Assess the R.O.I.

Graduate school is one of the biggest investments you will ever make in yourself.

In business terms, how much return on your investment (ROI) can you expect? The good news is that 82% of Class of 2011 business school alumni surveyed by researchers at GMAC® in September 2011 indicated their starting salary met or exceeded their salary expectations.

Overall, this class of alumni from full-time MBA programs reported a median starting annual salary US$85,000.  Alumni of full-time MBA programs who graduated in the year 2000 or since reported a median salary of US$95,000 plus additional compensation, on average, of US$18,123.

Alumni surveyed from Class of 2011 across all program types reported that they recouped one-third of their financial investment in the graduate management education immediately in the first year after graduation. Class of 2007 alumni typically saw a full return on their investment after four years from graduation.

Across the board, alumni reported that their degree was rewarding personally, professionally, and financially, and, as revealed in the 2012 Alumni Perspectives Survey findings, the vast majority (95%) of alumni rank the value of their degrees as excellent to outstanding in terms of enhancing their earning power and advancing their careers.

But before you can calculate a personal ROI, you should think about your skills, values, and interests, and how a graduate business degree would help you. Once you know where you want to end up, you will know more precisely what the potential return is.

The “Cost of Attendance” includes tuition and fees, books and materials, and living expenses. You’ll also have to consider the type and amount of financial aid (including loans, scholarships, and fellowships) you can expect. Also consider:

• Total loan costs amortized over different repayment terms, including any accrued interest on unsubsidized student loans.
• Relocation expenses and associated changes in living expenses.
• Income lost while in school. If you leave the workforce to get an MBA, you lose income during that time. But full-time programs are typically shorter than part-time programs, allowing you to get back into the workforce faster—at an MBA salary.

You’ll ring up extra expenses as you search for and apply to schools, as well as hunt for a post-graduation job. Costs add up, so be realistic about the number of schools you apply to. Consider:

• Testing fees, preparation materials, and other miscellaneous costs
• Application fees
• Phone calls
• Transcript request fees
• Corporate networking visits
• Postage or express delivery services
• Travel for recruiting events, interviews, or campus visits

To get to your ROI, weigh the costs against the higher salary and greater opportunities over the course of your career with an MBA. Also consider less tangible benefits—higher skill levels in management and business, better job preparedness, lifelong relationships with your MBA classmates, and personal growth. Finally, weigh all of these costs and benefits as they relate to your specific goals. You may well conclude that an MBA is a smart investment in your future.