What It Now Costs To Get A Top MBA Degree
Maria |
December 7, 2021

It’s no secret that getting an MBA is expensive, but how much money do you actually need for an MBA degree?

 In this episode of Business Casual, Maria, John, and Caroline will not only give you an estimate of how much money you’ll need to have a degree, but they’ll also explain why an MBA is a good investment for your career in the long run.

Episode Transcript

[00:00:07.210] – John

Hello, everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast with my co host, Maria Wich Vila and Caroline Diarte Edwards. Caroline, of course, is I cofounder of Fortuna Admissions, the MBA admissions consulting firm and a former director of admissions chief of admissions at INSEAD. And Maria, of course, is the founder of Applicant Lab, which is sort of a do it yourself tool software program to help applicants guide them through the process of applying to a top school. We are going to talk today about something that we do every year at Points and Watch, which is to assess the cost of a top MBA program. Every year we look at the top 25 and see what it costs to attend, not only in tuition, but the estimates that schools provide on room and board and the additional fees that they tack on to tuition. You’ll be not surprised to learn that obviously an MBA for a top 25 school is a major investment. I’ve always said that once you toss in the opportunity costs of forgoing your earnings, you’re looking at larger than any other purchase in your life outside of a home.


[00:01:28.370] – John

And this year I would say the top school is in New York City. It’s actually NYU Stern. The two year cost in tuition, room and boarding fees is $243,000. Stanford is next because we know how expensive it is to live in California. The total cost there is about $240,000. Dartmouth Tuck, 238,000. Same at Columbia, MIT 236. Interestingly enough, there are nine schools where the costs are higher than Harvard Business School. Harvard right now is priced at $223,000. I always think that one of the interesting things about these numbers is that when you look at the estimated room and board and fee costs in addition to the tuition, you can make the argument that, well, look, for two years, you’re going to have to pay room and board somewhere anyway. So what doesn’t matter. But most of these estimates that are provided by the school are for let me call it a conservative lifestyle. At many of these elite schools, MBAs live a very rich life going out for drinks and expensive restaurant meals. And maybe many people don’t want to live in a graduate dormitory. They would prefer to share an apartment or have their own apartment, which really significantly increases all of these price Tags on a degree.


[00:02:59.450] – John

So let’s start with Maria. How do you make sense of this? I want to kind of put these numbers into some sort of context. If I’m looking at $243,000 to get an MBA from NYU Stern, and I’m not even thinking about the loss of my earnings for two years, how do I get my head around that and say, yeah, this is worth it?


[00:03:24.740] – Maria

I think you look at it the same way you would look at any long term investment where there’s an enormous capital outlay up front and the expectation or hope is that you will recoup that in the decades that follow. So I think most people who get MBAs ultimately do acknowledge, even if they didn’t love the experience as much as they were hoping, even the most sort of disgruntled and grumpy graduates will acknowledge that their earnings potential has been pretty significantly increased as a result of doing the program. So my quick answer is look at it as you would you compared it to a house, right. If you buy a house and you live in it for 30 years. Yeah. It’s going to cost a lot upfront. But think about how long you will be benefiting from that purchase.


[00:04:12.410] – John

Yeah, that’s really true. And you think about the appreciation that you’re going to get from it. And in this sense, the appreciation is not merely the bump you get when you graduate, but really the bump you get throughout your career because every percentage increase on a bigger basis is very significant. The other big thing is there are opportunities that you will have with the MBA that are otherwise not available to you. A good example, frankly, would be firms that really rely on business schools for their talent pool. So McKinsey Bain, BCG, right off the start, where the starting salary is $165,000 with a $35,000 sign on bonus. If you’re an engineer or you’re into marketing or you’re into any field and you want to get into consulting, you don’t have a choice. You have to go to a top MBA program really to get those jobs. So that justify the expense because those jobs are incredibly lucrative. And while you have to work really hard at them, there is an immediate bump that is sustained over the period that you’re working at A, McKinsey, Bay and BCG or Deloitte or any other major consulting firms, for one thing.


[00:05:37.840] – John

Caroline, how do you make sense of this?


