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Calculate the Value of Your MBA: Is the Wharton MBA Really Worth $ 3.2 Million? %

Is Your MBA Worth Millions? Or is it possible to get a negative return on your investment?

What is the value of your MBA?

It’s a problem that many have tried to understand. One of the scholars’ recent exercises in calculating numbers provides amazing conclusions. Most master’s programs in computer science, engineering, and nursing boast a ROI of over $ 500,000. However, the median degree of graduate school in several other disciplines, including the MBA, which is the most popular graduate degree in the United States, has a negative return on investment.

Research is called it Is graduate school worth it? Comprehensive return on investment analysis. It surveys the net economic value of approximately 14,000 graduate qualifications at 1,441 universities across the United States and is one of the most comprehensive published to date. Preston Cooper, Research Fellow of The Foundation for Research on Equal Opportunity, the lead author, defines graduate ROI as an increase in lifetime earnings that students can expect from their degree, minus the direct and indirect costs of attending graduate school. doing. ..

Value your MBA degree

Cooper’s analysis found that the median master’s degree increased lifelong income by a surprisingly small amount ($ 83,000) after deducting graduate costs. However, there are significant differences between programs, especially schools. The authors claim that a master’s degree in engineering, computer science, and nursing provides a substantial guarantee of financial benefits to graduates. The most advantageous graduate degrees are professional programs in law, medicine, and business. Almost half of medical degrees have a ROI of over $ 1 million, as well as at least 20 MBA programs. Not surprisingly, arts and humanities programs are rarely rewarded. Overall, in reality, 40% of master’s degrees cannot generate positive returns.

Cooper claims that a median master’s degree in computer science or engineering will increase lifetime net income by more than $ 900,000. On the other side of the spectrum, the median return for a master’s degree in arts or humanities is minus $ 400,000.

The author conducted an analysis using U.S. Census data from The College Scorecard, a U.S. Department of Education dataset that reports median income for 11,600 master’s, 1,600 PhD, and 700 professional graduates. .. However, we acknowledge that the data source has significant limitations. It may not represent lifetime earnings as it reports only the median earnings for the first two years after graduation. Therefore, the author used the American Community Survey (ACS) to estimate graduates’ overall career earnings.

Business school brands make a difference

“Profits right after graduation can be misleading,” Cooper admits. “For example, both Master of Business Administration (MBA) and medical program graduates have a median revenue of nearly $ 67,000 for the first two years after earning a degree, but by the age of 45. People with a medical degree have seen a median income swell to $ 137,000, but MBA graduates earn only $ 88,000. “

He also found a wide range of variations from school to school. “The revenues of law program graduates average over $ 155,000 for the 225 law degrees in the dataset,” Cooper points out. “But the median revenue for these legal programs as a whole is only $ 118,000. The profitable income often associated with law degrees is concentrated in a small number of elite programs. This phenomenon is the value of these degrees. It can distort public perceptions about the law. Therefore, it is important to recognize that not all programs in the same area can guarantee good profits. “

The MBA is a prime example, and the data show why rankings are valuable to applicants. Upon graduation, a typical Wharton MBA will reach a median of $ 179,574. At the age of 45, the author estimates that Wharton MBA’s annual income will rise to $ 287,141. The median lifetime return on investment for the Wharton MBA? A large amount of $ 3,225,932 after deducting the cost of obtaining a degree (see table on the next page).

Kellogg, Booth, MIT, Colombia MBA ROI exceeds $ 2.5 million

With almost all Top 25 MBA programs, ROI is easy. At Northwestern University’s Kellogg School of Management, the ROI is $ 2,995,559. At the Chicago booth, it’s $ 2,547,297. At Columbia Business School, the median ROI is $ 2,583,931 and at MIT Sloan is $ 2,648,994.

Meanwhile, the University of Texas at Dallas MBA has a negative return of $ 62,863, according to a survey. At Northeastern University’s Damore Mackim Business School, the negative ROI is much higher at $ 472,726.

There are many surprises in the data.Among those that need to be a major danger signal, the authors claim that the Harvard Business School MBA has a ROI of less than 1 million at $ 971,932 (a previous analysis of Payscale’s lifetime MBA payments). Poets & Quants The median lifetime income for an HBS MBA was $ 8.5 million, but the study did not deduct the cost of a degree or reduce the lifetime income that would have been earned without an MBA. MBA Cooper of Stanford University claims that the value of the business is $ 2,120,946, much less than Payscale’s estimate of $ 8,330,000. In fact, in this new study, the Stanford University MBA earns lower than the Duke Fukua ($ 2,432,517), Cornell Johnson ($ 2,559,222), or the University of California, Berkeley Haas School of Business ($ 2,558,360) MBA. Claims.

