As an MBA, I have quite a lot to say about MBA program costs. You can enroll in a cheaper local state college MBA or go for an expensive national reputable MBA program.
The MBA programs are expensive due to high demand, resulting from the multiple potential opportunities a reputable MBA program can offer to its graduates. That is why higher-ranking MBA programs or MBA programs offered by private universities often can be expensive.
Other factors leading to the high cost of an MBA are prestige, credibility, and readily available credit in the form of student loans, enabling students to pay high fees even if they do not have the cash on hand.
Here is the list of factors that you should consider when evaluating whether an MBA program is too expensive or its cost is justified.
The actual cost of an MBA
MBA cost includes tuition, room, board, and other tangible fees and opportunity costs like any program. That means lost wages or opportunities that become close to you when you spend 2-4 years in an MBA program.
Include that in the total MBA expenses. Plus, you will become overqualified for many positions by just having MBA.
All above, at least double the actual cost of an MBA program, makes it one of the most expensive programs in the education system.
Is it worth spending money on MBA?
I wrote few articles about whether MBA is worth it on this blog. Check them out. Without going into too much detail, I will tell you that worth vs. not worth spending on MBA depends on your situation, career portfolio, and goals.
1. Law of Supply and Demand Drives MBA Price.
Speaking in economic terms, the primary driver of the cost of an MBA program(s) is demand. MBA degree is still in demand, and universities are in the educational business. They charge as much money as they can for it.
The high cost of an MBA is fueled by the aura of the prestige of an MBA program. Also, by its somewhat incorrect reputation of automatically propelling people into riches and boosting career to extraordinary highs. As you will see below, that is not incorrect, but quote not to the extent many MBA candidates expect.
This reputation of even the expensive MBA program, combined with excellent marketing, still creates demand for an MBA degree despite shrinking enrollment.
2. Availability of student loans drives MBA expense.
Fueled by readily available student loans and dreams of being a manager or CEO, MBA still attracts many students. That easy credit (debt) creates demand enabling business colleges essentially to sell MBA degrees as a service.
Whether as a valuable tool for career advancement or educational or even entertainment purposes (on rare occasions), people want to obtain MBA.
Student loans make it easy for MBA and other programs to charge higher fees because students do not have to pay out of pocket. Easy credit, coupled with aspirations and hope to succeed financially by having an MBA degree, gives students the false impression that incurring student debt is not a big deal.
But not everything is so wrong with an MBA. An MBA degree can still be a valuable career advancement tool if you get it for the right reasons. Read on.
3. Running an MBA program is expensive.
The cost of an MBA program includes running the program itself. From hiring knowledgeable professors to having facilities, labs, staff & overhead expenses, and research by faculty, all this costs money. And sometimes big money.
Attracting and keeping talent for faculty is a severe cost. Having a library, you can use, or a computer lab also costs money. Plus, student gym and other perks at being a student again.
Running MBA or other professional program is often like running a business. MBA program should have recouped those costs, but it also makes an annual profit for the whole university.
Hence, they charge willing buyers (students) big bucks for attending it.
4. MBA provides core business knowledge.
MBA offers a condensed program covering the basics of how business works – from marketing and management to economics, finance, and operations. Basic accounting skills too.
Essentially, MBA is an aggregation of business foundational knowledge. This knowledge is basic but essential for those who want to understand the business world generally.
I went through my MBA partially for knowledge. I interned in a company dealing with the privatization of companies in emerging markets. We had analysts and finance pros there who spoke unknown to me language. So, I was eager to learn finance and economics to understand business basics. I did, and I do not regret it.
Such knowledge costs money. Professors studied and collected that knowledge for decades to effectively present to MBA students in a concise form. Plus, access to a faculty offers some real-life experience not available in textbooks.
Note that MBA does not teach shrewd business and career advancement, sales, and schmoozing skills. Those skills you must develop on your own. But you can use an MBA degree as a status and professional credential when seeking new business or sales opportunities.
In the business world, your personal qualities and experience are more important than your education. That is the hidden truth an MBA program advertising materials usually omit. Still.
5. MBA can give a career boost.
If you already have a career, then MBA is well worth the money if it can give you job or skills leverage, and within the next 5-12 years, you can recoup resources spent on MBA.
Plus, obtain a return on investment from MBA in terms of profit after that. You can do it by building a career or starting and running a business.
It is often hard to predict what will happen and whether obtaining MBA justifies expenses.
MBA was an experimental professional program designed for middle-managers who wanted to advance their careers. I think, for the most part, it still is that type of program. And professional programs do tend to cost more for historical and economic reasons (demand).
Most people, when valuing an MBA, evaluate the only tangible or visible cost vs. benefit. When you assess an MBA, you must approach it from the economist’s perspective and see if MBA can add intangible value.
That career-boosting value is included in the MBA cost. Higher ranking business schools usually can charge more because their MBA graduates obtain better career advancement opportunities.
MBA also offers certain status. People understand that you have at least some essential knowledge and analytical skills since you went through an MBA. MBA means you at least have a brain in working condition.