[00:05:40.790] – Caroline

I think, as you said, you have to take a long term perspective on this. And it’s interesting to look at some of the data on return on investment. And the Forbes ranking is based on purely financial data. Right. Return on investment, payback time and so on. And it’s very impressive, right. The payback time on these top MBAs is just a few years. We’re not even talking decades. Right. We’re talking single finger years. And so when you think about the return on investment that you will actually generate over an entire career, it’s very impressive. So despite the huge ticket price and that entry to a whole new world looks very intimidating, and it looks like you’re taking a big risk. And I often talk to candidates who are thinking about applying, not even sure about applying because they’re so concerned about taking on that financial risk that is unsecured. Right. And if you buy a house, you can sell the house and you’ve got an asset, but you’re investing in yourself. And so it’s much more intangible and can feel much more risky. But as Maria said, it’s very rare that anyone regrets going to business school.


[00:06:59.070] – Caroline

And if they do have some regrets, it’s often about the choice of community or the place that they were and not about the whole idea of doing an MBA and whether that had a payback for them in their career. So I do think it’s still important to find the right fit for you and to get into the best school that you can, where you feel you will be able to achieve your goals. And sometimes I speak with people who get into multiple programs, and then they’re lured to a program that was not their top choice because of scholarship offers. And it can be very difficult to turn down a generous scholarship and to then take on the financial risk yourself of going to the program that was the one that you actually had your heart set on. But I always advise candidates to take, if possible, to take some of those financial elements out of the decision and think about really which school is the best fit for you, where you feel most comfortable, where you think which environment is best suited to enabling you to achieve your goals, because at the end of the day, you will pay those loans back, you’ll get the return on investment, and that’s something that will stay with you about that experience and the alumni network and so on will stay with you for the rest of your life.


[00:08:21.880] – Caroline

And so I think sometimes candidates are too focused on the short term of the calculations and how much it’s going to cost them, the size of the loan they have to take out and scholarship offers and so on. And I wish often that they were less influenced by those. And I know how difficult it is when it’s such a huge amount of money. But I always encourage them to take a long term perspective, and it’s possible not give too much weight to the financial considerations.


[00:08:49.850] – John

Yes. And as you mentioned, the other aspect of putting this into context is scholarship or fellowship aid. The schools are in literally an arms race to offer discounts on these numbers. So you can consider these numbers sticker prices. And if you look at what kind of fellowship or scholarship is available to people at most schools, it’s considerable. And there are MBA programs, to be totally honest about this, where almost every person gets a scholarship and many people get a free ride, and those tend to be not the best program. Sure. Those tend to be smaller programs where schools want to maintain a certain leadership position on a ranking, and they’re literally paying for their students better students to come than they would otherwise get. But you can get a really good deal at some of these schools. And then even at the best schools, they’re quite generous. So let’s look at Stanford. The average fellowship at Stanford is $42,000, a year or $84,000 in total rewards over a two year period. At Harvard, the average fellowship is just under 40 grand a year, or roughly $80,000 total, and half the class gets it. So that’s an extraordinarily large amount of discounting that’s going on at Stanford and Harvard.


[00:10:19.910] – John

And yes, these schools have large endowments, and yes, these schools tend to be among the most generous. But a lot of the other schools then have to basically anti up to be in the competition for the best applicants. And there are a lot of schools that have hundreds of scholarships, grants, fellowships, and awards. Ucla is one. Berkeley annually spends millions around it’s relatively small MBA cohort. And when you look at this many times, you can apply for aid, and it doesn’t take a lot of extra effort either. So it’s not like this is something that should be all that time consuming. I think what Caroline mentioned about people taking offers that they might not otherwise accept because of the scholarship award that’s dangled in front of them so that they don’t have to borrow as much money. Ultimately, you’re right, Caroline. You’ve got to know you want that degree from that school, and you’ve got to be pretty darn certain about it to pass up a Wharton or a Columbia or Harvard or Stanford and go somewhere else because you don’t want to get heavily into debt. Don’t be accepting an offer. No matter how generous it is, it’s going to turn you away from the dream school, the best possible education outcome that you could get from it.


[00:11:54.570] – John

What’s another way to actually weigh these offers? Because I bet both of you in counseling applicants to top schools get involved not only in the upfront process of here’s how you apply, here’s how you increase your odds of getting in, but just as importantly, on the choice issue, because if you have multiple offers and you’re thinking about this and cost is an issue for you, how do you think about it? Is there a framework for this? Maria, what do you advise people?


