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The Cost Of A Top MBA Program Is Now Absurdly High

Updated: 12/23/2019 by Financial Samurai 73 Comments

As an MBA holder from UC Berkeley, I should be very pro-business school. But after seeing the latest tuition figures compiled by US News & World Report, I cannot in good conscience recommend getting an MBA full-time today if you are paying full price.

Only if you are already rich, screwed up massively in college, want to take a long vacation (and rich), or despise your job and want a career change should you consider an MBA.

Take a look at the details yourself.

US News & World Report MBA Rankings 2018 - 2019

US News & World Report MBA Rankings 2018 – 2019

The first thing that stands out clearly is how wrong the rankings are. UC Berkeley Haas should be #1 since the school is located in the booming SF Bay Area and has the “cheapest” tuition. But besides the egregious rankings, the second most eye-opening part in this chart is the tuition.

Who in their right mind spends more than $65,000 a year on tuition alone?! Once you add food and shelter, we’re easily talking $100,000+ a year. Students are not only giving up two years of experience, but they’re also giving up another $150,000 – $300,000 in median lost income.

Yes, getting an MBA full-time is like taking a long work vacation for many people. But unless you are already rich, or are willing to work for decades after graduating, I’d much rather have the $300,000 – $450,000 in paid tuition and lost wages instead. Taking 4-6 weeks off a year in my late 20s and early 30s was good enough for me. How about you?

Some of you might think that given the MBA is a graduate degree, many schools provide grants to attract the highest caliber of people. Unfortunately, MBA programs are not like graduate programs in the sciences or humanities, where scholarships are readily available. MBA programs are businesses that seldom give out free money to students.

The Better MBA Solution: Get Your Employer To Pay

When I went to Berkeley Haas between 2003 – 2006, tuition was around $28,000 a year. I felt that was a steep price to pay back then as well. As a result, I applied to the part-time program because my employer was willing to pay 100% of the tuition if I stayed on for at least two years after graduating.

The program took me three years to complete. Every Saturday for nine months a year, I would go to class from 8:30am – 5pm and then spend another 10 hours a week doing homework and group projects. The first year was brutal due to the adjustment and all the core classes I had to take. But by the second year, the program was a lot of fun due to the electives I selected.

I could have finished the program in 2.5 years if I took two summers of classes, but I needed a break. I was regularly working 60+ hours a week in finance and was doing a lot of traveling.

Although the three years were tough, they went by quick. I worked for six more years before I finally left my employer in 2012. It was a good trade for both parties.

If you are considering getting an MBA, please first check with your employer to see if they have a tuition reimbursement program. It’s a business expense for them as well as a recruiting and retaining tool for their top employees.

If you plan on paying the entire bill yourself, then do research on how you can deduct the tuition of an MBA on your taxes. For example, if you earn under $80,000 the year you go to school or $160,000 if you are married, you can deduct all tuition and school-related fees. See more tuition deduction info from the IRS here and check with an accountant.

The Main Things I Learned From My MBA

Here are some of the things I learned in business school:

* How to create an income, balance sheet, and cash flow statement

* How to be a better negotiator

* How to be a better communicator

* How to properly analyze real estate transactions

* How to lead more effectively

* How to play nice with eager beavers

But the main thing I learned in business school was confidence. The more information I knew, the more confident I became. With an added diploma and three more years of work experience, I started to finally feel like I belonged in the finance world.

The problem with MBA programs right now is demand. Applications were down 5% – 10% for the top 25 schools last year and will likely decline even further this year once the data comes out.

The schools blame the decline of international applicants scared off by anti-immigration talk in the US, hurricanes in Texas, and white supremacist protests in Virginia for their declining demand.

But one variable they do not discuss is the extraordinary cost of tuition, which is just too obvious to me and any rational person working in a strong economy today. If business schools want to increase demand, they simply must lower price. You don’t have to go to business school to understand this concept!

Check out this chart highlighting the year-over-year change in MBA applications.

MBA application statistics way down

Business school demand is way down. Source: PoetsandQuants

Getting A Graduate Degree Is Contrary To FIRE

If your goal is to retire early, then getting a graduate degree doesn’t make sense unless you can go part-time or get your graduate degree in your early 20s.

