Today’s post is from our newest writer Andrew, an MBA graduate who presents us with a realistic look at the cost of getting an MBA.
Often when people look at the cost of an MBA they are only looking at the tuition fee, but in actuality there are a few other costs that you have to consider.
Your cost of higher education only starts with the tuition. After that are also your student fees and books. Student fees are unavoidable and include things like the students union, health and dental plan, student services, athletic centre membership and maybe something towards the building of a new student centre which will of course not be completed before the time you graduate. Books on the other hand are a variable cost that can be up to your discretion, but that is a topic for another day.
You won’t be earning a salary
So far so simple right? Except now you have to take into account the wages and salary that you will not have by being in school full-time during your MBA.
Keeping things simple, let us say that your current pre-MBA salary is $45,000 per year. Most MBA programs are 18 to 24 months in length, which means that potentially you will be out of the workforce and not receiving a salary for two years. Assuming that your MBA program is two years in length, that is $90,000 in opportunity costs that you will have to make up before profiting from the investment in getting your MBA.
Again in maintaining simplicity, let us say that the total cost per year of your MBA is $25,000, which when broken down is $23,500 in tuition, $1,000 in student fees and $500 on books. These amounts in student fees and books seem to be a long-standing average across Canadian universities. Over the two years of your MBA that ends up being a $50,000 cost.
Other costs to consider
Adding the school costs and lost wages brings us to $140,000 that you will have to earn post-MBA before seeing a return on your MBA investment. So really it is not just your MBA tuition cost that you have to consider. You also have to look at the wages that you are now missing out on by being in school full-time rather than working full-time.
Or you could find a school with the MBA program you want to take and that also offers it part-time.
For many people looking to do an MBA, their goal is to advance on the corporate ladder and to increase their salary. Going back to our $45,000 per year salary example, let us say that your post-MBA salary is $70,000. This then brings us to a breakeven point of four years. Two years spent on your MBA at a cost of $140,000 in lost wages and schooling fees, and then two years post-MBA earning $70,000 per year.
→Related: Tablet or laptop for your MBA?
One very important thing to understand is that the salary of your first post-MBA job is not necessarily going to increase by 56% over your pre-MBA salary like in our example. The key here is to look at what your post-MBA salary could be after a defined period of time – usually within three years after graduation. You are not going to receive a massive salary increase just because you have an MBA now. Like anyone else in the workforce, you still have to earn your value and demonstrate that you provide value to the employer.
This is a simplistic look on the real financial cost of an MBA to give you an overview of things. If you want to get more specific you may want to also include your potential salary from part-time jobs and summer internships, rent if you are going to move to another city temporarily and any other ways you end up earning, saving or spending money that is directly related to your time in school.
Andrew is a marketing, e-commerce and customer relationship management enthusiast. He has lived overseas studying trends in emerging markets.