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The Infamous MBA Debate: Does An MBA Really Pay Off?By Sarah ClarkLearning & Life Columnist
An MBA degree can seem to cost a small fortune. Students can spend anywhere from $90,000 to more than $225,000 for a master's degree in business administration, including the cost of tuition and foregone salary.
Given that seemingly outrageous sum of money, you might wonder if an MBA is a smart investment. Forbes Magazine seems to think so. In a 2003 survey of more than 5,000 MBA graduates conferred in 1998, Forbes found that on average, the graduates recouped the cost of their MBA within 3.1 years. In addition, the same pool of MBA graduates enjoyed average annual salaries of $106,000 just five years out of school. That's triple the average salary of pre-graduate school professionals. But what about the economy, you might say. Champagne is not flowing as freely now as it was during the technology boom of the late 1990s, when those Forbes MBA graduates entered the employment market. The Forbes survey also revealed that in the five years since their graduation, during both boom and bust economies, graduates who received their MBA in 1998 have experienced steady income growth of 11 percent, while the rest of the nation has averaged annual income growth of only 2.5 percent. So even during times of slower economic growth, it appears that an MBA degree still pays off. Strong Job Growth and High SalariesCurrent MBA graduates have an added advantage of entering a favorable employment market. According to a 2005 study by the National Association of Colleges and Employers (NACE), employers reported that they would hire 24.9 percent more MBA graduates during the 2004-2005 academic year than they did during the same period one year earlier.The NACE also reports that overall compensation packages for recent MBA graduates are expected to average $93,770 in 2005. Employers also said that they expected to offer new MBA graduates base salaries averaging $72,930. Furthermore, despite overall modest economic growth in the nation, employers said that they still plan to offer signing bonuses to 58.3 percent of MBA hires in 2005. Those figures are backed up by data from PayScale, which reports that MBA graduates in areas like New York and California average around $90,000. Salaries for MBA graduates in Ohio and Florida are a little lower, but still well above the national average at $73,427 and $68,903 respectively. Choosing a School with Good ReturnsTop-tier business schools, such as those at Harvard and Stanford, seem to guarantee a generous return on investment. But getting into a top-tier school is tough, if not impossible, and their costs are staggering, reaching as much as $225,000 in some cases.Don't despair. MBA degrees from other schools pay-off nicely too. For example, the cost of an MBA from the University of Iowa (for state residents) is $90,000. And Forbes found that it took only 2.5 years for University of Iowa MBA graduates to recoup their investments. Where are MBA Graduates Working?The investment banking and consulting industries have historically employed many MBA graduates. However, the NACE reported that the manufacturing sector would hire 29 percent more MBA graduates this year over last year. And while all regions of the United States reported increases in MBA hiring, the greatest growth is expected in the Midwest, where hiring of MBA graduates is expected to increase 35.9 percent.Financing Your MBAIt's important to plan your financing for your MBA degree. Subsidized federal loan programs are available to help with tuition, but they may not cover all your living expenses during school.If you want to offset some of the debt you may accrue during graduate school, consider going to business school part time while you continue working. Look for MBA programs that cater to working professionals, those which offer classes at night and on weekends. Also, some employers offer tuition assistance programs that can serve to offload a good amount of the cost of tuition. Getting an MBA is a worthwhile investment, but before plunging into graduate school, be prepared to see your investment through. Take advantage of part-time programs and employer-tuition assistance programs. And get a good sense of what you want to do after graduation. Planning now for a future career in business can offer generous rewards for years to come. Sources:
About the Author Sarah Clark is a freelance writer specializing in career development and postsecondary education. More Business Careers Articles |
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