So you are thinking about going to business school? I get asked all the time for advice on whether or not someone should go to business school. This is such a personal decision it is hard to give blanket advice on this topic. However, there are a few things you should think through before taking the plunge. The framework below can be applied to other grad school decisions as well. However, since I have my MBA I focused this post on business school.
Opportunity cost is the cost of something measured through the value of next best alternative. The cost of business school alone is staggering and has increased a lot since I started less than 10 years ago. I was shocked to see the expected tuition of over $50,000 and total expenses of over $80,000 at Standford and Harvard which means that two years at either of these schools will set you back over $160,000. However, when calculating opportunity cost you must also look at what you are giving up, and in this case it is income. While you will most likely have an internship between your first and second year of business school, you will not have a full time job so you must also take into account the salary you will not be making while in school. If you are currently making $50,000/year business school will cost you $160,000 PLUS $100,000 in unearned income for two years, not taking into account any potential raises. Total cost of business school for two years, $260,000. Nothing to jump into lightly.
The Actual Cost
Business school is expensive and if you take out loans for the full amount you will graduate with monthly student loan payments of over $1,000/month. If you want to be an investment banker that may be ok, provided you can find a job. However, if you want to work a non profit, this may be tough to swing and you will want to have more of your tuition money saved ahead of time.
Can you get in to a top school?
There are many differing opinions on which schools have the best MBA programs, however you tend to see a similar set of names in the top 10, just in different orders. Here is the most recently US News rankings. The value of your MBA starts to decrease as you go down the list. I do not think it makes sense to quit your job and attend business school full time unless you can get into a top program.
Is there a good part time program in your area?
Part time programs can be a great option, particularly if your current employer will help cover some of the cost. This is also a great option if you plan to live in your current city for the foreseeable future. With a part time program your opportunity cost is much lower as you are still working. And if you plan to stay in your current city, you can build a valuable network while in school.
Do you have a concrete reason for wanting to go back to school?
You need to have a concrete idea of what you are trying to get out of business school or it is hard to make the most of your program and you will graduate with a lot less money and may regret the decision. Business school is different from other professional schools such as law or med school in that you do not graduate with a defined career path. You need to define your career path. You will get a lot more out of business school, and have a much easier time getting in, if you know exactly why you are going in the first place. Are you going to switch careers? To broaden your skill set in your current role? Applying to business school because the economy is bad and you do not know what else to do is not a reason. There is no guarantee the economy will improve in the next two years and you lack of direction will make it harder to get a job when you graduate.
There are several things that ended up making business school an easy decision for me. I worked at one company in my time between undergrad and business school. From a functional perspective I knew I was not doing something I wanted to do for the rest of my life, yet the skills I was learning at this job were not obviously transferable to other jobs or industries. My company was very insular and I did not have a strong network of contacts to help me with any potential job hunt, particularly because I new I wanted my next job to be in the United States. This biggest factor that led me to apply to business school is that I love being a student and am a huge believer in spending money on experiences. Finally, since I knew I was going to make a career change at some point, I squirreled away a lot of money in the years before I applied to school. When I finally got my acceptance letter I had saved for a big chunk of the cost business school and the decision to go was easy.
Business school is not for everyone. However, if you go in with your eyes wide open to the cost and job prospects once you get out, you will likely have a great experience that will help you further your career.
*If you want to read about the sobering realities of paying back business school debt check out this blog. Look for an interview with No More Harvard Debt in the upcoming weeks.
*photo by roger4336 via flckr