Business School Costs on the Rise

Posted by: Louis Lavelle on October 17, 2008

It will come as a surprise to absolutely no one that the cost of business school is high and getting higher by the minute. But we’ve recently turned a corner on costs that I think bears noting.

It is this: there are places in this world where getting an MBA—and by that I mean nothing more than tuition and required fees—is now a six-figure proposition. At Harvard Business School ($101,660) and Wharton ($100,860) each of those three little letters will set you back more than $33,333.33. A third school, Duke ($99,906), is teetering on the brink of six figures, and perhaps four more will join that exclusive club within a year.

Add in the cost of living and forgone salary, and there are now five schools where the total cost of an MBA is in excess of $300,000—Wharton ($320,000), Harvard ($308,300), Chicago ($305,965), Stanford ($302,664), and Columbia ($301,178). London Business School is about $600 away from breaking the $300K barrier, and at least three other schools will probably do within a year.

Of course you can still get a perfectly servicable MBA for about half that...it just won't have that Top 10 pizzaz.

As expensive as the top programs are, I still believe they're a bargain, especially when you look at lifetime earnings. Which is probably why schools like Stanford (8% selectivity) have more applicants than they know what to do with.

Still, I sometimes wonder about the impact of the high-cost of b-school. If the doors are closed to all but the very rich (generous financial aid packages notwithstanding) will it create a generation of business elite completely disconnected from the concerns of the merely middle-class? Will the nation's most promising entrepreneurs avoid b-school, and the staggering debts they won't be able to repay for years? Will young men and women who want to use their newly minted management skills to help eliminate poverty and hunger and other world problems, and aren't expecting any big stock option grants for their troubles, do the same?

I don't know. But now that we've entered the era of the $100,000 degree, I think a discussion of the high cost of b-school, and what it means for students, business, and the broader economy is in order. Any takers?

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Reader Comments

Rajiv

October 22, 2008 02:38 AM

stagerring numbers. I for one would atleast think twice before making such a crucial decission. Agreed that a HBS, Stanford or Wharton is definately worth it, but the mind cant help but boggle at these obscene figures.

suhanya ramakrishnan

October 22, 2008 02:56 AM

Absolutely! With such costs the truly aspiring and motivated ones, driven towards non-lucrative causes will never be able to take risks that will drench them in neck deep debts. This can only mean one thing: B schools will be the exclusive right to the rich and greedy; needless to say the motivation will have to have a financial reason tied to it. The system has already been skewed this way, this has just gotten one step worse. The supposedly stringent filtration and entry criteria to top B schools; regulated by exceptionally strong essays (albeit made up) does do a good job of filtering out the true and capable aspirants.

Why does an MBA application have to be planned 1-2 years in advance? Why soo many essays? Why not have one essay and more rounds of interviews to bring out the true personality of the applicant? Why not have stronger source of support to fund the MBAs?

Rajiv

October 22, 2008 03:55 AM

I would also like to add a new perspective from an international student's point of view. Given the fact that Citibank has started to drastically scale down their Citi assist loan program to international students, it would become nearly impossible for bright and promising students from countries like India to graduate from the likes of Stanford and Harvard. I just hope the financial system in America finds its feed and helps nurture the dreams of the millions of Americans and pro-americans across the world.

- Rajiv

Zak

October 22, 2008 04:19 AM

The problem isn't so much with the top-end degree pricing it's the mid and lower tier prices also creeping up ... because for those students there is much less guarantee of a higher level of earnings post-degree. It may not have the same catapult effect. But many of the lower ranked schools still give the impression that their degrees will finacially change your life. For the lower ranked degrees there always has to be a motive for getting the MBA beyond monetary gain, which is by no means guaranteed.

cody

October 22, 2008 06:08 AM

Didn't all these gold-plated MBAs create the financial mess the world is in right now? Too much "spreadsheet thinking" is not necessarily good for the health!

Throw in the politicos with and without any Masters' degrees, and you will complete the circle ...

Rajesh

October 22, 2008 06:22 AM

I had often felt "is it worth the price?" whenever I used to think of a B-school. Though there is a possibility of getting an aid, since it is only needs based , most of the money has to be out of our pocket unless otherwise we can prove we dont have any little money. I feel the return on Investment is just like a Housing Investment with very low liquidity. Also thinking of those ppl, who dropped out of colleges and started world's best companies , I don't know if this MBA is in anyway a big boon for someone who wants to create a difference in the society. If this world needs better leaders , it should have a equal playing field for everyone. Otherwise all universities will only be graduate making machines glutting the market with irrelevance. I think the govt of evry country should have better policies like subsidies or creating world class institutions etc. which form the backbone of the future.

