Getting an MBA prepares students for the rigors of life and gives them the skills necessary for a career in the business world. According to Forbes Magazine, the richest people in the world tend to be business people who have learned to invest wisely and run businesses effectively. Aspiring MBA students may assume that the costs associated with getting their degree are negligible relative to the potential payout.
Total Debt
According to FinAid.org, as of 2010, the average MBA graduate has accrued $41,676 in student loan debt (for loans covering both undergraduate and graduate education). This figure should cause MBA graduates to take heart, since it is actually lower than the average student loan debt for graduates in general, which is $47,503. (One reason that the general average is higher is because of graduates in law and medicine who tend to accrue over $90,000 in debt.)
Total Cost of Debt
The face value of student loan debt does not express the true cost of your education unless you find some way of paying it off in full immediately after graduation. You must take into account the interest you pay as well as the opportunity cost of making those student loan payments over the years. (The opportunity cost is the monetary value of what you could do with that money instead of putting it toward student loan payments, such as investing it in something that will bring you even more money.) If the difference there is greater than the difference in salary that you expect as a result of your MBA, you may find that getting an MBA is not worthwhile for you.
MBA Graduate Salaries
Depending on the economic climate when you graduate, you can typically expect a starting income of $70,000 or above if you have an MBA from a respectable business school. However, if your degree is from a top-15 business school, this number could easily be between $100,000 and $150,000. With a salary like this and some frugal living, it is possible to pay off $50,000 in debt in just a few years and minimize the amount you would otherwise end up paying in interest if you were to only make the minimum monthly payments.
Other Considerations
After calculating the opportunity costs and interest payments against your current salary, it may seem to you that accruing the necessary student loan debt to get an MBA is not worthwhile. However, also remember that your current income is not necessarily a guaranteed thing. Having an MBA under your belt helps to ensure that, even if you do lose your primary source of income in the future, you will be able to more easily adapt and find another one instead of remaining unemployed and accruing other debts.
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