost.

Bottom line: you really are paying mainly for the opportunity to look at opportunities you cannot get without the MBA. This is worth more than just $$ amount. This is your long-term goals, dreams, interests. If you're going to never get the opportunity to chase the positions you always wanted to go for, if there's no way to lateral in over years and jobs and persistence, worry less about the cost and more about the cost of "what if?" Because that is a very expensive thing.

I went to NYU Stern BS & MBA about 100 years ago. Yes, was far less expensive and back in the day, they had a 4 + 1 program that I availed myself of, but that finance MBA STILL gets attention and still opens doors. Had I not gotten the MBA I would never have been able to change careers or open many doors that I did.

It's not foolproof, but there are some risks worth taking, That's for you to determine.
It was definitely worth it, because regret costs a fortune.

A few adjustments. Don't count room and board because you'd be paying that whether you work or go to school. Its just tuition plus lost income, after taxes. So I'd say more like 400k. Still a big investment, but for someone on the fence its worth getting the number right.

Short answer is, its worth it if you have a concrete idea of how an MBA will advance your career. So for example, PE has a pretty homogenous career track that often involves getting an MBA. Not always but usually. So for someone in PE, they can clearly point to the MBA pushing them up a rung and the 400k being paid off in higher earnings after school.

For someone who wants to switch to IB, and is really sure of that, the return on investment can be pretty clear there too.

Just a couple examples, there are many other career tracks (marketing, consulting, corporate strategy etc) where there's a well-worn path and the MBA has easily discernable value.

For people without a clear box that the MBA checks for them, ROI can be a lot tougher. More often than not, I think entrepreneurial types regret the MBA. Most of them, in my experience, wish they'd spent those two years focusing on their startup instead.

One thing you can use as a benchmark. Tim Ferriss did the "DIY MBA" where he took the same amount of money b-school would cost, and he invested it over time in different startups and learned a lot about business from doing diligence on those companies. I can tell you first hand, from doing some dedicated angel investing work, that it can be an extremely valuable learning experience; probably learned more doing that than I did at my MBA business schools">M7.

I got my MBA many years ago, pursued a decidedly non-traditional path, and do feel my MBA was worth it, although it cost a whole lot less when I did it.

However, I think more relevant than my personal experience a long time ago is an analysis I did of when an MBA is (and isn't) worth it: https://blog.accepted.com/when-is-the-mba-worth-the-time-and-money-epis… .

Also in calculating the cost of an MBA, don't include living costs that you would have whether you did the MBA or not. They're not part of the MBA's cost; they are a cost of living and will inaccurately inflate the cost of the MBA.

Every case is different. Some people do a part time MBA. Some people weren’t earning that much pre MBA and this gives them a boost. Some people got scholarships.

My case, I fell thru the cracks pre MBA despite going to a target undergraduate. I made final rounds at McKinsey, BCG, Monitor, and Accenture but just couldn’t clinch it. I switched tracks and interviewed at GS and a few other i banks but just couldn’t clinch it.

So I ended up working as an analyst for a REPE shop in CA, but they were so stingy that they only paid $36k per year. After tax, it was barely enough to cover basic expenses. Fortunately I didn’t have to pay room and board, because my mom was nice and let me move back home. It wasn’t ideal sleeping on moms couch but it’s not about pride when you know you’re worth more and you’re on the grind to go get it.

I ended up getting an MBA at a top tier public school, top 10 in most rankings. I got financial aid at a 2.5% interest rate. My bill was $30k per year tuition at the time. I left MBA to go to investment banking and then PE. So for me the math is very different than what you posted and certainly worth it given how stuck I was.

I made some mistakes along the way, and I may not be doing as well as many monkeys here, but I did manage to scrape together a decent enough nest egg so we will not starve in our future. We have a few properties in real estate as well.

Other classmates of mine went on to also do IBD, PE, become CFOs of public companies, or start tech companies. I think most would say their MBA was worth it as well just by judging where they ended up in life. Though of course I think each would have been successful regardless of the degree itself.

We had a fair number of military officer veterans in our class. They took their leadership experience and used the MBA to transition to the civilian world. As you can expect they kicked ass and each one ended up in senior management / leadership / starting successful businesses. I bet they would say that MBA was worth it, esp with military scholarships/ grants.

I feel like people talk about increasing salary but the fact that those extra earnings are taxed makes the decision more questionable. I like the fact that it’s kind of a vacation in a sense or break from the grind / habits, but don’t see that it’s really favorable if it can be avoided. Pre MBA PE to post MBA PE? is that is the kind of best outcomes that are seen then I don’t think it’s very useful. plus I don’t think you learn anything in school curriculum, it will be more about making connections and getting access to people you wouldn’t otherwise connect with. it’s a hard decision though, personally I’m going to avoid an MBA unless I get scholarships.

