A degree from a top business school has long been seen as a direct path to a job at a top company, but new data demonstrates just how much it costs to pursue that route.
Bloomberg Businessweek surveyed more than 10,000 2018 graduates of MBA programs from 126 schools about the amount of debt they piled on earning their degrees. The survey found that almost half of students at leading business schools around the world borrowed at least $100,000 to finance their MBA.
According to the survey, at minimum 40% of MBA graduates from U.S. News & World Report’s top-ranking business programs — those at Duke, Dartmouth, University of Michigan, Cornell and University of Chicago — reported incurring at least $100,000 in debt.
That percentage drops a bit at nine other top MBA programs – including those at MIT, University of Pennsylvania, NYU and Northwestern University – where around a third of recent graduates borrowed at least $100,000 to finance their degrees.
Conventional wisdom has held that the price tag on an MBA, however high, tends to be worth it. According to U.S. News & World Report, tuition for traditional full-time (two year) MBA students surpassed $50,000 per year at the top 15 ranked MBA programs in the 2019 Best Business Schools rankings – with some schools exceeding $70,000 annually. Prices at public schools, particularly for in-state students, tend to be lower. U.S. News says that, “among the 10 highest-ranked public B-schools, the average in-state tuition for full-time MBA students was slightly more than $42,000 per year.”
But Bloomberg’s survey results illustrate just how steep the debt eager entrepreneurs and executives undertake to advance their careers.
Graduates of the 26 schools where at least 20% of students report having had to borrow six-figure sums disclose median starting pay ranging from $80,000 to $140,000. “The survey data puts into stark relief just how much of a return some students need to justify their debt-financed investment,” Bloomberg reports.
Students see a clear connection between the cost of their degree and the benefit. Mike Sanchez, a 32-year-old investment banker at Citigroup and 2018 graduate of University of Chicago Booth School of Business, told Bloomberg that he didn’t consider the $110,000 in student loans he took out to finance the program a hindrance. Booth reports its median starting salary for last year’s graduates was $130,000.
Based on a 2018 report by QS Quacquarelli Symonds, a higher education data and research company, U.S. News reported that, “within 10 years of earning an MBA degree, the average MBA grad from either a U.S. or international business school had an estimated decade-long return on investment of $390,751, even after subtracting the tuition and opportunity costs of attending an MBA program.” At top business schools, like No. 2 Stanford University, the average decade-long ROI of an MBA degree exceeds $1 million.
And since MBA programs take less time to complete than other pricey professional degrees, such as law and medicine, business students still take on less debt and are seemingly less likely to drop out, student loan experts say. The latest data from the National Center for Education Statistics (NCES) illustrates the trends in graduate student loan debt among specific degree programs. Average 2016-17 student loan balances totaled $66,300 for MBA graduates, $145,500 for law graduates, and $246,000 for medical school graduates.
But not all graduate students find their degrees valuable. In a Gallup poll of more than 4,000 American adults with a postgraduate degree, only 23% of law school graduates said that their education was worth the cost; 42% of MBA graduates and 58% of medical school graduates found their degrees worth it.
Across all of the 126 schools that were part of Bloomberg’s survey, 18% of students reported borrowing six-figure sums to fund their MBAs. But not all students needed help financing the degrees. “Some 44% of respondents said they graduated with an MBA without having had to borrow to pay for it,” according to Bloomberg.
A recent report by The Wall Street Journal found that many schools are shutting down their traditional MBA programs “in favor of shorter, specialized masters and online degrees,” in subjects like data science and supply-chain management that are seen as more relevant to the current workforce.
The Journal found that the number of accredited full-time MBA programs in the U.S. shrank 9% between 2014 and 2018, as documented by the Association to Advance Collegiate Schools of Business.
But even as prestigious programs offered at schools like Harvard and Wharton receive fewer applications, administrators argue that the degree still holds value. Soojin Kwon, admissions director of the full-time MBA program at University of Michigan’s Ross School of Business, told The Journal that these MBA programs “provide access to jobs with attractive companies and great salaries, with a strong alumni network. That’s what students are buying.”