Rajesh

nik

October 22, 2008 06:57 AM

I guess the old adage makes sense here.. "its not what you have, its what you do with it that counts".

HC

October 22, 2008 07:03 AM

Louis Lavalle is absolutely right in surmising that the top six B-schools will become the elitist schools, out of reach of the average MBA seeker. This may even set a trend for other B-schools to follow, which will defeat the purpose of education. The job market is getting bad as it is on account of the financial turmoil, and mat not see normalcy in hiting for a couple of years. What is the future of an MBA then?

Michael

October 22, 2008 07:42 AM

No way at these prices. Even before the price of US MBA was questionably high but now with canceled loan programs (CitiAssist) in some schools it is even impossible.

According to me there is a more concerning problem that is not touched in the article. High costs and canceled loan programs (CitiAssis) drive back many international students. So less international students will want to study under these conditions in a US schools. Thus the diversity and the (fragile) international outlook of many US b-schools will be impacted negatively.

Kevin Kreindel

October 22, 2008 08:33 AM

These numbers are staggering...in this economy, what percentage of people can afford to go to these top schools for the MBA...although they probably remain full with the student base, enrollments and interest at these levels has to be in a decline.

kyjohnso

October 22, 2008 09:15 AM

If some of the top schools would consider adapting their programs to part time students many companies would pay the way for their employees. I am planning on attending Daniels (Denver) MBA program that is top ranked among part time MBA programs with an expected total cost of $85k and my company is paying the whole way.

Rabi

October 22, 2008 09:18 AM

Its easy to have a knee-jerk reaction when we see six-figure college fees, especially in this economy. But we need to think this through.

Applicants to these B-schools typically work for 5-7 years - so they have an opportunity to save at least half the 100K over those years. So they need only to take a loan for the other half...and learn to live like grad students during the program. That is provided they did not get out of undergraduate degrees with a huge loan! So better planning is key - and a healthy trait for future business or organizational leaders.

Going to these B-schools does not make one "greedy" - we have greedy politicians, lawyers, physicians, and yes - even plumbers! Its a human trait - not something you do course work on at B-school!

Also remember that we have a presidential candidate who went to Harvard Law (not every cheap) and yet worked in community service after graduating.

And don't blame all Wall Street ills on MBAs - many were lawyers and accountants and politicians - everyone down to the greedy citizen is to blame....most important, many of us are "financially and economically" illiterate - and those who have the knowledge exploit those who do not - old human trait once again. So get educated!

So lets get real: Expensive - you betcha! Greed - you come with it! Self-serving - remember that a rising focus at leading B-schools is social entrepreneurship!

Esiquio Rodriguez

October 22, 2008 10:47 AM

This only means that the expensive schools will accept more people that wants to make the school their 1st. or 2nd. mortgage. The quality of the candidates accepted will decrease and the quantity of greedy ones will increase. They'll fill the spots and doesn't matter the quality as long as they don't have to cut down on the way they work so they can give the real experience of an "Elite" B-School.

Erica U

October 22, 2008 11:10 AM

This is why I'm glad I did part-time (UCLA Anderson). It will cost me about $90k in tuition, but I don't have to factor in forgone income. It's a three year program, but the amount of my projected post-MBA salary increase for one year (the third extra year) is not nearly as much as my forgone income for two years. Plus I'll have two more years of relevant work experience.

Mogul

October 22, 2008 11:11 AM

I am so delighted to see that some of you are not fooled by these elitist institutions being the best there is in business. When Lehman fell all those Ivy leauers were jobless and that should let you all know that when the hammer drops a Harvard education will not save you when its every man for himself. I also wonder where is this mythical leadership these schools all promise you. The last I checked all these banks and countries were heavily invested into the same markets and stocks so when the markets went kaput everyone fell like dominoes, that sure does'nt sound like leadership and innovation to me. These schools are counting on us to believe the lies and justifying those exceedingly outrageous admissions requirements for admissions but if you really take a sincere look at these standards is the fact thats its about exclusion not admission. For goodness sake they are schools and not houses of worship. Dont get me wrong a student should do their best but these schools are promising you a great life and that is plainly not truthful. There are tons of schools to get a fantastic MBA degree from but people love to buy into the idea that my school is better because of the rankings further fueling the elitist nonsense and its so funny that you always see the same schools at the top. Paying that amount of money in the age of uncertainty is not smart and like Chuck D said "Dont believe the Hype".

