Navigating costs: Is an MBA a good idea?

If you’re looking to accelerate your career along the management track, you may be asking yourself, “Should I get an MBA?” As part of your decision process, you will want to understand the overall cost of an MBA as well as the types of programs available. 

‍

MBAs, or Master of Business Administration programs, are among the most expensive master’s degree programs in the United States. However, MBA graduates, especially those from top schools, statistically make excellent salaries on average. 

‍

According to 2021 research from the Forté Foundation, the average MBA salary after three to five years is between $151,951 and $172,469 for men and women, respectively.

How much does it cost to get an MBA?

In 2023, the average cost of the top 10 MBA programs was $236,873. This price includes average rent, tuition, and fees. The average cost for just tuition is estimated to be about $60,000 over a two-year program. However, this varies depending on the program.

Part-time and online MBA programs

Part-time MBA programs can be a more cost-effective way to pay for an MBA. The tuition for part-time programs begins at $12,456 for in-state students, but it can still be as much as $100,000 in total at some institutions. 

‍

Online MBA programs have also gained popularity, but costs vary significantly. An online MBA costs around $52,264 but can be as low as $13,000 and as high as $128,000, depending on the school and the program's features.

Cost of living considerations

Tuition is only one part of the equation to the true cost of attending an MBA. Usually, it’s the most significant expense, but students should also consider their living costs, including rent, utilities, healthcare, taxes, and more. 

‍

Additionally, there’s an opportunity cost to weigh. For example, if you leave a full-time job to pursue your MBA, you also lose out on your salary and potential retirement investment gains.

Additional expenses to consider

Some other considerations are the cost of applying to programs, which can be around $100 per application. Textbooks can also cost between $1,000-$2,000, depending on whether you buy them new or used. Depending on the school, you might also incur technology fees.  

Traditional MBA financing options

Here are a few common ways MBA students finance their education.

Financial aid and scholarships

Although the costs of earning an MBA are high, there are a few ways to mitigate expenses. FAFSA is the general form for applying for federal student aid. When you apply, FAFSA calculates how much funding you need and determines an appropriate amount of student aid, depending mainly on your personal and family’s income. 

‍

Grants and scholarships don’t have to be paid back, but student loans do. Your school’s financial aid advisor can assist you if you have questions.

Federal and private student loans

For MBA students in the U.S., there are several federal student loan options available. These include:

1. Direct Unsubsidized Loans – Also referred to as Stafford Loans, Direct Unsubsidized Loans are available to graduate students regardless of financial need. They begin to accrue interest immediately, but rates are reasonable, and repayment times range from 10 to 25 years.
2. Grad PLUS Loans – Grad PLUS Loans are another federal loan option for graduate students, used as a top-up for those who have maxed out their Direct Unsubsidized Loans. One of the benefits of a Grad PLUS Loan is that they can cover up to the total cost of attendance minus any other financial aid received. However, they require a credit check and have higher interest rates than Direct loans.
3. Public Service Loan Forgiveness Program – While not a loan itself, MBA graduates can consider working towards loan forgiveness by getting a public service job. Under this program, qualifying federal student loans may be forgiven after 120 payments if you work select public service jobs.

Other options include private student loans, which are better for those with excellent credit scores, as they can offer lower interest rates and different repayment options. 

Graduate assistantships

Some MBAs offer graduate assistantships to help pay for expenses. These typically require you to work with professors to grade papers and support undergraduate students. 

‍

For example, the University of Houston Downtown offers MBA students part-time graduate assistantships that pay $1,200 per month in exchange for 20 hours of work a week. Northern Michigan University offers a combination of tuition, stipends, and even meals on campus to their MBA graduate assistants.

Employer sponsorship and tuition reimbursement

Some companies subsidize MBAs for employees wanting to move into higher management roles. You may even be able to pursue an MBA while remaining on their payroll. Some companies also offer partial or complete tuition fee assistance.

MBA fellowship programs

A fellowship is one of the most lucrative ways of funding an MBA. Not only do fellowships cover the cost of tuition, but they often come with other perks, such as one-on-one mentorship and access to more professional networks.

