How Much Debt Do MBAs Graduate With?

By Seb Murray Updated Sep 21, 2017

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Introduction
MBAs borrow an eye-watering US$107,000
Prestigious schools charge more
Rising MBA cost has not dented demand
Return on investment quicker in Europe

Find out about QS's range of MBA scholarships

Business education does not come cheap, especially for MBAs.

And the cost keeps rising.

The average tuition fee last year for top-25 US business schools was US$118,468 – 81% higher than in 2006, according to data from The Financial Times. And that doesn’t include living and travel expenses, and forgone earnings for the duration of the course, generally two years.

MBAs borrow an eye-watering US$107,000

This has led to students taking on more debt, although the burden depends largely on the business school they attend. Among the 86 MBA programs ranked by US News, last year graduates owed an average of around US$55,000, according to a new ranking of MBAs based on indebtedness. Among the 10 schools where graduates borrowed the most, that average figure was an eye-watering US$107,000.

MIT Sloan, where half of MBAs last year took on debt, topped the list. On average Sloan MBAs owed about $122,000. At the other end of the spectrum, MBAs at University of Texas – Dallas owed just $7,000.

Prestigious schools charge more

The data show a correlation between the best schools and graduates with the highest debt. Nine of the 10 MBA programs where MBAs borrowed the most were ranked in the top-25 of US News’ 2018 rankings. The more prestigious a school is, the higher the tuition it can charge students.

The findings come as more business school students question the time and monetary cost of getting an MBA, and many opt for shorter, cheaper, master’s programs, such as the Master’s in Management (MiM). According to GMAC, 58% of MiM programs in Europe reported application increases in 2016.

Rising MBA cost has not dented demand

However, the rising cost of an MBA has not dented demand at top business schools. Applications have risen in recent years, even though overall US MBA demand is waning. That is because the top-ranked schools can rely on the quality of their brand to attract candidates, according to Chioma Isiadinso, CEO of admissions firm Expartus.

For many MBAs, ROI is a key consideration. According to data from QS, on average, graduates of top North American schools achieve full ROI less than four years after earning their degree. Over 20 years, this is worth US$2.6 million.

Return on investment quicker in Europe

The quickest returns are those at schools with shorter degrees, such as in Europe, where MBAs are typically around 12 months in length (QS research shows investment is recouped in three years). “According to Forbes, at US$171,000, the five-year ROI at INSEAD is the highest of any MBA program in the world, and nearly double that of top US schools,” said Graham Hastie, assistant dean at INSEAD in France and Singapore.

Scholarships have become a prized method of attracting talent to MBA programs, as bank lending dried up in the aftermath of the global financial crisis, and international candidates find it hard to get loans because they often don’t have a credit rating in the US. Employers are also less willing to pay for their employees to get an MBA.

However, Chuck Wood, an MBA student at Duke Fuqua in the US, said that an MBA is still worth the cost. “The price tag obviously makes some people shy away, but the return on investment is good,” he said. “The MBA remains a great opportunity to advance a career in business.”

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Written by

Seb Murray

Seb is a journalist and consulting editor who has developed a successful track record writing about business, education and technology for the international press.