As you know, education is one of the most costly things in the US. Thousands of students are left with enormous debts when they graduate. What is more, is it true that investing in education even pays off afterwards?
According to Poets and Quants, among the most popular graduate degrees, the MBA brings you the largest return.
This research conducted by Priceonomics, a San Francisco group, was aimed at finding out which degree created the highest/lowest amount of debt and which one brought the largest and smallest income after the graduate lands a job. The study was based on responses from alumni who addressed the Earnest company to deal with their student debts (including undergraduate ones).
Apart from the MBA, the following degrees were included in the research: JDs (Doctor of Law), MDs (Doctor of Medicine), Pharm D (Doctor of Pharmacy), DDS (Doctor of Dentistry), Master in Arts, Masters in Science etc. Schools where the graduates earned their degrees have also had an influence on debts and income.
MBA Provides Smallest Debt/Earnings Ratio
So, which degree took the first place according to study results? It was the MBA, and other degrees have nothing on it. Student debt to return ratio was calculated for every degree. Where the ratio was smaller than one, it meant that the alumni actually earn more money annually than they spent on one year of their education. If the ratio was over one, it showed that obtaining the degree was more costly if we compare the annual numbers.
The debt/return ratio for the MBA degree turned out to be the smallest: only 0.71. MDs’ ratio was 1.41, and for JDs it equaled 1.0, while for master’s of arts the ratio was no less than 1.07. Hence, the study found that not only are MBA degrees less costly in the end, but also allow you to make much more money than others.
For MDs, the average student debt was the highest among all degrees and equaled $191,200. JDs were just behind them with the average debt of $139,900. MBAs’ debt ($89,900) turned out to be higher than for master’s of arts degree holders ($62,800).
The Higher Your Debt, The Lower Your Income
All in all, although medical doctors’ and lawyers’ starting salaries are usually higher than MBAs’, they have a much larger debt accumulated during their multiple years of studies. That’s why for them, the degree payback is much smaller than for business graduates.
Not all criteria were taken into account while comparing the overall debt/income ratios – first year salary which is lower for MBAs than for MDs and JDs, as well as compensation packages which are actually higher for business degree holders than for other graduates.
The value of an MBA degree was also understated in terms of fellowships and stipends obtained by students in different spheres. For instance, half of Harvard’s MBA students get a fellowship which allows them to write off approximately half of their tuition fees.
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