MBA going against the negative ROI trend

However, the MBAs of these business schools are clearly at the top of the spectrum. “Perhaps surprisingly, one of the degrees that often doesn’t reward graduates is the MBA,” the author continues. “More than 60% of MBAs and other business-related master’s degrees do not show positive returns. However, few programs go against this trend. A 10% ROI for a business degree is $ 1 million. It is over.

“The MBA has a long upper tail of elite programs with favorable rewards. 13 MBA programs at prestigious schools such as Yale, Penn (Wharton) and Chicago (Booth) have a lifetime return of over $ 2 million. Perhaps this is to be expected from the extent to which the available networking opportunities are worthwhile. The choice of institution makes a big difference in the ROI of an MBA. Generally related to MBA. Stunning returns are only available at a handful of top schools.

“It seems that there are benefits associated with elite institutions. 8% of master’s degrees offer over $ 1 million in total returns, but their share has risen to 41% among ivy league-equivalent universities. Research universities have slightly better programs than non-research schools. 10% of research university master’s degrees have an ROI of over $ 1 million, compared to 5% of other institutions. I am. “

Analysis shows that many MBA programs other than the Top 25 still offer positive returns, but not as much as MBAs that tend to dominate the rankings each year. Still, lifetime returns in many well-known MBA programs that are not ranked in the Top 25 can be solid. At Fordham University’s Gaberi Business School, the ROI is $ 757,884. At the University of California, Davis School of Business, the median lifetime ROI is $ 994,682. At Temple University’s Fox Business School in Philadelphia, the ROI is $ 833,445. At Georgetown University’s McDonough School, the ROI is $ 871,100, and at the Ratgers Business School in New Jersey, it’s $ 790,017.

13 MBA programs offer lifetime returns of over $ 2 million

The author came up with an estimate of lifetime income using what is called a “counterfactual income profile” that adjusts income based on demographics, the local labor market, student abilities, and undergraduate majors. The “counterfactual” model allowed scholars to truly separate the portion of revenue that results from a graduate degree. This is especially significant for an MBA degree. This is because a high percentage of MBA students study business during their undergraduate years and earn more than many other college graduates.

Cooper states, for example, that a popular route to an MBA is a bachelor’s degree in business. “This route provides a lifetime return of $ 413,000, but given that the MBA itself usually has a negative return, the bachelor’s degree appears to be doing most of the hard work.” He is writing. “Not all lifelong learning channels are economically valuable. Students who combine a bachelor’s and master’s degree in English literature are usually lagging behind.”

Cooper adds that it is counterfactual and explains why some high-profitability does not necessarily result in high ROI. “If the counterfactual conditions are also high, high returns are not worth much,” he continues. “The MBA is a prime example of this phenomenon. The most popular master’s degree in the country boasts a median of $ 88,000 by the time graduates turn 45, which is counterproductive to MBA graduates of the same age. It’s impressive until you think that your revenue is $ 83,000. It’s well above the median of all master’s degrees. MBA programs are often withdrawn from high-income undergraduate majors such as business and accounting. This boosts the counter-factual income of MBA graduates. As a result, the MBA program needs to “work hard” to provide students with income that exceeds the opportunity costs. As we will see, many MBA programs cannot do this. “

Top 25 by ROI? Not a single MBA.It’s law or dentistry

But don’t be fooled by his conclusion that most MBAs have negative returns. “The MBA has a long upper tail for an elite program that pays off in favor,” says Cooper. “13 MBA programs at prestigious schools such as Yale, Penn (Wharton) and Chicago (Booth) offer a lifetime return of over $ 2 million. Perhaps this is worth the available networking opportunities. The degree of gain is expected. The choice of institution makes a big difference in the ROI of an MBA. In general, the excellent returns associated with an MBA are only available in a handful of top schools. “

Cooper found benefits associated with the elite agency throughout the sample. “8% of the master’s degree provides an overall return of over $ 1 million, but its share rises to 41% among universities comparable to the Ivy League,” he added. “Research universities have slightly better programs than non-research schools. 10% of research university master’s degrees have ROIs in excess of $ 1 million, compared to 5% of other institutions. . “

By the way, this survey found that all of the top 25 advanced degrees by ROI are law or dentistry. The most profitable and advanced bachelor’s degree in the country, and the highest overall degree, is the University of Colorado Denver’s Advanced Denver Professional Program, which offers an ROI of approximately $ 11 million. The highest ROI law degree is from Columbia University, with an estimated $ 6.4 million in return.

(See the next page for the Million Dollar MBA Program
).