The Business School ROI Calculator 2024-25

Methodology

The Bloomberg Businessweek return-on-investment tool for business schools relies on a standard calculation for measuring financial success: profit relative to initial principal. Say you bought $10,000 worth of rutabaga futures and sold them 10 years later for $70,000. Your profit would be $60,000, and your net ROI would be $60,000 divided by $10,000 or 600%. To get an annualized average for that figure, we need to account for the principal’s compounding growth. That’s a two-step calculation:

1. First, divide the final principal by the initial capital to get the gross return-to-investment ratio:

   $70,000 / $10,000 = 7

2. Next, raise that ratio to the power of one-tenth (for 10 years) and then subtract 100% (or 1) to get the annualized, compounded ROI:

   7 ^ (1/10) - 100% = 21.5%

To show how that works in practice, here’s what that principal would look like over the investment’s 10-year life:

Note: All figures are rounded.

We applied the same concept to the money spent getting an MBA and the potential payoff. For the investment, we included these items, as reported by the user:

• Tuition, room, board and any other living expenses while out of the full-time workforce
• Forgone income over the months spent attending school and any additional time out of the full-time workforce, based on pre-MBA salary, minus any money earned while at school from internships or other jobs.
• Interest on any student loans for their full term (usually 10 years). We discounted the interest rate to account for market-expected annual inflation over the next 10 years, about 2.5% as of June 2024.

For gross returns, we included these items:

• The difference between post-MBA and pre-MBA salaries for the 10 years after graduation. We assumed that post- and pre-MBA salaries would grow at the 10-year average of the Atlanta Fed’s wage-growth tracker for high-skilled and mid-skilled workers (3.9% and 3.8% as of June 2024, respectively), with both figures discounted by that expected inflation figure.
• The value of any signing bonus after being invested for 10 years at an assumed return rate of 5.5%, also discounted for inflation.

To help users answer six of the tool’s 10 questions, it displays medians based on Bloomberg Businessweek Best B-Schools surveys of thousands of people who attended 77 different MBA programs in the US. Respondents graduated in the years 2014 through 2023. The surveys were conducted in 2021, 2022 and 2023, some for alumni and some for students nearing graduation.

For users who don’t want to base calculations on a specific business school, we show medians for pre- and post-MBA annual salary and signing bonuses. We also provide the median program’s cost (tuition, room, board and other living expenses), student loan amount and length (in months), all based on the surveys. Cost figures differ from the tuition-plus-fees figures displayed in our Best B-Schools Rankings, which are the schools’ latest advertised prices, while the tool’s medians also include living expenses and are based on responses covering multiple school years.

Once a user selects one of the 77 schools, these six figures (pre-MBA pay, MBA expenses, loans, post-MBA pay, signing bonus and program length) reflect survey-based medians for the chosen program.

To ensure that all the above medians weren’t skewed, we excluded some survey responses from our calculations. We did not include responses from incomplete surveys or those that reported earning nothing (zero) before or after graduating. We also excluded answers that resulted in any one of these figures being more than two standard deviations away from the respondent’s school average: total expenses; 10-year differences between post- and pre-MBA pay; and annualized ROI percentages. Finally, we started with the well-documented assumption that MBAs increase earning potential, so we left out responses that reported earning less after graduating than before.

After those exclusions, the number of responses per school for the six key figures averages 93, the median is 58, and 98% of the figures are based on more than 15 responses. The surveys didn’t ask the exact same questions each year, so medians for signing bonuses and student loans relied on three student surveys, while medians for expenses and pre- and post-MBA pay relied on three alumni surveys and one student survey.

Some responses are in currencies other than US dollars, so they are converted using average or spot exchange rates – the months in school for expenses, the two years before starting school for pre-MBA pay (or through June 2024 if less than 24 months elapsed), the date of the survey for post-MBA pay and the end of the graduation month for signing bonuses.

The surveys reflected information from respondents from as long ago as 2014, so all figures are adjusted for US inflation such that dollar sums reflect June 2024 values. Many respondents provided current compensation figures one or more years after graduating, so we backed out estimated raises (using the same high-skilled annual bump of 3.9%, adjusted for inflation) to estimate how much they made immediately after securing their MBA before calculating raises 10 years out.

Medians for debt amounts are calculated only using figures from respondents who reported taking student loans.

When no questions are answered (whether or not a school is selected), interest-payment calculations use a weighted average rate of 5.47% (again, discounted for inflation) over 10 years, the typical term for a student loan. The weighted average is based on the Department of Education’s unsubsidized graduate student rates from 2012 to 2022 and how many respondents borrowed in those years, also discounted for inflation. It’s used so schools’ median-based ROIs aren’t skewed by how many students attended in higher- or lower-rate years.

Once any question is answered, interest calculations are based on the DOE’s rate for 2024-25, 8.08%, unless the user changes it. For users who secure loans with interest rates below the expected rate of inflation (again, about 2.5%), the tool calculates the benefit to the borrower of such a low rate, resulting in negative interest costs that increase the calculated ROI.