Ya - EB signing bonus after tax was enough to pay off ~40k in loans (had a scholarship). Salary went from ~120 all in in lower tier consulting to ~300 (last year average was 350 but discounting for COVID).

It's a career pivot move, you gain access to people and opportunities you never would have otherwise. If you're already in PE, maybe not worth it, but 2 years in Bschool have been the more fun than I could have ever imagined. It's not real life. Traveling like crazy, partying all over the world and no real responsibilities (go to a school with Grade Non-DIsclosure) after you land a job.

The MBA isn't for everyone. It does different things for people depending on so many factors. It matters on the applicant's circumstance in before they get to the school, it matters how much you pay, it matters how good the brand is, it matters what your school specializes in. It's a complex multi-variate decision. The simplicity of "an MBA costs $x is it worth it?" is just a confusing and over-simplified argument made by people who aren't putting it in a real world context. An MBA not an "all-fix-it" panacea, and it's not a guarantee for a better life. Hell, it's not even really a clear set of professional skills the way a medical degree or engineering degree imparts. It's a bunch of people getting together and taking business classes, and walking out with a brand on their forehead. In some circumstances that can be a game-changer, in other cases it's a 2-year distraction.

I was previously an informational interviewer for prospective MBAs applicants to my school. I talked 50% of the people out of going. It all depends. For example I had multiple prospects call and ask if they should go to b-school or get an MRED degree. If they were 100% dedicated to real estate and couldn't possibly see themselves working in another industry, then I said MRED all the way, no question about it. My wife for instance is only interested in real estate, and has zero interest in tech, PE, etc. I made the mistake of encouraging her to go to b-school. In hindsight, sending her to Columbia or MIT for MRED (she got in) would have been a MUCH better idea.

One of my buddies finished his 2 year analyst stint and immediately went to MBA, as a youngster. He got a school-year internship at a decent local PE shop which he continued in his second year. He interned somewhere else in the summer, but both academic years he was at the PE shop. He joined them after b-school, and during the financial crisis he and his manager spun out, and my buddy was made a managing partner of their new fund platform. They have raised several tens of billions since, and are now a megafund and category leader and this guy is a 40-year-old multi-multi-millionaire. I'd say the MBA was well worth it for him. After all, it got him the internships in PE and led to him eventually running his own fund by his early 30s.

I've mentioned the military vets who went to our b-school. One went from marine captain to CFO of a strong local real estate developer, immediately after b-school. Another went from marine captain to leading teams at a commercial bank, and then took that experience and transferred to one of the giant tech companies, quickly rising to head of sales in a category, then head of all sales in US. The MBA was well worth it for them.

Two of my classmates who met in bschool decided to forego the usual path, and instead launched a company immediately after b-school. They sold their business less than 5 years after b-school for several hundred million dollars. Each is now CEO of his own company, with multiple exits each. Another buddy did strategy consulting post b-school, then got laid off in the financial crisis and went on to built a tech company and sell it for tons of money. I don't think any of these guys regret their MBA decision.

if you guys want, maybe Patrick will let us do an AMA and podcast between someone who is reasonably satisfied with MBA (me), someone who hated the MBA experience, and someone who loved it.

At least it beats law school (this video is awesome)

Two problems with your calculation: 1) you add room & board to the MBA cost but don’t subtract it from the non-MBA alternative, and 2) you use pre-tax salary. The better way to think about it is the b-school loans plus the lost after-tax savings that you would have otherwise had. Making those adjustments would result in an all-in cost closer to $300K.

For the question of whether it’s worth it, the key variable is how much higher your salary will be post-MBA vs the alternative of not going. From that you can just calculate an NPV. If you assume you will make $50K more in after-tax salary, use a 10% discount rate, and assume you work for 20 years post MBA, it would result in a PV of $425K. For some it won’t be worth it while for many it will be.

Agree with many comments above that says the payoff is different for different people. For many, if you are making $200k per year post-MBA package, then of course it will make sense just purely from a numbers ROI, all the qualitative stuff notwithstanding.

For me, I was already close to / over the post-MBA salary before going and I went with a different purpose to expand my network, get a better brand name on my resume and open my eyes to opportunities beyond consulting, banking, corp. dev etc. If you keep your eyes and ears open, you can find something completely out of the ordinary simply because the people at MBA business schools">M7 schools are so great.

Example, I joined the founding team of a SaaS start-up midway through my MBA. Guess who was my classmate and seatmate for 6 months? The 25-yr old heir to a multi-billion family business in the industry for my start-up. Invaluable opportunity, and one of many that resulted from going to that school.