‍

Typically, MBA fellowships come from a corporate partner or foundation interested in helping a student or two succeed in the program each year. Due to their prestige, fellowships are typically one of the hardest opportunities to seize. Programs typically look at a combination of academic excellence, personal background, and minority status. Many fellowships will provide even more funding than is needed for tuition alone, providing enough funds to cover some or all of the awardee’s living expenses as well.

Application process and eligibility criteria

Most MBA fellowships are offered to applicants with one or more minority backgrounds to encourage greater opportunity for those with less privilege. 

‍

For example, Kelley’s Global Fellowship funds Latin American students. The Howard E. Mitchell Fellowship for Wharton supports black, Hispanic, indigenous, and female students. There are also many fellowships for LGBTQ+ applicants, such as the Reaching Out MBA. 

Alternative MBA financing options

Crowdfunding and online fundraising

Crowdfunding has become a popular new fundraising tool. There are many options for launching a crowdfunding campaign, like Kickstarter, Indiegogo, or GoFundMe.

Pros

• Easy to use and can reach a wide audience.
• You don’t have to pay the money back.

Cons

• High competition and hard to stand out.
• Success largely depends on effective marketing and online presence.

Income-share agreements (ISAs)

Income-share agreements refer to taking a percentage of the student’s earnings for several years after graduating. A typical ISA will have a 10-year maximum on the payment percentage.

‍

A research report from the Rand Corporation shared that ISAs are much less common than student loans and that the terms and student experiences with them can vary widely depending on the lender. Before choosing this option, take the time to understand how repayment works to make sure it’s a good fit for you. 

Pros

• Students pay back ISAs based on a percentage of their income, so they don’t have to worry about being able to afford their payments.

Cons

• The income share can be significant if you earn a high income.

Personal loans

Personal loans are another option if you need to borrow money to pay for your MBA tuition and expenses. You can apply for a personal loan from many different lenders, but the payments typically start immediately.

Pros

• Personal loans are unrestricted, so you can use them for anything, whether for living expenses, tuition, or car payments.

Cons

• Payments start right away for personal loans, unlike federal student loans, which go into deferment when you’re enrolled in school.

Home equity 

If you’re a homeowner, you can use home equity loans and HELOCs (home equity lines of credit) to pay for school. These options leverage the equity in your home to provide you with extra funding at lower interest rates than many other funding options. You’ll still have monthly payments, but the repayment term offers more flexibility than other loans. 

‍

Also, consider HEIs (Home Equity Investments), which allow you to access cash with no monthly payments. 

Pros

• Home equity products can provide a lump sum or credit line based on home equity.
• Home equity products are relatively easy to obtain and offer flexible terms. 

Cons

• You're using your home as collateral, risking foreclosure if you can't make your payments.

‍

Home equity options are best for homeowners with substantial equity who are confident in their ability to repay without jeopardizing their housing security. If an MBA student is in that position, it’s an excellent option to consider.

Is an MBA a good idea?

Return on Investment (ROI) Considerations

Is an MBA a good idea? It depends on your expected ROI calculation. Many top-ranked schools advertise higher average salaries for their graduates, but it’s important to remember this is not a guarantee. In the U.S., for the 2021 hiring year, the median starting salary for new MBA hires is $115,000. 

‍

So, it’s best to run your own calculations. Ask yourself whether you’d be satisfied with earning two-thirds or even half the average income graduates of your MBA program make. Then, compare that number to the cost of tuition, fees, living expenses, and the lost opportunity cost of any wages you would have made.

Analyzing potential career advancement and long-term benefits

Pursuing an MBA makes sense if you’re looking for career advancement because many higher-level business positions require it.

‍

However, not everyone’s experience in an MBA will be the same. Some students drop out due to difficulty or stress, while others graduate and secure six-figure jobs. 

‍

That’s why it’s important to consider your own future goals and personal finances before determining whether an MBA is right for you.

Final thoughts

An MBA can be a powerful catalyst for career advancement and personal growth. However, it also requires substantial time and monetary investment. For that reason, it’s important to decide whether or not the cost is worth it to you.

‍

If you’re a homeowner looking to further your education, tapping your home equity can help you accomplish your goal without taking on debt. A Home Equity Investment from Point offers no monthly payments, no need for perfect credit, and no income requirements. See how much you can qualify for today without impacting your credit score.