This past weekend, the roommate I’ve had since moving to the DC area moved out.
While I’ll be sad to see him go as he was my closest friend down here and a good roommate, I’m happy for him as he moves on to the next opportunity in his life.
He was able to find another (seemingly) nice guy to take the remainder of his lease, so fingers crossed he turns out alright.
So what’s the big move? He’s heading back to school.
By back to school, I mean he’s putting his career on pause and enrolling into a full time MBA program.
A full time MBA program can be incredibly rewarding, and there are many good things that can come out of that. However, there’s also several major drawbacks.
Let’s get into some of the pros and cons of pursuing a full time MBA program from the perspective of my roommate and I (through the many discussions we’ve had on the topic).
This is specifically for an MBA program, though I am sure there are similarities across other grad degree platforms as well.
What is an MBA?
Firstly, it’s important to explain what an MBA program is for those who don’t know.
MBA stands for Master of Business Administration.
There are full time programs and part time programs; the main difference being part time programs are ones in which you take classes on the weekends or after your regular job.
This is a popular post-Bachelor’s degree for those either looking to get into the business world, or further advance their career within the business world.
A common strategy is to get a Bachelor’s degree, enter the workforce for several years, and then apply for an MBA program.
The application process is tough, requiring several steps. First you need to take the GMAT which is a qualifying test (think SAT). Then you’ll need to update your resume, get recommendation letters, write university specific essays, visit campuses and set up interviews/information sessions, fill out the application… it’s a lot of effort.
In addition, the top MBA programs have microscopic acceptance rates, meaning the competition is fierce.
The typical full time program lasts two years in which most students would get a relevant paid internship the summer between the two years.
My roommate did very well on the GMAT, had a solid resume and aced his interviews, and thus was able to get into a top-10 MBA program, which is an awesome accomplishment.
It was throughout this whole process that we discussed the pros and cons of pursuing a full time MBA, and when it would and wouldn’t make sense to pursue one.
Here’s what we came up with:
PROS:
Career Growth
Getting an MBA has the potential to jumpstart your career.
Whether you are looking to switch professions or advance in your current field, getting that degree can seriously help.
Some people tend to plateau in their careers in their late 20s/early 30s, and an MBA degree is a good way to get you to that next level.
Upon graduating, your earnings have the potential to increase as well.
Of 2017 graduates from the top 10 MBA programs, the average combined salary and bonus was over $150,000.
Not just top 10 but even into getting into a top 50 MBA program can lead to a salary and bonus north of $100,000 which can be a major step up depending on your current salary.
Grow Your Network
In general, people that attend an MBA program are highly motivated individuals. Being able to meet, make friends with and learn from other people like this can lead to many positive future outcomes.
You never know when a relationship you’ve made can help you out finding a new job or providing you with an opportunity that wouldn’t have been there otherwise.
In addition, many schools have a committed alumni network that can help you get the foot in the door for other future opportunities.
The advantages of growing your professional network through an MBA program can be incredibly rewarding.
Learn Valuable Business Skills
For those enrolling in an MBA program for a change of careers, the skills you will learn as part of an MBA program are essential.
If you’re ever looking to start your own business the things you will learn here can potentially be the difference of whether it will be successful or not.
Not to mention, the personal development you experience can be incredibly rewarding as well.
CONS:
It’s Expensive
This is the big one… A full time MBA can be expensive. How expensive?
How about up to $200,000 expensive.
That’s an insane amount of money for a two year program. Granted, at the top schools you can expect a very high salary coming out, but going into $200,000 in debt just sounds crazy.
Not only is the two year program expensive, but the entire process along the way is expensive too.
GMAT Books: $200+ (books to study for GMAT test, some hire a tutor for over $1,000 to help get the maximum score).
GMAT exam: $250 each time (many take it several times to get the highest score).
Applications: Varies, but most school charge over $200 just to apply.
Visiting the campus to show interest prior to applying is almost essential, which is all paid for on your own as well.
My roommate is expecting to take out nearly $160,000-$180,000 in student loans in order to attend. He estimates he also spent nearly $3,000 on the entire application process as well.
Quality
The quality between different MBA programs is also a huge differentiator. The difference between the top 10 programs and the bottom 10 programs is drastic.
Anywhere in between can be a mixed bag. The networking aspect, quality of jobs you can get afterwards and overall experience really depend on the school that you attend.
While a school that “only” costs $60,000-$80,000 to attend and is lower ranking may be much cheaper, you have to consider what you are getting with that degree and whether it’s worth it or not.
Time
The amount of time is takes to complete your degree must also be considered. Most full time programs are at least two years.
That’s two full years of not earning a salary and relevant work experience.
You could potentially be using that time to earn more money in your current career, or start up a side hustle that brings in even more money.
It’s also a huge commitment while back in school to continuously be networking and preparing for internships, interviews and studies.
Is a Full Time MBA Worth It?
With most of the Pros and Cons listed above, is a full time MBA program worth it?
Despite already having a pretty good salary (just below six figures), my roommate certainly thinks so.
He reasoned that with the earnings potential of those top degrees, and minimizing lifestyle inflation, he’d be able to pay the student loans off fairly quickly in a few years. From there he’d have an extremely high salary to quickly increase his wealth and be in a better spot than he would be had he not gone.
He did agree that if he was not able to get into a top 15 program, it probably would not have been worth it to him, simply because the earnings potential right out of school would not be as high.
With that logic it’s tough to argue against that line of thinking, and for his situation I actually agree with him.
Prior to discovering FIRE (Financial Independence, Retiring Early), that was actually my own plan as well.
