Earlier this month, the Wall Street Journal reported that MBA graduates from the classes of 2016 and 2017 had an aggregate federal student loan burden of $3.7 billion, an average of $39,900 per student, according to data from the United States Department of Education. Graduates of elite MBA programs held even more significant debt on average. Northwestern’s Kellogg graduates averaged $116,420 and NYU’s Stern graduates averaged $105,931; similarly, alumni of Yale University’s School of Management, Chicago Booth, and UVA Darden all had average debt between $85,000 and $100,000. Notably, these data points only include federal loans and not money obtained from the private loan market, suggesting that the estimates do not represent the full debt load.
A Bloomberg Businessweek Survey on MBA debt was also released earlier this summer with similar findings. The survey, which included the responses of more than 10,000 2018 MBA graduates globally, found that close to 50 percent of students at top business schools had borrowed at least $100,000 to fund their MBA. Among the top U.S. programs, a minimum of 40 percent of the MBA graduates at Duke, Dartmouth, University of Michigan, Cornell, and University of Chicago said that they had taken on at least $100,000 in debt. The percentage was lower at MIT, University of Pennsylvania, NYU, and Northwestern, at around one-third of graduates.
The same Wall Street Journal article notes that “The cost of a traditional two-year MBA has more than doubled since the global financial crisis sent droves of college graduates back-to-school starting in 2008, to an average of $30,100 a year in 2016, according to the latest figures available from the Education Department.” Currently, however, according to the U.S. News and World Report, the tuition for the top 15 ranked two-year full-time MBA programs in 2019 exceeds $50,000, with some priced higher than $70,000.
Even if this summer’s announcement that Harvard Business School and the University of Chicago Booth will freeze tuition for the upcoming school year portends a broader slow-down in tuition hikes, the cost of an MBA will remain significant. Despite the high cost, however, the MBA has still been shown to have a strong return on investment. Last year, QS Quacquarelli Symonds, a data and research company specializing in education, released findings from its Return on Investment Report for the full-time MBA, which include:
The average global ten-year ROI of an MBA is $390,751, which accounts for tuition, cost of living, and foregone wages. The highest ROI is found at Stanford at $1,023,150, the only school to enter seven-digits.
The average global payback time is 51 months. Europe offers the quickest return at 39 months versus 55 in North America, which is likely due to shorter program lengths.
The U.S. is home to 19 of the top 20 schools for highest post-MBA salary. The global average is $79,829 ($89,037 in North America) and Stanford is at number one with an average of $140,600.
North America also has the highest average salary increase at 74 percent.
While the prospect of taking on large debt as an investment in an MBA shouldn’t necessarily deter prospective students, the means for financing the degree should be considered as thoughtfully as the school selection.