Skittish about giving up $100,000 and two years of your life for an MBA degree? Should you choose a cheaper, public university or a pricier, more prestigious private university? How long will it take to recoup your lost income and tuition? Well, it all depends. BusinessWeek Online's exclusive Return on Investment Calculator can help you estimate what sort of payoff to expect from that sheepskin.
Start at www.businessweek.com and click on "B-Schools." Under the header "Getting In," click on the "ROI Calculator." First, choose the B-school or schools you would like to attend. Plug in your salary, gender, home state, years of work experience, current employer's size (number of employees), and undergraduate major and career plan (consulting, investment banking, or other).
To help you decide on an MBA program, the ROI tool will churn out personalized statistics: the amount of money you'll have to invest (including lost income); your estimated salary increase; and how many years it will take to recoup the investment through salary increases. Finally, the calculator racks up 10 years' worth of estimated salary increases and, from that vantage point, figures an annualized rate of return on the money you spent.
Much of the calculation depends on where you are now and where you plan to go. For example, more work experience correlates with a larger salary. Consulting and investment banking are more lucrative career paths than, say, working for a nonprofit. Whatever your stats, the ROI calculator can estimate how degrees from various schools might pay off in the long run.
Say, a New Jersey woman with five years of work experience for a big corporation earns $65,000 a year and wants to do consulting (table). Between the University of Pennsylvania's Wharton School and local Rutgers University, her better option is the top-ranked Wharton MBA. She'll invest almost $50,000 more at Wharton than at Rutgers, but the estimated salary increase a Wharton degree provides more than makes up for it. She recoups her initial outlay 4 1/2 years sooner and earns a higher salary to boot. The Rutgers MBA won't let her break even for 11 years.
Depending on your situation, attending a public university can save you more than any salary increases you would get from attending a prestigious private school. Consider a New Jersey man with three years at a small company, earning $40,000, and also shooting for a career in consulting. For him, the Rutgers option might be better. He would get a higher salary from Wharton, but his investment is a third less at Rutgers. Net result: a 31.9% ROI from Rutgers, vs. 26.7% from Wharton.
To be sure, the ROI calculator makes estimates based on data the B-schools provide, and every MBA student's experience differs. The calculator doesn't measure such intangibles as the value of learning for learning's sake or creating a network for future job opportunities. Although a Top10 B-school might not pay off with your first post-MBA job, the network you create could open doors later on.
Still, the calculator offers insight into whether that MBA is worth it. For instance, if your pre-MBA salary is $80,000 and you want to work in consulting, only two B-schools--Harvard Business School and Stanford University--would give you a positive ROI over 10 years. In that case, you may be better off investing your money somewhere else. Then again, considering the stock market these days, maybe you do want to invest in yourself.
By Brian Hindo
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
