Is Business School Worth the Money?

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Over time, MBAs earn $1 million more than non-MBAs, says a new study.

If you’re on the fence about whether to spend the time and money to pursue a graduate business degree, a new report from the Graduate Management Admission Council could help you decide—including what kind of program might give you the biggest returns.

Based on a survey of 14,279 alumni of 275 MBA programs worldwide, the study says these MBAs reported base salaries that totaled $1 million more over the two decades following graduation than if they had not gone to B-school. GMAC’s calculations show that, even taking into account the opportunity cost of two years of lost pay, people who graduate from two-year, full-time MBA programs recoup their investment, on average, in three-and-a-half years.

Can’t take two years away from your job (and spend an average of $105,000 in tuition, in addition to lost pay)? That’s not necessarily a problem since, the report says,“graduates with lower investment costs tend to recoup their expenses more quickly and show a larger ROI.”

For instance, MBAs who got their degree part-time, at an average tuition cost of $25,000, took just two-and-a-half years to earn back their investment, as did executive MBA grads who paid roughly the same tuition. After five years, the two groups reported total ROIs (including pay increases minus the cost of their degrees) of 221% and 491%, respectively. By contrast, because their MBAs cost so much more, the full-time two-year students’ five-year ROI was 132%—still not too shabby—and climbed to 445% only after an average of 10 years.

In all, 89% of the alums said their MBAs have proved “professionally rewarding,” and 9 out of 10 said they’d go to B-school if they had it to do over again. About 70% said their MBA led to “faster career advancement.”

Even more women (96%) than men rate their degrees as a “good” or “outstanding” investment, despite the fact that female MBAs tend to earn less than their male peers. In the year or two immediately following graduation, the report says, both men and women get a salary boost averaging $20,000. After that, though, women’s pay flattens out. “The gender pay gap persists among business school alumnae,” the report notes. “This appears to be a continuation from the lower salaries women earned prior to entering business school.”