[00:12:24.870] – Maria

There’s a framework, but I would say it’s more of an art than a science. I think that there are so many qualitative elements that should go into your decision. So on the quantitative side, yes, I think you should look at the career outcomes for your desired career from the career placement reports, how many people go into your desired career, talk to the students. How easy is it to get that job that you’re dreaming of? But I also think that there’s a cultural component to each one of these top schools has a slightly different cultural vibe. And I think there’s something to be said for being near your tribe, so to speak, finding people that are more aligned with you. And so I think there’s the quantitative aspect or the quantifiable aspect, like the more hard, tangible aspect of do they offer the classes I want? Do they have the career outcomes I want. But then I think there are also the other things, like the culture, even the location. For example, if you really want to live on the West Coast, it won’t hurt to go to a school on the West Coast because people tend to stay.


[00:13:25.650] – Maria

Even if a large percentage of a class does disperse geographically, there is usually also a pretty big chunk that stays in the area. So if you want to live in the Midwest, maybe you do value an offer from a booth or a Northwestern a little bit more than you might an offer from an East Coast school, for example, right?


[00:13:46.720] – John

Yeah, totally. And often geography is destiny. There tends to be more of an alumni network around the schools, whether East, West, Midwest, and that helps. It also tends to be certain different sets of companies that may be recruiting at these different schools. So geography is also a real key component of where you decide to go. Are you surprised that the most expensive school just in terms of tuition? Forget room and board, forget the additional fees that schools tack on and expense their students. But the most expensive MBA program in the world today is MIT Sloan $79,000 a year in tuition. Are either of you surprised that MIT would be that high and be number one over Harvard, Stanford, Wharton, Kellogg, Chicago?


[00:14:46.850] – Caroline

There’s not a huge amount to choose between them, is it? I don’t know exactly how the schools calculate this, but it also depends what it is included. Sometimes there are different things that are included in the tuition, different additional cost. So I don’t think those small differences are going to make a big difference at the end of the day to the total cost of the overall experience. And I think that location plays in more to the calculation of cost because there can be a big difference in paying rent in Palo Alto versus some other Metropolitan areas.


[00:15:26.130] – John



[00:15:28.290] – Caroline

There’s a cluster of tuition fees, and they’re all fairly close together.


[00:15:33.450] – John

Yeah. And the exception would be among the top 25 schools. It’s probably not a surprise. The least expensive opportunities are all at public universities, right. So if you look at Indiana, Kelly, it’s 52,000, University of Washington, the Foster School, 54,000 a year. Ut Austin, MCCOM is $58,000 a year compared with at the top, MIT at 79, NYU at 79, Dartmouth at $78,000, Columbia at $77,000. So you’re looking in that case at a $20,000 a year difference or $40,000 over the two year period. But obviously it’s a reputational, image or prestige game. The brands like MIT, Stern, Dartmouth, Columbia, Kellogg, Wharton, Chicago, Stanford, Yale obviously have more pricing power than Indiana, Washington, UT, Georgetown, or Rice, all of whom have among the top 25 MBA programs. The more affordable price Tags. Is the premium worth it? Do you remember how much you paid for your MBA, Maria?


[00:17:00.270] – Maria

I don’t. I think I blanked it out of my head. But to Caroline’s earlier point, even I who went into the startup world right after business school. And so my monetary compensation was not as high as it was for some of my classmates. Even I was able to pay off my debt fully, I think, within ten years. And so you really are able to pay it off. It’s not as daunting once you actually graduate. I think the premium is worth it. A difference between, say, in Indiana versus a Sloan. I would pay that difference.


[00:17:37.530] – John

Yeah. Now, I do know that you remember how much your room and board was at Harvard Business School.


[00:17:43.330] – Maria

Yes, that’s the room because I was in a dorm, a teeny dorm room that was only slightly wider than the twin bed that was in it cost, I think it was $700 a month, but that did not include food. So there was a cafeteria on campus where I ate most of my meals. And so obviously that would just add up depending on what I chose to eat in a given day.


[00:18:10.350] – Caroline

But yeah, I do believe that Maria was on bread and water.


[00:18:16.230] – Maria

It was more like Mountain Dew and coffee.


[00:18:21.080] – John

This is before the Raymond noodle, phenomena, right?


[00:18:24.930] – Caroline

Energy bars.


[00:18:26.020] – John



[00:18:26.690] – Maria

Exactly. Oh, man, I could have really used some energy bars back then. Would have been pretty transformative.


[00:18:33.190] – John

As a point of contrast, the rooming board at Harvard Business School is $30,270 a year and the highest rumor board is at Stanford, where it’s $34,806 a year. Now, the argument on this, like I mentioned earlier, is that, look, you’re going to have to pay room aboard somewhere. So that’s an expense that you’re already incurring to incur at a business school. The only difference is that you’re not having income to help pay for it, but you obviously have to have that expense no matter what you do. Caroline, you’re going to make a point.


