Most MBA applicants try to get into Harvard, Stanford or Wharton — commonly called HSW — to fast-track their careers. But whether you get into one of these premier programs or not, earning an MBA is probably still worth it.
Take MBA candidate Spencer Shube as an example. He based his business school choice last year on which program offered him the highest return on investment.
“When I did a lot of research into the program that I wanted to do, salary was a big aspect. The idea of how much time it would take for me to get this degree and for me to get the salary to pay off debt and whatever opportunity cost,” says Shube, who worked for Deutsche Bank in Jacksonville for three years before enrolling at Hough Graduate School of Business at the University of Florida last fall.
The 26-year-old says, “It wasn’t a difficult decision for me to reap the benefit of having in-state tuition at Florida.”
In-state tuition for a full-time student at Hough costs $12,737 per year — a much lower price tag compared with the annual charge at more highly ranked b-schools. Tuition prices at the top five business schools, as ranked by U.S. News in the 2018 Best Graduate Schools, cost more than $60,000 per year for students who pay the full amount.
[Learn how to enhance earnings with an MBA specialization.]
There’s a difference in value among business schools, experts say.
MBA admissions advisers often look at the return on investment, or ROI, for determining some of the earning power of a business degree. One tool for calculating the return on investment for prospective MBA students is to compare the starting salary after graduation with debt, referred to as salary-to-debt ratio.
According to U.S. News data on average starting salary and average debt, the typical return for a Hough MBA graduate in 2016 was 285 percent. That’s nearly double the average return for a Harvard MBA grad: 155 percent. But 2016 Harvard MBA grads earned a higher average starting salary at $134,071 per year, which is 36 percent more than the average starting salary of a Hough grad: $98,331.
“There’s a wide variety of business schools that offer people — depending on their career — a choice that’s not limited to three or four schools,” says Jeff Thomas, CEO of New York-based Stratus Admissions Counseling. “There are dozens of schools that pay off for people in terms of the value to their career and pure earnings power.”
For prospective students interested in pursuing an MBA program outside the top five, here are a few considerations for finding a degree that pays off.
1. Less competitive schools charge less tuition. Admissions consultants say that the majority of business students attending an HSW school, where the admissions rates are lower than 20 percent, tend to make more before pursuing a graduate business degree. These candidates also earn a higher starting salary upon graduation when compared with other MBA grads.
But consultants say that shouldn’t dissuade other prospective MBA students.
“If you apply somewhere where the admit rate is 30 percent, you’re not paying as much coming in and you’re making more coming out,” Thomas says when looking at the overall return on education.
Ryan Barba, an MBA admissions consultant who used to work as an admissions officer at the Johnson School of Business at Cornell University, says: “What will drive your success is getting into a school that has a strong fit for your career goals.”
[See the 11 MBAs with the highest return for grads earning $100,000-plus.]
2. Schools in the bottom quarter have lower starting salaries. Schools ranked in the top 30 among the Best Business Schools had graduates in 2016 pull in more than $100,000 as an average starting salary, according the data reported to U.S. News by 128 business schools in the most recent annual survey. These schools had a 1.56-to-1 average starting salary-to-debt ratio , or 156 percent return rate.
The average starting salary for a business student who graduated in 2016 from an MBA program that ranked in the bottom quarter was $63,253, U.S. News data show. In fact, MBA grads’ salaries from schools ranking in the bottom quarter have stagnated in terms of wage growth , increasing by less than 1 percent over 10 years, according to U.S. News data. Conversely, MBA starting salaries are growing among all the other ranked b-schools, where salaries have grown by more than 21 percent since 2006.
[Dive into job rates and starting salaries for MBA grads.]
The Stratus Admissions consultant says most of his applicants only work with schools ranked in the top 50.
3. B-schools scholarships can increase ROI. MBA admissions experts say that picking a school where the prospective student would be a strong candidate is a good move for securing scholarships and increasing ROI.
While HBS does offer nearly half of its MBA candidates some form of financial aid, experts say prospective business students may have better luck with scholarships at a non-elite program.
“There are a number of schools, depending on your GMAT scores, that can take quite a bit off your tuition bill,” says Thomas. “Oftentimes this might not be the top three schools, but if you look down to the top 20 schools where they are trying to attract very strong candidates, you can attend a great school at a reduced rate.”
Searching for a business school? Get our complete rankings of Best Business Schools.
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You Don’t Need an Elite B-School for an MBA to Pay Off originally appeared on usnews.com