Arturo Valencia

October 22, 2008 01:04 PM

I hardly saved $6k after 5 years of work in Lima (Peru) and despite the financial aid I could get to pay an international MBA it now seems to be unreachable because the low salaries for analysts here in this country.
I don't like virtual MBA programs but maybe look for a program with at least a couple of internatinal acreditations. AMBA and EQUIS.
Select other countries like Canada, Singapur, Switzerland, Italy and forget USA and UK

Thomas Lang

October 22, 2008 01:07 PM

Take a look at some of the richest guys in the country and world. Warren Buffet being the richest guy in the world right now. He did not even goto any of these schools and still suceeded. I am not saying you don't need college, but I do think that it's a combination of expierience, guts, willingness, attitude,and so forth. Bill Gates if I remember right dropped out and still went on to be successful and wealthy. I think in the last 30 years, college is overrated and too expensive and needs reforms, and overhaul and if I had to pay that kind of money to goto school, I better have a good paying job guaranteed and waiting for me to have that debt paid off and in writing. I think change is on its way anyway, and as things get worse in the US, your going to see some of these schools having to change their attitudes about things.

CB

October 22, 2008 01:25 PM

I completely agree with Erica U, part time is the way to go. I am a part time MBA at Santa Clara University (Leavey) and will graduate in eight months completely debt free. My opportunity cost was being in school for a bit longer and having a very tight schedule balancing full time work and almost full time school. Compared to loans and forgoing a salary for two years, I think it will be worth it. Through the program I have continued to gain relevant work experience and have been able to apply what is taught in school in my daily work life.

Siddharth Dixit

October 22, 2008 01:33 PM

ESSAYS :
----------------
Someone asked the question why so may essays !

I have been part interviews on both sides of the table for a prominent buisness school and can say one thing...essays are there so that you & buisness shcool both know crystal clear what you want to do with your MBA . more so from candidates perspective , from the very firt week he enters the recruitment dance starts ..its Company presentations, networking, resume worshops, "Investment banking 101, Consulting 101 class series ( aprar from your regular work load of 5 courses ) ..ect ect..if one knows for sure what he or she wants to do with his/her mba ...it wont be a difficulty in choosing the right path..its easy to get lost trying to sample all flavors of industry ..jumping between I-banking, consulting, marketing, product management , brand management , operations , Enterprenureship, venture capital, private equity etc etc..

Shoreline

October 22, 2008 01:58 PM

I am one of these people that is attending business school with the goal to pursue social entrepreneurship. The idea of spending $150K+ to attend a top MBA program is quite a real concern for me. Probably only second to the even bigger worry that I will be surrounded by greedy drones with the one and only mission to make more and more money at any cost to themselves or those around them. But what can you expect of the students when the school themselves follow the same mentality? HBS has a $20+ BN endowment where they could simply pay for the majority of each student's tuition from the interest / return they realize on it each year. More and more business schools are becoming breeding grounds for only management consultants and investment bankers (just check the stats of any of them). There are more ways to be successful and content with life than pursuing these two avenues. But the schools and students as well continue pushing more and more in this direction for one purpose only: GREED.

Jose V Silva

October 22, 2008 03:20 PM

I think an MBA is still a smart choice... Averagae salaries for these scholls are over 100k. If you compare it to buying your first home (assuming an over 200K mortgage debt) your better off going to Wharton!

Just to clarify, Warren Buffet attended Wharton Business School for a couple of years!

Lenny

October 22, 2008 05:11 PM

My traditional MBA cost $12k from Webster University, MO. Upon graduation I was promoted with a pay raise of $10k a year. With 13 years left until retirement, the additional $130k in salary makes my mid-range school MBA a deal. For those of you in your late 30s early 40s, stay away from the elite schools, the deals are in mid-level schools. P.S. My employer paid full tuition, I bought the books- what a deal!

Rajath

October 23, 2008 08:30 AM

May be a year back it could be taken for granted that after a top branded MBA from HBS/Stanford would land you in a job that pays 100-150k USD. But hasnt the situation changed? I think it has.

With this in view i think one should take to these schools in long term view, and see how these brands can add value in long term.

MBA Podcaster

October 23, 2008 08:34 PM

When you look at the estimated ROI on your MBA you will likely find the MBA degree will pay off in spades, even under current sitautions. The challenge is to find smart ways to finance the degree. We have produced a (free) podcast on this exact topic with guests from Sallie Mae, Wharton, GMAC and H&R Block (re: tax benefits)

You can listen here: http://www.mbapodcaster.com/MBA_MoreInfo/Financing-MBA.asp?iEpisode=7

Louis

October 24, 2008 08:54 AM

What a great response! Thanks, everyone, for weighing in.

On the subject of MBAs being implicated in the Wall Street mess, I actually looked at that--bottom line, the CEOs of these companies are a mixed bag (some MBAs, some not MBAs). See my post on the subject: http://www.businessweek.com/bschools/blogs/mba_admissions/archives/2008/09/nightmare_on_wa.html

I think the two most important points made by readers is that there are, in fact, good deals out there (you don't have to go to a top school) and that even the expensive top schools repay the investment in spades over the course of a career.