The goal of FIRE is to break free from the grind as young as comfortably possible. By spending 1 – 4 years in graduate school, you are sacrificing precious time and money in order to hopefully leverage your degree for as long as possible.

Originally, I had thought that once I got my MBA at 29, I would work full-time until age 40. But I couldn’t take six more years of indentured servitude so I engineered my layoff at age 34. Not all was lost though as my MBA gave me some tools to figure out how to make money with my own two hands.

The only person I know who had a lower return on their MBA than me is a friend who went to Harvard Business School full-time. When she graduated at 29, she proudly told me, “I never plan to stop working Sam!”

But after she had a baby girl three years later, she never went back to work. Despite only working one year longer than the time she went to school, she met her husband in business school, who ended up making multiple millions at a hardware device startup. They live in a $4M+ house and life is good, so perhaps her return was stellar after all.

Still No MBA Regrets

Despite the ridiculously high cost of getting an MBA, you will likely not regret going. You’ll meet a lot of interesting people, go on amazing school trips, and be forever part of a fraternity that will always believe their MBA was worth it.

Just make sure you either work for at least 10 years after graduating or make at least 10X the total cost of getting an MBA before you stop working, whichever comes first. After all, getting an MBA is all about maxing your return on investment.

Further, an MBA is a great way to reset your career if you screwed up in high school or slacked off in college or work at a terrible job you absolutely hate. If this is the case, go for it and figure out how to deduct the cost on your taxes.

As for me, of course I don’t regret getting my MBA because it was largely free. It was painful to be working 80 hours a week for three years, but once I was done, working only 60 hours a week felt like a breeze. Hard work should never be an excuse for regret.

Staying in San Francisco for more than 12 years after graduating has proven to be a wise decision given a Berkeley MBA carries more weight here than in other parts of the country.

Finally, now that you know I got an MBA from Berkeley, doesn’t it seem like you’re getting even better value for what you’re reading on Financial Samurai? If not, I’ll gladly give you your money back. Go Bears!

Looking to refinance your student loans? Check out Credible, a student loan marketplace that has qualified lenders competing for your business. Credible provides real rates for you to compare so you can lower your interest rate and save. Getting a quote is easy and free. Take advantage of our low interest rate environment today!

Related: Is An MBA A Big Waste Of Time And Money?

Readers, do you think getting an MBA is still worth it today? What types of people are willing to pay so much to get an MBA nowadays? Do you know anybody who went to graduate school and ended up becoming a stay at home parent or retiring shortly after?

Note: Some people really dislike folks with MBAs, especially those who didn’t get an MBA. There’s also tension sometimes between the engineer “creators” and the business development, sales, and marketing types (MBAs). The reality is, you need all types of people to make a business run well. Know the culture of the firm you want to work for before getting an MBA or applying to that firm. 

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Filed Under: Education

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

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Comments

  1. Billy says

    July 21, 2019 at 5:10 am

    Very helpful post, Thanks! My GF is applying for part-time MBA programs, and tuition is definitely a big concern. Although her employer can cover up to $8000 a year through the tuition-reimbursement program, she still needs to pay $52000 plus living cost out of pocket. Plus, the 2018 Tax law made tuition non-deductible, which is another $10,000 loss… She can still afford it, barely… as a senior associate already having 3 years+ working experience. However, we are still thinking whether it’s worth it to invest it in a 3-year part-time MBA degree, or to spend the same amount on some other investments which can generate more passive incomes. IMHO, the US higher education is totally crazy! This kind of situation doesn’t seem to be sustainable in the long run!

    Reply
  2. Dave says

    May 21, 2019 at 7:39 am

    I don’t think it is worth it for myself. For some people, it can be great for a career transition or promotion. I’m also not sure how many scholarships these programs give out, but that would be a game changer. For me, it doesn’t seem to help with my career progression (can get promoted without MBA), currently making $140k and will get up to about $230k next year most likely, so that’s a total of $370k in lost income (~$250k after tax) if I were to do the MBA. Plus nearly $75k/year in MBA tuition ($150k for 2 years). That comes to a grand total of $400k opportunity cost. Doesn’t seem worth it to me. I don’t want to take on student debt and I enjoy work-work more than school-work.

