The ROI of a Graduate Business Degree

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

To calculate your ROI, determine the cost of attending business school, how much you can expect to earn upon graduation, and how long it will take you to recoup your investment. Keep in mind the potential benefits b-school offers for expanded career options, higher-level skills, and enhanced earning power.

• Alumni earning graduate degrees in business and management last year enjoyed a receptive job market, as 92% of 2012 graduates surveyed by GMAC were employed three months after graduation.
• 77% of the class of 2012 graduates surveyed said their starting salary met or exceeded their expectations, and 76% said they could not have gotten their job without their graduate management education.
• This may help explain why of the business school alumni surveyed in 2012 who had yet to pay off their loans, 50% said they had no concerns about doing so.

Step 1: Determine Cost of Attendance
Add up all the expenses you can expect to face, such as:

• Tuition, fees, books, and living expenses
• The costs of searching for and applying to schools, including testing and application fees, test prep materials, and travel expenses for recruiting events, interviews, campus visits, and other activities
• Relocation expenses
• Time off work or unearned income

Identify all potential sources of funding and any financial aid (including loans, scholarships, and fellowships) you can expect.

Step 2: Consider Future Earning Potential
Simple salary data show that grads start strong and then improve:

• Alumni from full-time two-year MBA programs in the class of 2012 reported a median starting annual salary of US$85,000
• Alumni of full-time (two-year and one-year) MBA programs who graduated in 2012 and as far back as 2000 when we first began our alumni surveys reported a current median salary of US$100,000.

Step 3: Calculate How Long it Will Take You to Recoup Your Investment
On average, class of 2012 alumni from all program types reported recouping 38% of their financial investment in b-school at the time we surveyed them several months after graduation. Alumni across all graduation years that we surveyed (2000–2012) indicated a full return on their investment, on average, four years after graduation.

To figure out your own timeline, simply take your pre-enrollment salary and subtract it from your expected post-graduation salary and then divide your total cost of attending b-school by the salary difference to learn how long it will take you to recoup your investment.

Finally, weigh all of these costs and benefits as they relate to your specific goals. You may well conclude that the choice to pursue an advanced business degree is easier than you thought.

Want more information? Read up on how to finance your b-school degree.