The thing that interests me, though, is the impact on society when an education--even one with a great ROI--is off limits to all but the very rich, or those willing to take on a huge amount of debt. Does it change who pursues an MBA? What they do with the degree once they graduate? What gets taught in the classroom? Have these changes begun already?

Any thoughts on that?

Louis Lavelle, Associate Editor, BusinessWeek

Louis

October 24, 2008 09:03 AM

What a great response! Thanks, everyone, for weighing in.

On the subject of MBAs being implicated in the Wall Street mess, I actually looked at that--bottom line, the CEOs of these companies are a mixed bag (some MBAs, some not MBAs). See my post on the subject: http://www.businessweek.com/bschools/blogs/mba_admissions/archives/2008/09/nightmare_on_wa.html

I think the two most important points made by readers is that there are, in fact, good deals out there (you don't have to go to a top school) and that even the expensive top schools repay the investment in spades over the course of a career.

The thing that interests me, though, is the impact on society when an education--even one with a great ROI--is off limits to all but the very rich, or those willing to take on a huge amount of debt. Does it change who pursues an MBA? What they do with the degree once they graduate? What gets taught in the classroom? Have these changes begun already?

Any thoughts on that?

Louis Lavelle, Associate Editor, BusinessWeek

chris

October 24, 2008 11:30 AM

surprised that no one has mentioned impact of the implication of rising costs if you have a spouse going to school as well.

one person's perspective: my wife and I chose grad schools (Duke and UNC respetively) to balance debt and education. She went first to Duke, giving me two years to get in-state residency and then obtain a first-rate MBA for a terrific price at UNC. Lots of ways to think about it - but this strategy worked well for us.

Omar B

October 24, 2008 06:24 PM

At IE business school (Madrid)is more than 40 000euros (academic year) plus an average of 1600 euros per month (living expenses)

At least they give you all the material (notes, copies, etc).

OB

Ashley MacDuff

October 24, 2008 07:58 PM

Lots of schools have high rankings, but low tuitions. Look north of the border, or across the Atlantic. Check out BW top 10 non US schools - you'd be surprised at how much lower some of the tuitions are.

Paulo Nishimura

October 25, 2008 05:28 AM

I think it is ok. My boss has plenty anyways.
I work hard. I do my part, we, the company achieve very high standards with my contribution... I am part of the band here that does not play loud but certainly makes nice tunes. But, wouldn't it be great to earn a grant and a scholarship? I would much rather like it - sometimes I think to myself.

Ruben

October 25, 2008 02:23 PM

to Thomas Lang: You are wrong my friend! Warren Buffet did go to Columbia Business School where he got a Master's Degree in Finance. Not an MBA you might argue- Sure. At the time Columbia didn't offer MBA degrees otherwise guess what degree Mr Buffett wight have gone for to break into Wall Street. Oh by the way- He also did his first year of college at Wharton!

C Janssen

October 25, 2008 10:29 PM

I'm already living the dream - I mean nightmare. Despite the fact that I got my MBA 8 years ago, I have since gone on to get my PhD. Both of my graduate degrees are from universities in New York City. If you knew how much money I owe the government to pay for my education, your jaw would drop to the floor. I struggle with the fact that my return hasn't even come CLOSE to my investment. Tuition is out of control. While I'm glad I chose to go to grad school for personal reasons, economically - it doesn't make sense at all.

Ras.

October 28, 2008 11:01 PM

As the text says:
will it create a generation of business elite completely disconnected from the concerns of the merely middle-class? Will the nation's most promising entrepreneurs avoid b-school, and the staggering debts they won't be able to repay for years? Will young men and women who want to use their newly minted management skills to help eliminate poverty and hunger and other world problems, and aren't expecting any big stock option grants for their troubles, do the same?
I don't know.

I can confirm it will, because I am one of them. I did indeed apply for all the schools, and was finally after 2 years of applying, admitted to the University of Michigan, and another school in Boston. In the same time, however, I was offered a job that opened tremendous possibilities, with a good salary (expat conditions as I was to work in Asia). I took the job instead, and am now regional manager for this company which is the biggest in its field.
I regret that Harvard, and similar schools did not take me in, but all they were concerned about was my GMAT score of only 500. I honestly believe that I would have been able to challenge the faculty to such an extend that they wouldn't know what to answer, because I have been working in sales management for 11 years. perhaps I was too old (37) to be admitted, since, we also have to admit, that Harvard is for young (rich) kids!

CC

January 30, 2009 01:18 AM

Now that the ROI is expected to be much lower due to the financial industry meltdown, isn't it time for the B schools to consider a reduction in tuition?

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