However, if I was in his situation now, I actually would choose the opposite and not attend full time business school.
So what’s the difference?
My roommate plans on a “traditional” retirement (in his 60s), while I’m seeking to retire early (30’s is the goal!).
The longer you work, the more the full time MBA makes sense, as you’d have many more years of higher earnings to make up for the debt you go into.
For me, on my journey to FIRE, taking two years off of work and going into all that debt would likely only delay the process, despite the future higher earnings.
Especially as I already earn a decent income, I think my time would be better spent working on increasing my current income as well as generating other passive income streams, and avoiding that debt.
It’s certainly a personal decision, and even for those pursuing FIRE it may make sense to actually attend.
The decision can be a tough one, but it’s definitely one that a lot of thought must be put into prior to going.
After all, $100,000 to $200,000 in student loan debt is not something to take lightly.
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Have you ever considered going back to school to get an MBA or other post-undergrad degree? Was it worth it? If you already have, going back in time would you make the same choice? How much does the MBA process differ from other Post-Graduate degrees?
I had this exact same dilemma, just about a year ago, when deciding which option to explore to increase my income. In my opinion, pursuing a full time MBA could make sense if you are further down the income scale, so $40-$50K. It can be an opportunity to really boost income potential.
But if you already make over that $75K threshold, it can be really difficult to justify. Especially if you are pursuing financial independence. If you expect to work till traditional retirement age, then choice of school will be the most crucial thing. Going to those top 10 schools is what is truly going to make the biggest impact on income.
I decided to explore a slightly different route, which i’m hoping will yield the same results. You can read about it here https://halflifetheory.com/beat-the-game-cheat-code-to-a-six-figure-salary/
Totally agree with you there, this may really help people with lower incomes to get into a higher income bracket, provided they don’t have any other current major debt. For me on the other hand with my ultimate goal the numbers just didn’t make sense, hopefully I can increase my income in other ways without getting into debt or giving up working years!
I got an MBA part time as paid for by my employer a decade ago. Honestly this is the way to go if your not concern d about making connections via the top schools. No cost to me other then time. The MBA was required for a few jobs I held.
Totally agree with you there. I may be going that route myself if I can potentially get my company to pay for it all. If not, no worries as it’s certainly a lot of time. Hoping to get started on some side hustles soon which I could spend my time on instead making more money!
As I was reading through this post, I kept thinking it wouldn’t make sense for those seeking to retire early. And then there you said it towards the end! 🙂
This is certainly a decision that each individual has to make for their own situation. For me, I don’t see many benefits by doing it and honestly it’s something I have never seriously considered. You did a nice job breaking down the pros and cons. It is a ton of work and not for everyone.
Similar to you, I’m more focused on increasing my savings rate and income where possible. I’m comfortable with the life I’m living and the track I’m on financially. As you said, a MBA probably makes sense for a highly motivated, career-oriented person who is looking to maximize wealth and retire at the “standard” age. In that case, the investment in the MBA is much more likely to pay off.
Exactly! Running the numbers with the shorter timeframe it just really didn’t make sense, with limited upside due to the shorter timeframe and that depended on everything going right! I think it’s definitely geared more towards those on the “traditional” retirement path
I think it is highly dependent on your degree. As an engineer I was able to learn everything I needed from the MBA skill set while on the job and had I taken a couple of years off to get the degree it would have put me behind. It also generally wasn’t worth a whole lot to have it in my industry, at least based on the fact that nobody in the C suite at our Fortune 300 corporation had an MBA. However if I was a business or liberal arts major then I think it might have been worth it just to get some street cred since there are so many people with generic majors like that.
That’s a good point, I was drawing a lot of the perspective from someone already in the business world, but someone with a different career it may not be as relevant. For people going for early retirement I think part time where your employer pays for it all/majority of it is the way to go if you’re willing to put the time in
Yeah I’m stopping with my lowly BA unless someone wants to pay the entirety of the cost of me going to grad school. And even then I’d have to think about it because I’m not sure you could pay me to do homework/write papers again 😅
As someone on the lower end of the salary spectrum, that salary boost sounds amazing. But it definitely doesn’t make sense for anyone pursuing FIRE. It’s already going to take me a while and I’m not willing to push my timeline back and additional two years.
Yea I’m with you, going back to school really doesn’t sound appealing, but at the same time neither does working! 😂
Would love to read a post on a side job ideas and other sources of income you’re looking at. I need to get on that myself!
Yes still mulling ideas in my head and vetting if they’re plausible.. would rather write about it once I actually start though! So that way I’m not making any false promises haha
I don’t have an MBA so not sure I’m the best person to give advice. But from anecdotal comments from friends who do have one, they say that MBA’s used to garner a bigger salary and better opportunities back int he 1990’s and 2000’s, but not as much now. One of my friends is a recruiter and says that MBS’s are “a dime a dozen” and don’t matter much to him. But purely anecdotal.
I do somewhat agree with that, MBAs may have led to better opportunities a few years back, but at this point so many people have them that for some positions they are now required. Or if you don’t have an MBA, if it comes down to choosing between two candidates for a position that are seen as even, the one with the MBA could have the edge. Also anecdotal on my part and I can see both sides of the discussion
You describe a real trend. I finished college December 2017 while working full time. Towards the end of college, I considered an MBA. As fate would have it, in this same time frame, I was also introduced to FI by a coworker. I was a quick convert. For now, the MBA doesn’t have the ROI with my current income and position. It would be better to save and chip away at side gigs at this point.
Totally agree with you there! For some it may make sense, but I think for most pursuing FIRE it doesn’t really add up 🙂