NOTE: Those with a technical background and knowledge and an MBA from a reputable MBA program may enjoy an excellent boost in the modern tech environment. MBA may help to get into management or even getting an opportunity to take over a project and excel completing it and acquiring a reputation of being a knowledgeable and capable tech manager.
6. MBA may offer an earnings boost.
As I explained above, for many, but not for all, MBA may offer a career boost and salary boost after graduation. MBA program may offer both new career, business, and networking opportunities after graduation.
Keep in mind that MBA may sometimes benefit long after graduation. That is what happened to me – I exploited some opportunities a long time after graduation partly because I had MBA on my resume. An MBA did boost my earnings, although later in life.
7. MBA offers a network of connections.
The MBA program is expensive because it also offers networking with other MBA students in your class. Some may become friends or business partners for life. How can you value that?
Note that higher-ranking MBA programs are more selective in whom they accept. Potential networking is also a factor in admission. For example, MBA admission officers are more eager to take someone who already has a career or succeeded in some other way.
And may potentially not only add to classroom discussion but himself or herself have better career opportunities. And may even offer career opportunities to his fellow ex-classmates.
For example, when your ex-MBA classmate sends you a job offer or a link to a job offer, and you get the job. You can value that your MBA according to how much you make throughout holding that job position plus experience and other contacts that you get.
One of my ex-MBA classmates became a recruiter. She tried to place me later by sending me to a few interviews. Still, competitor candidates from quite extensive MBA programs won. But she tried, and those couple of interviews were an opportunity. How would you value that?
The higher rank of the MBA program, the better connections you will make. Wharton, Harvard, Yale MBA programs offer top-notch business connections for the future.
But even in a small local MBA program, you may meet future business owners, managers, or just future millionaires. I know a few of my classmates who made millions of dollars in their respective different ways.
Hint – they were already intelligent people before MBA, so their success was a pretty natural progression.
8. MBA teaches team building.
Whether leading teams or operating in groups, this is one of the important skills you learn in an MBA. This is not about beer-drinking or sports-watching together—the difference is that you get together to work on a specific class-assigned business project. And individual students’ success (a good grade) in this scenario depends on the team’s success.
So, you learn how to operate and work together and help each other accomplish a common goal with better results. Not enough, but in MBA, you learn the basics of team building, team operating, and management.
And after learning how to operate in a team and build and lead a team, you may become a better leader. At least on a small scale.
I had to build teams in my work, and I attribute at least some of that success to my MBA experience. At least MBA taught me how to set aside personal pride and personal issues to work together with others without bias standing in the way.
NOTE: Remember, getting an MBA is not the goal. It must be only a tool to accomplish your other career and life goals. MBA can be another significant leverage for your existing skills, experiences, abilities, dreams, and aspirations. MBA degree does not give you automatic success or an outstanding career. It is still up to you to advance yourself.
MBA is not for everyone. An expensive MBA is worth it for a minority of candidates. For many regular folks and career-starters, MBA may be essentially a hit or miss unless it is from the top 5-10 MBA programs.
One problem with the MBA program that I see pertains to the outdated education system. We are moving exceptionally rapidly into the new tech/robot/AI 21st century world. However, our educational system is largely still stuck in the 18th-20th century.
Many MBA programs still teach those very foundational basics without indulging in new high-tech topics and skills. The MBA programs that embrace new skills and knowledge suitable for the modern world will survive. Other MBA programs which are stuck in the 20th century will not.
Are MBAs overpriced?
Some MBAs are overpriced, while others are not. For example, the top 25-10 MBA programs may be well worth the money because they offer career opportunities and an excellent business network after graduation.
Also, some other MBA programs in the top 50 can justify high fees if they are placing students in decent jobs in the local market.
Returning to the skillset I mentioned above, MBA is not overpriced if it offers new modern, specific, tangible skills applicable in the 21st-century business environment, which can land you a job, career, or business opportunity.
But sometimes, MBA programs below top 50 rankings are overpriced. Whether it is the university’s brand name/ or excellent marketing, those high fees may not be recouped by students in the short or even long term because low ranking MBA program offers few to no placement opportunities after graduation or does not provide specific applicable modern work skills.
Many MBA programs are not nationally recognized and do not carry any brand value. You can opt for a lower-cost local state college MBA in such a case.
The reason they are overpriced is money. MBA programs are expensive because they are profit driven and charge plenty of money based on sufficient demand.
Conclusion.
Universities are essentially companies. A brand name on your CV offers more credibility than the name of an unknown college. It can open plenty of opportunities over a lifetime.
The top 10-15 MBA programs are the best, especially if you want to get into high-level management in the future and make those six or seven figures plus benefits and golden parachutes.
If not, then you should consider one with the lowest cost possible.
Still, your previous work experience, knowledge, and skills matter quite a bit for recruiters and hiring managers, even if you graduate from a low-ranking MBA.
Do not forget about developing those skills. It is the value you can offer – what you can do on the job or in business – that matters, what you can do for a company, customers or clients, and society.