Was an MBA worth it financially? The Costs vs Benefit

What about all those costs you have to make up?

As I write this, tomorrow is the deadline for my very last payment in the MBA program - my graduation cap & gown. It makes me think about the total cost of doing this.

Going back to school was financially the riskiest thing Christine and I have done together so far; the costs are relatively certain but the reward can be influenced by a lot of things outside of our control… It's a classic Cost vs Benefit, or Risk vs Reward story. I want to define what the costs and benefits were for Christine and I, and tell how those costs and benefits played out.

I’m not going to talk about salaries because telling people how much money you make is tacky (and highly correlated with being a tool-bag). I am going to talk about the time it will take to make up all our different costs. I’ll have another post specifically about the benefits of the MBA.

There are 2 kinds of costs: ‘Real’ cost and ‘Opportunity’ costs. The real costs come out of the bank account such as tuition, fees, student club dues, moving and travel, books, software, HBS Case Studies (etc). Christine and I’s costs were a pretty unique situation. Here's why: Tuition for out-of-state residents is a healthy 5-digit number per quarter. I thought this was unavoidable because I didn’t have any type of scholarship, but once I started school I learned about scholarships that could be earned during school, research assistance-ships (tuition money for helping a professor do research) and teaching assistance-ships (tuition money for helping a professor teach, grade papers and deflect dumb questions…yes, there is such thing).

I was very fortunate to earn a spot as an accounting teaching assistant after doing very well in my accounting class, setting meetings with professors to learn more about teaching assistance-ship opportunities, and continually following-up.
You’re probably thinking to yourself “Self, Brennen is probably a nerd because accounting is for nerds, and I am not a nerd.” This is probably true, but it just happens to be that the accounting department at Foster needs a ton more TA’s compared to other departments, so there’s much less of a chance to be a TA for anything other than accounting. Being a TA was a huge deal because it provided Christine and I with a full tuition waiver plus a small stipend during each quarter as TA. I’ll end school having TA’d for 4 quarters, which is equivalent to having a 2/3rds scholarship plus some cash each month. This puts us in an amazingly fortunate position in terms of costs, because we will only end-up paying for two quarters of tuition out of the six. In short, our costs were dramatically lowered because I jumped on the TA opportunity, but had to sacrifice a lot of time and forego other opportunities. 

The second type of costs are opportunity costs - the value of everything you have to give up - such as not working full-time for a 1 year and 7 months & all the work-benefits that go along with it. I chose to quit my job, we chose to live nearly 1,000 miles from the closest direct family member, Christine chose to work remotely for the same company rather than quit & find a new job in Seattle, we chose to rent an apartment farther from campus & commute 1-2 hours a day, etc. …Lots of costs and missed opportunities had to be made.

I added up both costs: the regular costs plus the missed opportunities that make sense to put a dollar value on.

We’ll make up all the tuition costs plus all the opportunity costs in less than 2 years and 4 months. In other words, after 2 years and 4 months we will have broken even from all the things we gave up like work benefits and salaries plus all the costs of school. The financial aid from TA’ing plus having a much lower pre-MBA salary (aka low opportunity cost) than the average student kept that pay-back time pretty low compared to averages for even the most inexpensive schools like BYU or Texas A&M.

We’ll make up just the ‘real’ costs (tuition, books & moving costs etc) during 2015. I think this is a misleading statistic, but it’s a stat you’ll probably read about from magazines and websites that try to evaluate how fast graduates break-even from going back to school. It’s misleading because it assumes you’re putting every single dollar you make towards your tuition costs or student debt. No one does that. In a perfect world you should take the money left over after your cost-of-living, and see how long it will take you with that money to pay off all of your school costs. No one reports that number because it’s hard, and cost-of-living is a little unpredictable. But I did for Christine and I because I’m a nerd, like to budget do things in excel. Assuming Christine didn’t work, we save for a rainy day & retirement, it will take about 3 years to pay off the cost of school using just the money “left-over.” 

You probably don’t have a great gauge if this is a good or bad amount of time to pay back the tuition, so consider this recent list of schools ranked by “payback period” or time it takes that school’s graduates on-average to put all their new salary towards their tuition costs.

Overall, we got a very good deal. A great deal. Partly because of being a TA, partly because I was lucky to find & land a good job, but fully because Christine was supportive, because we both worked very hard to make things happen, and because we were blessed.

Christine worked really long weeks and pulled all-night'ers regularly to be able to keep up with her job working remotely. Working remotely is way less efficient when you can’t talk to people easily, and get left out of the loop. I did okay in a demanding full-time program where basically everyone is smarter than me all while working 15-20 hour/week job, traveling all around the country pursuing an internship or full-time job, holding leadership responsibilities in my church, and maintaining a healthy marriage. I’ll be proud of my mediocre grades with my diploma, because it took quite a bit of work & sacrifice on both Christine and I’s part. And if you are a recovering MBA grad, a current MBA student, or thinking about an MBA, you should plan on being proud too. It was hard and we had to pay a lot of costs, but there was much more to benefit from it.

There are a lot of rarely discussed benefits to a getting a master’s degree. Everyone wants to talk about salary. There are a plethora of better reasons (and piñatas!) that I didn’t fully understand until after the fact. I’ll tell you about them in my last post.