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Is a Master's in Business Administration Worth the Cost?

Is a Master's in Business Administration Worth the Cost?
Jennifer Calonia
Jennifer CaloniaUpdated January 17, 2023
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A master’s in business administration (MBA) may open up new job opportunities for you and lead to a higher salary. Enrolling in an MBA program can also help you establish invaluable connections with your peers.However, the cost and time required to earn an MBA is significant. According to the Education Data Institute, MBA graduates have a total average student debt of $80,892, and $62,325 of that amount is attributed to MBA costs.Is an MBA worth it? This guide can help you decide if getting an MBA makes sense for you.

What Is an MBA?

An MBA is a master’s degree in business administration. It typically takes one to two years to complete, and generally requires 36 credit hours. MBA programs are designed to teach students the skills needed to plan, organize, manage, and lead business organizations.  The curriculum varies depending on the specific MBA program, but it typically includes areas like management theory, accounting, organization and production, marketing, and other key business-related functions.

Cost of an MBA

Looking at a list of 34 top business schools compiled by MBA Today, the average total costs of an MBA program are about $130,385. However, tuition costs can vary widely, depending on whether you enroll in a: 
  • Full-time vs. part-time program
  • In-person vs. online program
  • Public school as an in-state or out-of-state student
  • Private college or university
For example, for the 2022-23 academic year, first-year, full-time MBA students attending The Wharton School at the University of Pennsylvania can expect to spend $84,874 on tuition and fees. By comparison, full-time, in-state students pursuing an MBA in person at San Diego State University (SDSU) pay $9,608 in tuition and fees for 2022-23. Out-of-state SDSU MBA students pay an additional $396 per unit. Certain MBA specialties at SDSU also incur an added fee per unit.Online MBA programs may cost anywhere from $5,000 to more than $60,000 a year in tuition. Many of the top online MBA programs are typically just as expensive as on-campus programs. However, you will save on housing costs, among other things, if you earn your degree online. 

Pros and Cons of MBA Degrees

Pros

  • May facilitate a career change. An MBA might help you transition into a new career or industry. 
  • Provides promotion opportunities. If your employer requires a master’s degree to advance into a management role, an MBA might be your ticket up the ladder. 
  • Chance to build strong professional networks. You could develop relationships with similarly driven peers who may be a lifelong resource.

Cons

  • Getting an MBA is costly. The tuition for MBA programs is high. Additionally, students often take on additional student loan debt to cover MBA costs.
  • It doesn’t offer guarantees. Just because you complete an MBA program doesn’t mean you’ll get the job, promotion, or higher salary.
  • Significant time commitment. The program’s rigorous academic demands are challenging and time consuming.
Pros of MBA DegreesCons of MBA Degrees
May assist with a career pivotVery expensive
Could boost job prospects, advancement, or salaryDoesn’t guarantee a better job, career growth, or a bigger salary
Might help with establishing lifelong professional networksExtensive time commitment

Are Online MBAs Worth It?

Compared to the total cost of a traditional in-person MBA program, the cost of online MBA programs might be worth it at some schools and in certain cases. As mentioned, for the top MBA programs, tuition for online MBAs are virtually the same as they are for on-campus MBAs. But at other schools, they may be less expensive.Although an online MBA might offer lower tuition at some business schools along with the convenience of studying from home, it’s not for everyone. For example, it might be harder to communicate with a professor for one-on-one guidance or to build meaningful connections with your classmates.

How Much Do MBA Graduates Make?

Recent MBA graduates can generally earn a starting salary that’s 22% to 40% more than what they’d make without an MBA. The National Association of Colleges and Employers found that MBA graduates received a starting salary that was about $20,000 higher than the annual salary of employees with a bachelor’s degree in business.How much you can earn as an MBA graduate depends on multiple factors, such as:
  • The type of MBA program and business school you choose
  • The industry you work in
  • Your employer
  • Your location 

Weighing the Opportunity Cost

Aside from the MBA cost for tuition and education-related expenses, you might also consider whether the opportunity cost of getting an MBA is worth it. Opportunity cost is the loss of potential gain from other opportunities you could choose instead of getting your MBA.For example, you can compare the difference between your highest earning potential in your industry without an MBA to your highest earning potential with an MBA. Be sure to factor in the expense of getting your MBA degree and the student debt you might incur.In addition, there are also intangible opportunity costs, such as the real-world career experience you’ll get if you aren’t enrolled in a full-time MBA program. Think about the opportunity cost to your personal life as well. While you’re focused on getting your MBA, you might postpone certain life events, such as getting married, starting a family, or buying a house.