    Reply
    • Samar Misra says

      January 18, 2020 at 1:29 pm

      You nailed it great! I am absolutely against student loan debt and I honestly feel even from top elite schools like Harvard or Stanford in any in-demand field that one there is no guarantee of getting the best, preferred job as other top, elite grads are competing and networking too and two I feel that being chained to debt affects career passion. Tuition must be abolished everywhere as education free of cost is a universal human right.

      I am glad I did not pursue an MBA and pursued a Masters in Urban Planning 9 years after finishing undergrad and after working. Like how the MURP I am pursuing at my acctedited state university is cheaper with my two AmeriCorps Ed awards knocking out 1st half of tuition. Love how my degree is usually required in the field and translates to public service, public health, Economic Development and city and town Planning with sustainability which are my passions unlike investment banking, finance, private equity or reaping profits on and on without a true social mission towards uplifting thr less fortunate.

      Reply
  3. Zeke says

    December 19, 2018 at 3:34 pm

    I graduate from an M7 in June 2019 and just accepted an offer this week. My pre-MBA income was less than $100K and my new job will pay right above $100K. Although it is less than the median salary of my classmates, I will be relocating to the South whereas the majority of my classmates move to Boston, SF, or NYC. Although I am excited about the firm and have significantly increased my salary, I just told someone this week that I believe MBA tuition has reached the threshold of being a good investment.
    I am excited about how the network helps me in 10+ years though.

    Reply
    • Financial Samurai says

      December 19, 2018 at 4:14 pm

      Congrats and good luck! Just make sure to stick with your career for at least 10 years post MBA and I think you will have made a fine ROI.

      Reply
  4. Joe C says

    November 28, 2018 at 5:34 pm

    I agree 100% with this post.

    Unfortunately in some areas having a master’s degree will be a technicality to advancement. My girlfriend and I are in the middle of part-time master’s that we are paying for out of pocket. For me, an MBA at just under $15K online from a state school that is ranked decently in the Princeton Review online rankings. For her, a master’s of nursing (MSN) in education from a state school for under $9K. Both schools are flexible and work with their students, unlike some other private schools we’ve dealt with.

    I might lose the prestige of one of the big name schools, but I have an Ivy League degree on my resume from undergrad where I was lucky enough to have essentially free tuition through my mom’s job. For both of us, WHERE we go to school is less important for our career paths than that we actually got the degree. This obviously doesn’t hold for every industry, but for healthcare/our paths, the networks that come from a “prestigious” university was not of much value.

    There are other affordable options out there for people looking to do part-time. Many state schools (particularly those in the middle of the US) offer online students in-state tuition rates regardless of where they reside. Not right for everyone, but perfect for a lot of people who probably don’t know about it and are taking on unnecessary debt.

    Reply
  5. David says

    November 23, 2018 at 11:36 am

    I would only consider an MBA if I was desperate to change careers and the career I wanted to go into has a lot of MBAs. Even a few years ago the cost seemed outrageous when I was considering it, and it has only gone up since. My local state school, Arizona State, recently made their full time MBA tuition free so that looks a bit more attractive but I am more interested in doing a masters in Statistics part time while I keep working.

    Reply
    • Samar Misra says

      January 18, 2020 at 1:33 pm

      Though isn’t it true that for some fields where one wants to switch careers to that an MBA may not be right choice due to functional and specific skills required? I ask as this many healthcare, other types of jobs or other trades require specific skills besides MBA?

      Thanks for your encouragement and advice which I acknowledge. Just curious reason some people refer to MBA as general all around ticket for changing careers as there are a vast array of careers?.

      Best,

      Samar

      Reply
  6. Gaz says

    November 18, 2018 at 5:45 pm

    Sam. How about reviewing the online MBA programs only and their cost to value ratio versus those institutions where you have to attend in-person or some form of a hybrid where it’s some online but still requires mostly on-site presence.

    And are part-time MBA programs and classes another way to start the process to ensure the MBA program you’re committing too is the best one suited to your career, hopefully with some government loan assistance and work sponsorship too.

    $5-10k from NYC firm’s barely makes a dent in today’s priced moderate MBA programs, let alone the well known and more elite programs…many thanks.

    Reply
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