Is an MBA Worth It? The ROI of an MBA

Master of business administration (MBA) programs provide opportunities for students to learn key business leadership skills while growing their professional networks. But they don't come cheap.

The average MBA costs close to $55,000, and top schools can run students over $120,000 per year. If you're considering an MBA, you'll want to know if that investment will pay off.

This report explores the data on an MBA's return on investment (ROI). We'll also cover the pros and cons of the degree to help you decide the next steps in your education and, ultimately, your career.

Should I Get an MBA? Pros and Cons

Deciding whether an MBA is worth it for you depends on your circumstances and goals. But hard data can help inform your decision, regardless. Consider these risks and benefits.

Pro: Earning an MBA may increase your salary, often significantly.

Getting an MBA is generally linked to higher earnings.

In 2022, the National Association of Colleges and Employers (NACE) surveyed people who had graduated in the past six months. People fresh out of an MBA program made a median salary of roughly $84,700.

Those who had just graduated with a bachelor's in business administration (BBA) made starting salaries of about $56,400.^{Note Reference [1]} That's a 50% pay bump or a difference of over $28,000.

That's great for career starters. But what if you completed your bachelor's years ago and started growing your career and income? You still stand to benefit from earning an MBA.

According to a 2022 survey of full-time MBA graduates produced by the Graduate Management Admission Council (GMAC), the median salary increase for recent MBA graduates worldwide was 29%. Graduates of North American programs experienced a 50% hike in compensation after earning the degree.^{Note Reference [2]}

Pro: MBA grads are in demand.

Of course, to get paid, you need to get hired. Fortunately for prospective MBA students, GMAC's survey found that 86% of business school graduates were employed upon graduation in 2022.^{Note Reference [2]}

GMAC also surveyed corporate recruiters and staffing firms about their demand for business school graduates. Worldwide, 63% of respondents anticipate that the hiring demand for business school graduates will increase in the next five years.^[3]

In the U.S., 46% of recruiters expect the demand to rise, 51% believe it will remain stable, and just 3% think it will shrink.^{Note Reference [3]}

Pro: MBA programs may help you develop the skills and network to fast-track your success.

Attending business school offers the opportunity to connect with hundreds of fellow students and take advantage of robust alumni networks. Harvard Business School, for example, has 89,000 alumni across 173 countries.^[4]

The combination of income, demand, and network can be powerful in more ways than one. In another GMAC survey, alumni of graduate business programs reported the following outcomes:^[5]

• 87% said their degree increased their employability.
• 77% said their degree increased their earning power.
• 72% said it paid enough to support their desired lifestyle.
• 66% said it provided them with greater job security.

The number one benefit from receiving my MBA was gaining effective leadership skills to compete worldwide, said Paula Fontana, MBA, interim president of the National Black MBA Association. Without my MBA, it would have taken many more years of experience to accomplish what the MBA provided in two.

Con: Not every business career requires an MBA.

While MBAs have their benefits, an advanced degree isn't always necessary to pursue a career in business. Consider:

• Just 23% of business owners have a graduate degree, such as an MBA.
• About half of North American CEOs in large companies (54%) have an MBA.^[6]

Also, while many top consulting firms hire MBA grads, there are other ways to become a consultant. For example, you can become certified in project management, human resources, supply chain management, or another field.

Con: Earning an MBA has its costs — and not just tuition.

Tuition and related costs vary widely by program. Harvard's Business School will run you almost $113,000 per year — a whopping $226,000 in total.^[7] Meanwhile, the average part-time online program costs about $15,000 per year and may take 3-4 years to complete.

Keep in mind, if you're taking time off from work to complete your program, there's an opportunity cost too. For up to two years, you're not learning on the job, climbing the organizational ladder, or making money.

Con: MBA costs can turn into student loan debt.

According to the National Center for Education Statistics, about 44% of MBA students took out student loans for their degrees in the 2015-2016 school year.^[8]

The average student loan debt for an MBA was $50,100.8 For reference, in today's dollars, that's about $64,000.^[9]

All this is to say that you should calculate your costs and likely debt — and think realistically about your return on investment —before committing to a program.

The ROI of an MBA: Deeper Dive

The idea of ROI is that you know you'll assume some costs — maybe even great costs. But those costs should pay for themselves down the road. So, when does having an MBA pay off? We crunched the numbers and found different results for different situations.

Early Career

Recall the NACE study that found that people who recently completed an MBA program earned about 50% more than people fresh out of a bachelor's program in business administration (BBA).^{Note Reference [1]}

If you've just graduated from a BBA program and you continue school for another two years to earn your MBA, it would take you six years to recoup your initial investment — including program cost and lost salary.

What about opportunity cost? Now, let's say that whether you earned your MBA or not, your salary grew at a rate of 2% annually since you graduated. It would still take about five years and nine months to break even on your investment. Check it out in the chart below.

Mid-Career or Later

If you completed your bachelor's degree years ago, you may be making more money now than when you just graduated.

In May 2023, Payscale reported that the average salary for people with a BBA was $72,000. Payscale sources salary data from people at all stages of their careers, most of whom are in or past the middle of their careers.^[10]

Payscale also reported that the average salary for MBA degree-holders was $95,000.^[11] That's 32% more than all BBA degree-holders earned. While not as hefty as the pay bump for career starters, it's still significant.

What's all this mean? Earning an MBA now can still pay off, but it might take a little longer.

If you stopped earning an income to attend an MBA program full time for two years, it would take about eight years on average to see a return on your investment. (For consistency, we'll still assume 2% wage inflation each year.)

If you kept working while earning an MBA part time, it would take longer to earn your degree. But once you graduate, you would drastically cut your time to see an ROI — to around three years.

ROI of Top Online Programs

The ROI of an MBA partly depends on where you complete your degree. Different schools have different costs and different salary outcomes for graduates.

Georgetown University's Center for Education and the Workforce estimated an ROI value for master's programs in business administration, management, and operations, relying on data such as students' monthly earnings and average debt payments.^[12]

Here's how our top online MBA programs stack up based on Georgetown's report:

Top-Ranked Business Schools Have Highest ROI

According to Georgetown's data, schools with the highest ROI are Ivy League institutions and other prestigious, highly selective business schools.

These schools charge higher-than-average tuition. They also provide far higher than average returns.

Takeaway: Deciding on a Program Matters

Earning an MBA can positively impact your paycheck and many other aspects of your career, but choosing the right program matters.

Search for programs with active alumni networks that can demonstrate evidence of high value for graduates in terms of employment rates and starting salaries.

You can also find scholarships for MBA programs. Fontana received a scholarship from the University of Georgia for her MBA. So, she said, the ROI was immediate.

Finally, you may also lower your opportunity cost by earning your MBA part time or through an accelerated program, such as a mini MBA. After all, flexible, faster, and more affordable options are the future of the MBA.