Applying to business school takes a lot of planning with admission tests, top-pick schools, finances, and more. But there’s one big factor all aspiring MBA students should plan for as they research potential business schools: return on investment (ROI). Selecting an MBA program with a good ROI is the best way to start your business career on the right foot. If you’re considering getting your MBA, here is a breakdown of the top factors to consider in determining the ROI of the degree.
Understand the differences between the types of MBAs
First, it’s important to know about the three major types of MBA degrees: full-time, part-time, and executive. They’re all MBAs, but they’re quite different in terms of schedule and timeline of completion.
- Full-time MBA programs are like most traditional master’s degrees. You’ll attend classes on a daily or near-daily basis and spend a lot of time on campus (or possibly online) to complete your degree in two years.
- Part-time MBA programs offer classes that may take place during the day, evening, or weekend. Because you’re not spending as much time in class as with a full-time program, it tends to take longer than two years to complete a part-time MBA.
- An executive MBA program (EMBA) is an accelerated version of the part-time MBA. You can complete it in two years but typically with fewer classroom hours. EMBAs are also specifically designed for highly experienced business managers. To be eligible for admission, you’ll need at least five years of full-time experience in business administration, though many programs require more than that. Most significantly, EMBA programs expect students to continue working full-time while studying. Classes are timed to accommodate the work schedules, with evening and weekend classes and perhaps one or two “intensive” weeks of study.
Ultimately, these three types of MBAs differ significantly in structure, dynamics, and potential ROI. To decide which type of MBA program is right for you, conduct a thoughtful and thorough grad school search. It might also be helpful to talk with alumni of each kind of MBA program about their experiences and gather any advice they have to offer.
Related: What Unique Concentrations Should I Consider for My MBA Program?
Learn the key factors of your ROI
So, what do the differences between full-time, part-time, and EMBAs mean for your ROI? There are two key factors to consider.
The ability (or lack thereof) to work while enrolled
It’s difficult to work full-time while also completing a full-time MBA. In fact, the course schedule for a full-time MBA can be so demanding that students aren’t able to work at all. The resulting loss of wages over the course of two years can have a significant negative impact on the degree’s ROI. Part-time MBAs and EMBAs, on the other hand, do give students time to keep working, so lost earnings are not a factor.
Tuition and fees
In theory, full- and part-time MBA tuition and fees should cost roughly the same. In reality, the fees for a part-time MBA program are significantly higher. Part-time MBAs stretch out over more semesters, which means more fees by the time the program is complete. Because EMBA programs take the same amount of time as MBA programs, you don’t typically see higher fees. However, EMBAs do have higher tuition costs—usually much higher.
Familiarize yourself with long-term earning potential
Cost only tells half of the story of MBA ROI—the investment half. Now, let’s consider the return you get on the investment in the form of long-term earnings. Despite the relatively clear differences in cost between part-time, full-time, and executive MBAs, there’s not necessarily a clear winner in terms of return. Here’s a breakdown for each degree type:
- Part-time MBA: While part-time programs cost more in fees, students can continue working while they study, advancing their careers before completing their degree. A combination of more experience and a fresh degree might make part-time students eligible for higher post-degree pay in comparison to their full-time peers.
- Full-time MBA: A full-time MBA can also promote a long-term increase in salary and a healthy ROI because students graduate more quickly—a faster track to MBA-level pay. Receiving that pay bump sooner can make for strong earning power in the long run.
- EMBA: True to its name, the EMBA is viewed by employers as a special qualification for top executive positions. The types of jobs you can get with an EMBA tend to have much higher pay than typical MBA-level jobs. The prestige of an EMBA diploma plus a robust level of managerial experience can boost your pay significantly.
Related: 6 Ways an MBA Can Help You Become an Entrepreneur
Compare tuition costs at different business schools
Perhaps the most important factor in long-term earnings and ROI is not the type of MBA program but the school where the program is hosted. This is where things can get interesting with the ratio of school costs to long-term earnings. Tuition costs for individual MBA programs vary a lot. So right away, you can see how your choice of school makes a huge financial difference. Use sources like U.S. News & World Report to look at the top and mid-tier business schools and compare tuition costs versus program reputation.
Look at the average earnings of graduates
The up-front costs for top and mid-tier MBAs are all over the map—but ROI doesn’t stop there either. To figure out whether a difference in tens of thousands of dollars also comes with significantly better ROI, you must look at the average pre- and post-degree salaries of graduates who attended the programs you’re considering. For the most part, the most expensive among U.S. News & World Report’s top business schools also offer the best ROI, allowing MBA graduates to enjoy a huge paycheck increase. This includes schools like Harvard University and Stanford University, where MBA graduates can go from five- to six-figure salaries after completing their programs. The data on post-degree salaries for lesser-known MBA programs is perhaps the most interesting. Schools that are not necessarily “prestigious” still offer good ROI in terms of long-term increases in pay for graduates, like Willamette University in Oregon.
Understand the long-term debt of getting your MBA
The money you spend during your MBA studies as it relates to long-term debt is the last consideration in the ROI of your degree. Likely, you’ll have to take out student loans to pay for your education—six-figure loans, in many cases. In addition to the principal balance of student loans, aspiring MBAs need to account for the interest they’ll be paying on their loans.
How much debt you take on depends partly on how you want to live during your program. Do you want to live as close to school as possible, even on campus? That decision can increase your rent and the money you need to borrow while you earn your degree. Are you comfortable having roommates? Can you eat cheaper food or do without other expensive comforts? If you want to minimize long-term debt (and enhance your ROI), you should plan a student budget before you begin your program. Use a student loan calculator to decide how much additional debt you’d need to take on to stay comfortable so that you can focus on your coursework.
Related: Scholarship Strategies That Help Cut Grad School Costs
Have you determined the ROI for your MBA yet? What are you waiting for? Big student loans and difficult programs can be daunting, but if you have a passion for business, you can make it work and thrive. Use this guide to find the best degree for your career and your wallet, and you’ll be well on your way to success.
If you want to go a step further and explore more specific and niche types of MBA programs, check out our Handy Guide to the Different Types of MBA Programs.