Alternatives to MBAs

There are other ways to further your education and career opportunities that don’t involve getting an MBA. They include: 
  • Certificate programs. Earning a certificate toward a business specialization, like marketing or finance, could offer an additional edge when it comes to job prospects — without the financial and time commitment of an MBA.
  • Online courses. Learning platforms, like Udemy and Coursera, have Massive Open Online Courses that teach specific subjects. These courses are sometimes offered by colleges and top universities. 
  • Professional organizations. Joining professional groups and associations may provide networking opportunities and a forum for sharing industry knowledge.

Paying Back Student Loans 

If you decide to pursue an MBA but you’re currently repaying undergraduate debt, or if you want a plan for repaying your MBA debt after graduation, here are some ideas for repaying student loans. 

Forbearance During Graduate School

If you have federal student loans, you can receive in-school student loan deferment that pauses your payments while you’re enrolled in an MBA program. You must attend an eligible school and be enrolled at least half-time. In-school deferment is generally automatic, but if you don’t receive a deferment notification from your lender, you can request one from Federal Student Aid.Many student loans do accrue interest during deferment. The interest may then be added to the principal balance of your loan, potentially making your total student loan debt even bigger. You may want to consider paying the interest during deferment to help prevent this.Also, be aware that private student loans don’t have the same deferment options as federal loans. If you have private loans, contact your lender to find out about student loan deferment or forbearance options they might offer.

Student Loan Forgiveness Programs

Federal student loan forgiveness is available to federal loan borrowers. There are a number of federal forgiveness programs you can explore, such as Public Service Loan Forgiveness (PSLF). This program requires you to work full-time at a qualifying public-service employer while making 120 qualifying payments. After that, your remaining eligible federal loan debt is forgiven. In addition to the federal government programs, there are state student loan forgiveness programs you can check into.

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans are available to eligible federal student loan borrowers who can’t afford their current monthly student loan payments. There are four IDR plans to choose from, and they adjust your payments to your income and family size. On these plans, your payments are typically 10% to 20% of your discretionary income, and your loan term is lengthened to 20 or 25 years. After that, any remaining federal loan balance is forgiven.Recommended: Your Guide to Choosing a Student Loan Repayment Plan

Student Loan Refinancing

You could also consider refinancing your student loans. With refinancing, a private  lender pays off your original loans, and creates a new private loan that you’ll repay. If you have good credit, you may qualify for a lower interest rate, which could save you money. There are many advantages and risks of student loan refinancing. While a benefit is that you may be eligible for a lower interest rate, one downside is that when you refinance federal student loans, you are no longer eligible for federal programs and protections, including income-driven repayment plans and student loan forgiveness.If you don’t need access to these federal programs and you decide refinancing is right for you, check your student loan refinancing rates with different lenders to find the lowest rate and best terms.

The Takeaway

Getting an MBA could offer many advantages, such as a higher salary and career advancement, but pursuing this degree is also very expensive. Weigh all the pros and cons to determine if an MBA is worth it for you. Although the MBA cost and time demands are extensive, getting your degree might be justified if it will help you achieve your career goals.If you choose to enroll in an MBA program and you’re looking for ways to manage your student loan debt, there are a number of options that might be helpful. For instance, you can explore deferment and forgiveness programs. Student loan refinancing may also make sense if you don’t need access to federal forgiveness programs and protections. If you qualify for a lower interest rate, you could save money.  Lantern makes it convenient to find a student loan refinancing option that’s right for you. Our user-friendly platform lets you compare loan offers from multiple lenders at once for a faster, easier experience.Check your student loan refinancing rates with Lantern.

Frequently Asked Questions

Is an MBA degree really worth it?
How much does an MBA increase your salary?
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About the Author

Jennifer Calonia

Jennifer Calonia

Jennifer Calonia is a Los Angeles-based finance writer who has covered the gamut, including student loans, credit card rewards, consumer loans, and debt. Her work has been featured in outlets like Bankrate, NerdWallet, Business Insider, Yahoo Finance, and U.S. News.
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