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Is Business School a Smart Financial Decision? Analyzing MBA Returns

Quick Highlights:

  • A business degree, including an MBA, can significantly increase earnings, offering a high return on investment (ROI) if aligned with career goals.
  • Consider full costs including tuition, fees, and opportunity costs like lost wages when evaluating a business degree.
  • Higher salary, promotions, networking, and personal growth are key benefits of obtaining an MBA.
  • ROI varies by program and personal circumstances so you will need to calculate potential earnings and costs for informed decision-making.

Table of contents

If you are looking for a good return on your investment (ROI), the cost of business school is worth checking out. A master’s degree in business administration (MBA) is known for opening doors to new opportunities. Among other business degree benefits, you can enjoy promotion opportunities and access to a broader range of jobs. 

Is business school worth it? The MBA ROI is a good investment if you need to make a career pivot or plan on pursuing a job that requires an MBA. Otherwise, the ROI for business degrees might not be worthwhile. Before you spend tens of thousands of dollars on school, take some time to consider the MBA cost versus benefit. 

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Understanding the ROI of Business Degrees

MBA ROI is a term that you will typically see discussed in business schools. ROI refers to the amount of additional money you earn for every dollar you invest in something. You can calculate the ROI business education offers with the following formula.

ROI = ((Final Value of Investment – Initial Cost of Investment) / Initial Cost of Investment) x 100%

Final Value of Investment represents the additional money you expect to earn over your career due to the investment, such as an MBA.Initial Cost of Investment is the amount you initially pay for the MBA.

The median MBA graduate brings in an extra $5.7 million over the course of a 35-year career according to figures from PayScale. While the cost of business school varies significantly, the average MBA costs $56,850. By plugging these numbers into the formula, you can see that an MBA ROI is at 9,926.39%. This means that you are bringing in almost an extra $100 in ROI for business degrees for every $1 you invest. 

When deciding the answer to, “Is business school worth it?,” you have to look a t the MBA ROI for your specific program. The ROI of top business programs can be significantly higher because these programs often lead to better alumni networks and professional networks after graduation. By calculating the value of an MBA from your university, you can see if the MBA ROI aligns with your career goals or not.  

Costs Associated with Business School

Is an MBA a good investment? To figure out the financial benefits of an MBA, you must start by looking at the size of the business school investment. This means you should consider the tuition, fees, and transportation costs connected to going to school. Because you are a full-time worker, you should also calculate the potential lost income during your study periods. 

  • Tuition: The most obvious cost of business school is tuition. Depending on your program, this can range from a few thousand dollars to nearly $200,000.  
  • Room and Board: If you have to move to go to school, you will need to calculate the additional room and board costs. 
  • Fees: Other than tuition, your school likely charges technology, parking, and graduation fees. These costs can add up, so they are important to consider when you’re thinking about business degree benefits.  
  • Textbooks: The average student spends between $628 and $1,200 each year on textbooks according to the education data initiative. You may be able to decrease this cost by buying used textbooks or shopping online. 
  • Opportunity Cost: Part of the cost of business school is the opportunity cost. These are the things you would have used your time and money on instead of going to school. For example, missing out on family hiking trips is a potential opportunity cost. Lost wages are a common opportunity cost for college students. Depending on your salary, your lost wages could add up to more than the cost of attending business school.

The MBA cost versus benefit can also vary based on the kind of MBA you get. For example, you may want to pursue a part-time MBA, full-time MBA, or executive MBA. With a part-time MBA, you will likely be able to continue working at your current job, so your opportunity cost won’t be as high. 

Meanwhile, an executive MBA is made for people who are further along in their careers and want to keep working at a full-time job. In addition to allowing you to work full-time, this type of program lets you network with returning students who also have a lot of job experience. As a result, you may be able to get a better MBA ROI out of executive MBAs.  

Potential Returns from a Business Degree

While there is a cost associated with getting an MBA, you can also enjoy business degree job prospects. Among other business degree benefits, you may be able to increase your salary and access additional promotions. You can also enjoy non-financial returns, like networking opportunities, personal growth, and skill enhancements.

  • Higher Salary: Over the course of your career, having an MBA will typically lead to a higher salary. This can add up to millions of dollars over several decades, but the amount depends on the career field you work in. 
  • Additional Promotions: Sometimes, the only way to get a promotion is by having an MBA. Take a look at the people who have the promotion you want. If most of them have an MBA or a similar advanced degree, then you may need to pursue additional years of school in order to get a higher position.  
  • Networking Opportunities: One of the sources of business school career advancement is through networking. When you go to top business schools, you get to meet students who have similar experiences and backgrounds. Later on, you can use these connections to land jobs and hear about new opportunities.   
  • Personal Growth: A business degree allows you to grow on a professional and personal level. It encourages you to learn new professional skills and become better at financial management. By encouraging you to push your boundaries, business school can help you develop on a personal level as well.   
  • Skill Enhancements: Is business school worth it? If you need to know about managing employees or managerial accounting, it probably is a good investment. By going back to school, you can learn a whole new set of skills that will help you succeed in a leadership position. 

Comparing ROI Across Various Business Schools

Is business school worth it? The value of an MBA may depend on where you go to school. The following list of business schools includes some examples of the type of ROI you can expect. Salary to debt ratios are provided using data from US News. 

  • University of Colorado (Denver): With a 2.2-to-1 salary-to-debt ratio, students can quickly pay off the cost of their education. After graduation, students typically receive a salary of $108,246 and have an average debt of $50,209. 
  • CUNY Bernard M. Baruch College (Zicklin): At this school, students have a 7.3-to-1 salary-to-debt ratio. They graduate with $17,689 in debt and an average salary of $129,050. 
  • Arizona State University (W.P. Carey): Students graduate with a 7.2-to-1 salary-to-debt ratio and $20,549 in debt. The average starting salary for graduates is $148,110.
  • University of Georgia (Terry): At the University of Georgia, students typically graduate with a salary-to-debt ratio of 6.7-to-1. They have an average debt of $21,113 and an average salary of $141,505.

Factors Influencing ROI

The value of an MBA can change based on personal factors and external factors. For example, the business degree benefits you receive can vary based on the economy. If the economy improves, there will be more job opportunities and higher wages. 

Likewise, changes in an industry can quickly increase or decrease your job prospects. For instance, artificial intelligence (AI) is a field that is experiencing a lot of growth, so there are added job prospects in this industry. In comparison, computer programming, data entry, and similar fields are losing job positions because of AI. 

Finally, personal factors can impact the ROI for business degrees significantly. Many people use a business degree to get a promotion with their current employer. If there aren’t promotions available or they don’t pay well, you won’t get a high ROI. Additionally, your MBA ROI will be strongly influenced by the career path you want to take. 

Decision-Making Tips

The ROI for business degrees can be calculated by looking at the cost of school, your expected earnings, and your opportunity cost. However, the real business degree benefits go beyond just a simple calculation. Your personal financial situation and career aspirations are more than just a number. 

Before you start paying the cost of business school, take some time to think about what you want in life. If your dream job requires an MBA, you may be willing to pay a higher cost to get your degree. Likewise, someone who hates going to school may need a higher ROI to make an MBA worthwhile. 

This decision is a highly personal one, so take some time to research online before you make a choice. You may also want to talk to an academic advisor, friend, or family member about their opinion. With the right research and information, you can make an informed choice about your education. 

Take the Next Step in Your Career 

Is business school worth it? Ultimately, the answer to this question depends on the kind of business degree benefits you need to receive. The cost of business school may be worthwhile if it is a requirement for your career goals. By carefully researching the MBA ROI beforehand, you can make the right decision for your career.