When talking about MBA programs, a key motivator in pursuing an MBA is the increased salary an MBA graduate can command in the workplace. Money as a motivator is the most often talked about benefit. But that benefit is discussed at the surface level most of the time. In this blog post I will take a more detailed look at the financial side of the MBA.
Student Loan Debt and Costs
The cost of attending an MBA program is steep. According to several websites, the average tuition of a two-year MBA program costs $80,000. The cost of tuition is just the beginning of it though. The tuition doesn’t include things like books ($1,500), new laptop ($2,500), school supplies ($500) or my study abroad trip in Oxford ($4,500).
For the length of the program, it is impossible to work. In MBA words we call the money lost during the time you’re in the program that you could have been making as an, “opportunity cost”. Although figures vary, the 2007 census shows that the average full-time working male with a 4-year degree makes approximately $40,000 annually. Multiply this by two years, and you could have made $80,000.
During the program, particularly in Malibu, the living expenses of normal life continue. Rent, power, water, gas, Internet and food add up over the cost of the two years. This may cost $30,000 for the entire two year period. Add a $1000 for a little entertainment(networking events, mixers, DVDs, eating out, etc) and then you’re about there.
Before we get to summing these figures up, you should know that these two years were not spent living a glamorous lifestyle. There was no real “shopping” as normal people with incomes do. Books were bought used and online if possible, Top Ramen was a common dinner and I haven’t gone out drinking socially during the second year at all.
The expenses of my MBA were almost completely paid for by student loans. My parents continue to help me out with my cell phone, gas, car insurance and health insurance, but school related expenses are mostly mine. The total amount of my student loans is approximately $120,000. Add to it the amount of money that I could have been making in the workforce ($80,000), and the total cost of my MBA program is $200,000.
Starting Salaries and Signing Bonuses
Gosh, that last section was a little depressing. Sometimes thinking about the student loan debt mountain that accumulates during the program is a little overwhelming. The biggest fear many students have graduating the program is that they won’t be able to find a job that pays enough money to cover the impressive student loan payments that will be due.
The average MBA starting salary is $90,000 a year, based upon a variety of online sources. However, the recent downturn in the economy could send that number to somewhere around $80,000. The range of salaries is quite large as well, ranging from $65,000 to over $135,000. The choice of career path post-MBA is a large determinant of the starting salary. Careers in non-profit and government tend to be on the lower end of the spectrum, with careers in finance and consulting tend to be on the higher end of the spectrum. This data is a little dated (2006, pre-recession), but here are some general expected starting salaries:
• Consulting $101,736
• Energy Utility $100,263
• Finance $103,122
• Health Care $111,477
• High Tech $98,621
• Manufacturing $98,417
• Nonprofit/Government $73,125
Products/Service $94,558
Many companies also offer newly hired MBAs signing bonuses as well. The average starting signing bonus hovers around $20,000. The range for signing bonuses ranges from none at all to $30,000 or more.
Conclusion
While the starting salaries are usually much higher than what people made before business school, the major takeaway we hope to gain from the MBA is upward career mobility. We all want our MBA to help us ascend the corporate ladder so one day we will be sitting around the executive table. That’s where the big money is. But for now, many students are busy weighing their different options for when they graduate... this April 17th.
