While the cost of your degree entails how much money you spend on your MBA, the opportunity cost of your MBA refers to what you are giving up to pursue your degree. As with all applications of economic principles, any decision that results in a choice between two options has an opportunity cost. If you continued to work instead of continuing your education, how much money would you have made in the time it takes you to complete your MBA? For people pursuing MBA online or part-time, this is not as relevant because they are still able to work and take classes.
If you’re leaving your job to pursue your MBA, or in the rarer case if you’re continuing your education straight out of college, the opportunity cost is a more important factor to your decision. You may hear the term “forgone salary” thrown into the mix when analyzing the cost of attendance at any given school. If you’re pursuing your MBA full-time, you should add how much money you would have made onto how much the degree costs. If your degree costs $100,000 for two years, and you would have made $50,000 per year if you kept working, then your MBA essentially costs $200,000.Weighing the opportunity cost begs the question: Is an MBA worth it? If you plan on working full time and going to school part time, or if you enroll in an online MBA program, you reduce your opportunity cost. You can continue working and will not have to forgo a full two years’ salary. Similarly, if you’ve got a great MBA scholarship
or financial aid, then your opportunity cost is very low.Pursuing an MBA can be a big investment, but for many people, it’s worth it. According to the Official GMAT Website
, the average MBA graduate of the class of 2011 expects a 55% increase in salary
over how much they made before their MBA. So yes, you may forgo two years of a salary, but you can emerge from the program with a much greater salary. If that’s the case, your degree has paid for itself sooner and you’ll be reaping the benefits for the rest of your career.