We recently compiled a list of top MBA programs with the highest return on investment and in this article, we will talk about The Top MBA Program with the Highest Return on Investment.
Declining College Enrollments
The National Center for Education Statistics (NCES) reports that college enrollment decreased by nearly 14.6% in the US between 2010 and 2021. Particularly, enrollments at 4-year private for-profit colleges decreased by about 54%. Declining enrollments in colleges is an indication that many high school graduates are either struggling to cope with the financial difficulties that come with a conventional career path or simply failing to see the value of investing in a college degree. According to a survey published by HCM Strategists, 64% of survey respondents who did not wish to attend college did so because of financial reasons. 38% were not willing to attend college due to fears about the cost of college and amassing debt. The remaining 26% believed it was more important to work and earn money in the short term.
In times past, it was quite common for American students to utilize educational loans in order to secure their future. However, BankRate reveals that 24% of Americans believe that borrowing too much for their education is their biggest financial regret. Consequently, even those capable of obtaining student loans are skeptical about whether or not a college degree is worth the debt. Moreover, increasing interest rates on federal student loans are likely to shake confidence in student loans even further. Recently, the Education Department announced that as of July 1st, the interest rate on new federal student loans would be rising to 6.53%, in comparison to 5.5% currently. In addition, rates on graduate and professional loans will be rising to 8.08%.
Due to the increasing impracticality of college education, many individuals are choosing to supplement their CVs with comparatively affordable and flexible alternatives. One such alternative that has become quite popular is digital education platforms such as Udemy, Inc. (NASDAQ: UDMY) and Coursera, Inc. (NYSE: COUR). While such courses are unable to unlock doors in the same manner as a college degree, they can be used to learn useful skills. Moreover, several renowned companies, such as Microsoft Corporation (NASDAQ: MSFT), Meta Platforms Inc. (NASDAQ: META), and International Business Machines Corporation (NYSE: IBM) now offer professional certifications online through Coursera, Inc. (NYSE: COUR) and Udemy, Inc. (NASDAQ: UDMY), allowing users to showcase their skills proficiency.
MBA Enrollment Trends
Declining enrollments in colleges isn’t exclusively an American phenomenon. Whilst some countries around the world are currently experiencing an increase in college enrollments, research from GMAC reveals that business school applications are experiencing a decline worldwide. In a survey of nearly 250 business schools, it was revealed that applications to all business school programs fell by almost 5 % in 2023, following a 3.4 % decline in 2022.
The statistics are even worse for MBA program applications, which fell by 6.5% and 4.9% during 2022 and 2023 respectively. MBA is arguably the most prestigious graduate accreditation offered by business schools. Apart from allowing individuals of non-business backgrounds to pivot their careers towards a management path, an MBA can be a catalyst for career growth. In fact, in 2022, GMAC estimated that MBA graduates working at US companies earn a median annual salary of $115,000. In comparison, those with a bachelor’s degree earned a median salary of $75,000.
Considering this, it might be surprising why fewer and fewer people are inclined to enroll in an MBA, even in comparison to other business school degrees. However, much like college education in general, the financial requisites of an MBA, as well as the risks associated with student debt, have resulted in a decline in MBA enrollment. While the cost of an MBA depends greatly on the institution of study, Education Data Initiative estimates that an average MBA in the US costs $56,850. For top-tier B-schools, this figure is well over $200,000. In addition, most MBA students also have to deal with the financial impact of having to relocate and/or give up work for the course of their degree.
Thus, despite the many benefits of an MBA, it has become an unfeasible career path for many working-class Americans. However, much like alternatives that are offered by Coursera, Inc. (NYSE: COUR) and Udemy, Inc. (NASDAQ: UDMY), many high-ranked universities now offer online MBA degrees that are both affordable and flexible to the needs of working-class Americans. In addition, most of these degrees can be completed without forgoing your existing job.
Online MBA: An Alternative to Conventional MBA
An online MBA degree from the Jack Welch Management Institute at Strayer University has an estimated cost of $35,000, just 62% of an average MBA. It is worth noting that this particular degree was featured in the list of Top 10 Online MBA Programs by both The Princeton Review and Poets & Quants. Strayer University is a subsidiary of Strategic Education, Inc. (NASDAQ: STRA), Inc., a company dedicated to providing innovative educational services.
In late April, Strategic Education, Inc. (NASDAQ: STRA) announced its Q1 2024 financial results. During the period, the company achieved a YoY increase in revenue of 13.1% to $290.3 million. The majority of revenue was generated through the company’s U.S. Higher Education (USHE) Segment, which comprises of Strayer University and Capella University. The segment yields a revenue of $219.2 million, which was an 11.3% increase from the same period in 2023.
Improved margins in the USHE segment yielded an overall adjusted net income of $26.8 million and adjusted diluted EPS of $1.11. In Q1 2023, the company posted an adjusted diluted LPS of $0.09, primarily caused by significant losses in its Australia/New Zealand segment, which has since turned profitable. Currently, Strategic Education, Inc. (NASDAQ: STRA) stock has a forward P/E ratio of 23.15 and is priced at approximately $109.
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Although online MBA is an affordable alternative to in-person MBA programs, the quality of in-person learning is difficult to emulate in an online environment. Thus, individuals looking to enroll in the best MBA programs might find that the highest-paying MBA programs are ones that offer in-person, full-time instruction. One method of figuring out what are the most profitable MBA degrees is to calculate which MBA school has the best ROI. With that in mind, join us as we look at the top MBA programs with the highest return on investment.
The Top MBA Program with the Highest Return on Investment
Methodology
To develop our list of top MBA programs with the highest return on investment, we initially picked out the most highly rated MBA programs in the US. We used rankings from sources such as QS and Fortune to develop a shortlist of 50 universities. To ensure the schools were comparable, we focused only on full-time, two-year MBA programs, which is the most common structure for MBA degrees. Further research was narrowed down to these only.
Among these highly rated MBA programs in the US, we calculated the average expense using the cost of attendance data provided by each school. To calculate each program’s return we used the median base salary based on the latest available employment reports. Using an expected increase in salary of 3% per year, we calculated each program’s return on investment during the first 5 years of employment. The top 15 institutes were chosen as the top MBA programs with the highest return on investment.
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Here is the top MBA program with the highest return on investment:
1. The University of Texas at Austin – McCombs School of Business
Insider Monkey Score: 10
Total Cost of Attendance: $177,610
Median Base Salary: $175,000
ROI: 423%
The University of Texas at Austin is the flagship institution of the University of Texas System. In 2023, the school’s MBA graduates achieved the highest average base salary in its history of $157,735 and a median salary of $175,000. The estimated 2-year cost of attendance of the program is $177,610, the second lowest on our list.
According to the institution’s website, McCombs facilitated 80% of job opportunities through internships, recruiting through Texas McCombs corporate partner ecosystem, alumni and staff networking, or other UT Austin resources. Approximately 69% of MBA graduates secured employment in Southwest US, while 43% of all graduates ended up in the consulting industry.
To learn about other top MBA programs with the highest return on investment, you can check out our detailed report on the 15 Top MBA Programs with the Highest Return on Investment.
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