[00:19:10.550] – Caroline

Yeah. So I wanted to put in a plug, if I may rather shamelessly for the one year program. Absolutely.


[00:19:19.930] – John

I was going to ask you, Caroline, how much you paid for your one year MBA at INSEAD.


[00:19:26.430] – Caroline

God, I mean, like Maria, I can barely remember. I think it was something in the €40,000 and now it’s about €90,000. So it has gone up considerably. So that’s about $100,000. But the payback is fantastic at this one year program. So we mentioned the Forbes ranking, which is based on financial data, and Stanford and Chicago at the top there with a four year payback and IMD, which are at the top of IMD and Insured at the top of the Forbes ranking. It’s about two and a half years to pay back. So it’s difficult to argue with a financial proposition of these top one year programs because it does make a tremendous difference if you are incurring living costs and paying tuition and foregoing your salary for one year rather than two. It’s very powerful formula and I know that a lot of people apply to these programs with the intention of being able to leverage that more efficient format and therefore benefit from those cost savings. And that’s a huge part of the value proposition of these programs. And it’s great for attracting candidates from around the world because a lot of the students of these programs have not been earning US style salaries before they go off to business school.


[00:20:59.310] – Caroline

And so you’re working in India or you’re working in some other parts of the world emerging economies where salaries are much lower, regardless of how prestigious your job is, you just don’t have the same savings.





[00:21:16.830] – Caroline

So it makes a tremendous difference for those candidates to be able to get the full MBA experience and achieve their career goals in one year rather than two. It’s a very powerful value proposition.


[00:21:30.690] – John

Yeah, that’s really true. And as you pointed out, the ROI on those degrees, based on the calculations, reports does is exceptional. So you were saying the latest data shows it takes four years to get the payback on a Harvard or Stanford degree, how long you get on INSEAD.


[00:21:52.630] – Caroline

So it’s 2.7 years for IMD, and it’s 2.6 years for 2.4 years for Cambridge Judge. So, I mean, that’s very fast.


[00:22:02.120] – John

Exactly. That’s really a good point. The other thing you should know, though, is that generally one year programs in terms of scholarship aid tend not to be as generous as some two year programs because they don’t need to be because they’re more affordable to begin with. So that’s also a thing. I think it’s so hard for someone to make decisions on the basis of cost because the sticker prices are not the real prices. And it’s not about your negotiating power, really, because there’s a bit of a black box when it comes to how much aid you can get from a school. So you apply and you kind of don’t know what it’s really going to cost you until you get that offer back. And while some people have some negotiating power, it’s pretty limited, really, because the schools don’t want to get into a fight for you with another school bidding against each other. That is rare when that happens, if it happens at all at some schools, because most schools refuse to do it at all. But it is hard to make this decision totally unclosted. You just don’t know what the final price is going to be.


[00:23:16.980] – John

The other thing is with the two year program, you’re going to have that summer internship, so you’re going to be earning some cash. And those numbers are on our side as well. What insurance are paid at different firms in different industries, and that takes down some of the sting of the price tag as well. I think all three of us come down on one point here. We totally agree that it is worth it. The numbers are shocking. Yes, the costs are significant, but all three of us believe this is a top school, a no brainer investment. Still. And if you look at the outgoing data right now, today the Wall Street Journal finally caught up with stories that we’ve been running for three months, that salaries for MBAs are record levels, jobs are plentiful, sign on. Bonuses are pretty nice. So it’s clear the rewards are there once you get the degree, go out and apply. All right. Maria and Caroline, thank you so much for this discussion and for all of you out there. Yeah, the price is high, but it’s worth it. All three of us agree that the top MBA from a great school is a no brainer investment.


[00:24:41.630] – John

Sure. When you go and you look on the websites and you look at this article that we’ve just published on the cost of an MBA, you might be shocked, but that is the price tag cost. You can probably get a discount through fellowships and scholarships. You’re going to have an internship and a two year program. The payback is going to be four years or even two and a half in a one year program. So we think it’s worth it. We hope you’ll you think it is too. Maria and Caroline, thanks for the discussion. This is John Byrne with Poets and Quants. Thanks for listening to Business Casual our weekly podcast.


What It Now Costs To Get A Top MBA Degree
Maria |
December 7, 2021


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