Every business owner knows the importance of tracking ROI or return on investment. What is the benefit of an investment relative to its cost? As Lendio points out, “Having the foresight to determine if an investment will result in a positive return allows you to make financial decisions that will ultimately help you successfully grow your business.”
The same kind of thinking applies to the financial aspects of earning a Master of Business Administration (MBA). Will the financial benefits of an MBA outweigh the cost? The Graduate Management Admission Council (GMAC) provides an illustrative MBA Return on Investment (ROI) Calculator that provides a number of snapshots, including total MBA investment, initial pay boost and time to recover one’s investment.
What Is the Cost of an MBA?
One way to evaluate the cost of an MBA is to look at tuition. According to education resource ThoughtCo., tuition for a traditional two-year MBA may run $60,000 to $100,000 or more. By comparison, online MBAs can range from $7,000 to more than $120,000. Of course, tuition and fees vary from one MBA program to another.
It is important to consider other factors as well when calculating the cost of an MBA. This includes any application and registration fees. Other potential expenses include:
- Commuting costs (for students enrolled in campus-based MBAs, not living on campus)
- Relocation expenses (for students attending campus-based programs not within commuting distance)
- Books and supplies
- Club and activity fees
- Library and technology fees
- Lost wages (for students who put careers on hold to earn an MBA)
- One-time graduation fee
- Interest on student loans
While tuition is typically the most significant expense, these other costs can add up. This is why it can make sense to consider tuition from the start when exploring options for MBA programs.
Online programs can be appealing for many reasons, including potential cost savings. Taking a look at Northwest Missouri State University as one example, online MBA programs can be a more affordable option. As of July 2021, the total cost of tuition and required fees for Northwest’s MBA General online program was listed at $12,300. In addition, tuition is the same for in-state and out-of-state students.
How Much Can MBA Graduates Earn?
Anyone considering an MBA has probably heard that salaries can be high. What can MBA graduates expect to earn? How do salaries for MBAs compare with those for workers with a bachelor’s?
A variety of factors affect salary, such as geographic location and industry. Credentials may also contribute to different wages for workers within similar occupations. Holding an MBA correlates with a higher salary potential, according to the Graduate Management Admission Council. Backing up this correlation are the findings in GMAC’s 2021 Corporate Recruiters Survey: A recent MBA graduate has a projected median starting base salary of $115,000 per year. At $65,000, salaries for recent hires with a bachelor’s are less than 60% of the MBA median figure.
Taking a look at the upper end, the GMAC 2017 Alumni Perspectives Survey reports C-suite executives, such as CEOs and CFOs, earning a median of $440,122 in total compensation per year.
Looking at the ROI for an MBA, GMAC found that it takes an average of three and a half years for alumni of traditional two-year MBA programs to recover their costs. For part-time and online programs, that number falls to two and a half years.
Is an MBA worth the cost in the long term? According to GMAC research on B-school outcomes, business school alumni earn a half million to a million more (depending on annual salary increases) over 20 years than if they had not gone to business school. This may put the ROI of an MBA in a new light.
Learn more about Northwest’s online MBA General program.
