As the costs for Master of Business Administration (MBA) programs soar, many ask if the degree is worth it, with top programs charging $80,000 a year or more. Data from the Graduate Management Admission Council (GMAC) shows MBA applications are down about 4.9% in 2023, despite a pandemic-era bump, and top companies like Apple Inc. (AAPL) and Alphabet Inc. (GOOGL)have dropped degree requirements for many roles.
Earning an MBA can help professionals improve their career prospects, increase compensation, and gain job promotions. An MBA can provide the skills and knowledge necessary to start a new business, and many employers require an MBA for specific management or leadership positions.
In addition, professionals in one career can use one to switch to other careers while others might find it far easier to enter a business world where contacts can mean everything.
Meanwhile, even an MBA attained at an excellent state school—where credit hours are a few hundred each—is a substantial expense in time and money. Is earning an MBA worth the cost? Below, we examine the return on investment students can expect from an MBA.
Key Takeaways
- A Master of Business Administration (MBA) is a graduate degree focused on management, business, finance, and entrepreneurship.
- MBAs are often required to pay for expensive tuition, especially for more recent college graduates.
- Most MBA graduates confirm the degree is worth it, leading to better quality jobs and better-paid jobs.
- When deciding on an MBA program, it helps to look at the return on investment (ROI), which is the salary you hope to gain from a new job or promotion after graduation versus the cost in time and money for the degree.
Understanding the MBA Degree
MBA coursework involves a broad spectrum of business-related topics, including accounting, statistics, economics, communications, management, and entrepreneurship. MBA programs not only prepare students to work for financial institutions but also for management positions or as founders of startup companies.
Many MBAs are cross-listed with other graduate-level programs so that you can advance in a specialty in business administration for use in health, real estate, or technology startups.
Excelling in academics serves as a solid foundation, butbusiness school is geared toward real-world professional outcomes. That's why many schools value relevant work experience in their admissions criteria.
For instance, executive MBAs (EMBAs) are designed for those already in management or leadership roles in the workforce. EMBA admissions teams know that academic records might be stale and thus give greater weight to work experience and the professional networks applicants have built.
Part-time and EMBA programs are designed to allow full-time employees to earn their MBA through events, weekends, and online courses. Some employers pay toward tuition if they believe the new degree will make you more valuable to the company.
Full-Time vs. Part-Time Programs
One can take two routes to earn an MBA: through a full-time or a part-time program. Although both result in an MBA, there are trade-offs to consider.
A full-time student will find working difficult while they go to school. These programs are more popular with younger students who have earned bachelor's degrees and can afford to study full-time on campus.
Part-time MBA programs typically come in two types:
EMBAs: Designed for students in the workforce in executive or leadership roles, these programs can be costly. Many students expecttheir employer to pick up at least part of the tab.
Part-time MBA: This degree is geared toward full-time employees not yet in leadership positions. These students take classes after work, in the evenings, or on weekends.
Grades and GMAT Scores
Earning a bachelor's degree with a 4.0 GPA is an achievement. But not getting straight A's doesn't necessarily destroy your chances of getting into a respectable program. Schools usually target students with a GPA of 3.5 or better, which means average grades between B+ and A-. The very best and top-rated programs demand a higher GPA than mid- or lower-tier ones.
The best business schools generally demand the highest Graduate Management Admission Test (GMAT)scores. The average score among successful applicants to top-tier programs, as well as their 2023 full-time tuition and fees, is below.
MBA Degree Pros and Cons
An MBA is only worth the expense, time, and effort when the graduate plans to work in a business-related field, in management, or as a company founder. An MBA may not be as useful for those working in other industries unless they are in management or leadership roles, or the MBA is cross-listed with other professional programs at the university, such as a master of public health.
Not all MBA degrees are created equal. The number of colleges, universities, and business schools that offer MBAs is increasing, making the space quite crowded and online searches for reputable information difficult.
Unless a student earns a degree from a known program, it might not be as valuable as expected. Recruiters and hiring managers are unlikely to view an MBA earned from an unknown or online-only educator to hold the same weight as one from a top-10 school. Professionals going back to school at a second- or third-tier school could end up wasting their time and money.
