Are M.B.A. Degrees Worth It?
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What question does this episode introduce about the value of an MBA?
Wednesday, October 27th. I'm J.R. Whelan for The Wall Street Journal. Many people seeking a graduate school degree to jumpstart their career choose a master's in business administration. But an MBA can cost hundreds of thousands of dollars. So is it worth it?
A lot of experts say it's important to take in consideration other life circumstances around you. Do you have over $100,000 in undergrad debt still hanging over you? You might want to double check that because that's a pretty big deal.
On today's show, graduate degrees and debt. How do MBAs stack up against other grad programs? We'll talk with our business education reporter Patrick Thomas about it after the break.
After completing four years of undergraduate education, many students are on the hook for years of student loans, but some go on to borrow even more money to pursue an MBA. So does a business degree pay off? And what options for borrowing and repaying an MBA loan are available?
Why do students choose to pay $100K–$250K for an MBA?
Patrick Thomas covers business education and careers for the WSJ. He was part of a team of reporters who studied federal loan data from about 600 graduate programs, and he's here to discuss what they found. Patrick, thanks so much for being with us.
Thanks so much for having me.
So Patrick, you know, an MBA degree typically comes with a steep price tag. They can run anywhere from $100,000 to $250,000. So why do some students choose to take such a pricey path, and what do they hope to get out of it?
Well, many students pursue their MBA for the promise of a bigger payday, the ability to pivot to a new industry. It's very popular among career switchers, especially if you're in something like engineering or medicine and want to kind of pivot to the management side of that if you want to run your own firm. That's a very popular way to get into it. Or launch themselves onto an executive path. Maybe you were a consultant and want to go work in the C-suite at a Fortune 500 company. This is a way over time to kind of just build your resume to get that credential that you would be able to do that. And yeah, it's expensive and that can turn some students off in recent years. That's definitely been an issue for schools, but a lot of students keep coming for the promise of that bigger payday
Now, what do we know about how well an MBA pays off in earnings after graduation?
In the data we analyzed from the education department of nearly 600 programs, so not just the top ones you hear about it, but all of them, on a one-to-one debt-to-income ratio, 98% of those business schools typically made more money two years out of school than they had borrowed, which is kind of the metric to show when, if it's kind of paying for itself right after graduation and compared to other graduate programs, the MBA fared much better, where we know where law degrees, only 6% of programs had graduates with higher median earnings than debt. MBAs, it was 98%.
How did the WSJ team measure whether MBAs 'pay off' using federal loan data?
So it's a much bigger difference in terms of how this degree, just the volume of schools that can pay off compared to other graduate programs and even top schools, but compared to law, which is another kind of popular degree if you're a career switcher for students. A lot of students decide between the MBA or law school. This just kind of shows that the MBA wins out a little bit there.
What about the amount of debt that a typical MBA grad faces? How does that compare?
Compared with other graduate programs, I mean, it's fairly similar, but it's definitely the median is less. It's in the 60s, so it's not as high as some places. Again, not to harp too much on law school, but it is lower. In terms of the programs at places where the salaries are lower, I mean, typically some of these debt loads are lower in terms of state school. But some of the debts were really, really low at the top schools. And there's a couple reasons for that in terms of students going to Harvard only took out like $41,000 in federal loans. And There's a variety of reasons of why that is, including the data we look at only accounted for federal loans, and they only wanted to take out a small number at the best interest rate.
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Chapters
6 chapters
1
What question does this episode introduce about the value of an MBA?
0:06–1:05
2
Why do students choose to pay $100K–$250K for an MBA?
1:05–2:57
3
How did the WSJ team measure whether MBAs 'pay off' using federal loan data?
2:57–4:25
4
How do MBA earnings compare to law and other graduate programs two years after graduation?
4:25–6:53
5
What typical debt levels do MBA graduates carry and why do top schools show lower federal loan amounts?
6:53–8:01
6
What borrowing options do MBA students use, and how do Grad PLUS and private loans differ?
8:01–8:29
Speakers
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