Hiring managers also know that an MBA doesn't automatically make someone an ideal hire. Some believe that people who have achieved leadership positions with the degree would also have done so without it. In addition, having an MBA won't make a candidate stand out if they're already flawed in other ways.
While many entrepreneurs hold MBAs, startup companies do not always look to hire other MBAs. Instead, they often hire those who might offer a different perspective.
An MBA might help in getting a job interview, but it will not guarantee the applicant willland that job. Meanwhile, people with work experience looking to give theircareer a boost can open avenues for growth and promotion with a part-time or EMBA program.
That said, if you're up against an applicant and all else is equal, an MBA surely helps, though those cases are relatively rare.
Pros
Graduating with an MBA can earn you a higher salary.
You'll have a leg up on your competition if you earn your MBA from a top-tier school.
An MBA gives you the skills and knowledge you need to advance in your field.
Cons
Having an MBA doesn't necessarily make you an ideal hire.
Going to an online or unknown school will not get you noticed.
An MBA isn't worth it if you don't intend to work in a business or management-related field.
What MBA Degree Program Alumni Think
GMAC publishes annual reports on how graduates from business schools rate their experience during and after school. The survey results are encouraging.
Their 2022 Alumni Perspectives Survey Report (latest report) shows that more than 90% of graduates rated the value of their experience favorably and that 85% believed that their investment in education had been positive. Two-thirds of graduates reported moving up at least one job level after graduating, though this was most common for those starting at junior levels.
While business school alumni rate their degrees positively, theROI has decreased as investment costs, such as tuition, have increased much more than salaries.
All MBAs aren't created equally, so ensure you choose your program and your school wisely.
MBA Degree Alternatives
Many alternatives can help with a career in finance, business, or management for those who aren't interested in an MBA. The Master of Finance degree is finance-specific, taking only one year to complete. It provides graduates with the skills needed in trading, investments, asset management, or risk management.
Other graduate degrees in related fields are also good options for somebody looking to focus on economics, statistics, applied mathematics, or accounting.
The Chartered Financial Analyst (CFA) program is a self-study program that offers a comprehensive curriculum covering three levels of study. Each level is tested by challenging exams. The curriculum is considered by many to equal a graduate education, and being a charter holder is often valuable in the hiring process.
Other self-study programs are just as coveted, such as the financial risk manager designation and actuarial exams.
How Much Does an MBA Increase Your Salary?
According to a report from GMAC, the median starting salary for an MBA graduate is $125,000, 22% to 40% higher than for graduates without an MBA. Remember that your MBA's impact on your salary depends on many factors, including your school, chosen field, position, and experience.
How Many Years Does It Take to Get an MBA Degree?
The estimated length of a full-time MBA program is two years. Some schools offer accelerated programs for individuals who want to graduate earlier, which can take anywhere between 12 to 18 months. Meanwhile, part-time MBA programs can take as long as three to four years, depending on how many courses you take each year.
What Is the Best Age to Do an MBA?
There's no age requirement to do an MBA. Most students pursue a graduate degree like this in their mid-to late-20s. Being in this age group gives them a good chance to gain some work experience, in addition to the time and flexibility to determine where they'd like to work after they graduate from business school.
Can an Average Student Do an MBA?
It depends. The top MBA programs are highly competitive, with strict admissions criteria, including top GMAT scores. Lower-ranked programs could be an option for those who were just average students during college. Alternatively, some executive MBA programs or those taught overseas may be more lenient with admissions.
Is an MBA a Master's Degree?
An MBA is a Master of Business Administration. It's a field of graduate study that specializes in business administration after a student receives their undergraduate degree.
The Bottom Line
An MBA can improve one's career path or help land a high-paying job. Typically, however, the expense is only offset if the degree is earned from a better business school and the career path sought is business-related. Despite the cost-benefit analysis, most business school alumni report very positive experiences and high value from their MBA degrees.
If you can't afford costs, can't get into the right program for you, or don't have the time to juggle work and study, there are fortunately other options to pursue, such as the CFA or a master's degree in finance or economics.
