The MBA class of 2012 entered the job market during uncertain times. The worst of the financial crisis was over, but unemployment was still 8.2% nationally and big banks were licking their wounds from massive losses triggered by the subprime mortgage crisis. Nonetheless, most grads from the top 25 U.S. business schools landed on their feet, with 90% securing jobs within three months of graduation.
Total compensation for those grads reached $177,000 on average last year, up 9.2% annually since graduation (before inflation). The growth rate is on par with the class of 2010 from elite programs. Both figures are well ahead of the U.S. average, which was 2.7% over the past five years, according to the Bureau of Economic Analysis.
The result: the average payback period for graduates of top 25 schools on their investment in an MBA (tuition and forgone salary) was 3.9 years, similar to two years prior (4 years). However, both are off substantially from the pre-financial crisis classes of the late 1990s, for whom the payback period averaged 2.7 years.
The University of Pennsylvania’s Wharton School ranks as FORBES’ best business school in the U.S. for the first time in our 10th biennial ranking with a “5-Year MBA Gain” of $97,100. The previous high-water mark for the business school was second in 2001 and 2005. Wharton ranked seventh in 2015.
The Wharton School was the first collegiate school of business established in 1881 when iron miner Joseph Wharton donated $100,000 to U Penn to found a “School of Finance and Economy.” These days most Wharton MBA students head to finance or consulting jobs upon graduation (79% of the class of 2012), which traditionally are the most lucrative areas for MBAs. The concentration in these sectors pushed Wharton’s current total compensation for the class of 2012 to the highest of any school in the world at $225,000.
The top employer for the 2012 class was consulting firm McKinsey, which hired 53 out of 805 Wharton graduates. Other major employers: Boston Consulting Group, Bain, Deloitte and Goldman Sachs. The biggest employers for the most recent class were the same outside of Amazon.com replacing Goldman Sachs.
“Wharton was a great springboard to make a transition geographically and job position-wise with a strong brand name and network as well as providing practical knowledge,” says Thomas Jueng, who traded a telecom job in Seoul for a venture capital career in Menlo Park, Calif., upon graduation.
Our ranking of business schools is based on the return on investment achieved by the class of 2012. We examined more than 100 schools and reached out to 17,500 alumni around the globe. We compared graduates’ earnings in their first five years out of business school to their opportunity cost (two years of forgone compensation, tuition and required fees) to arrive at a five-year MBA gain, which is the basis for the final rank. Schools whose alumni had response rates below 15% or a negative return on investment after five years were eliminated (click here for a detailed methodology).
Stanford Graduate School of Business fell one spot overall to second after two straight editions ranked first. The Class of 2012 arrived in Palo Alto with a pre-MBA salary of $80,000, which rose to $215,000 last year. Stanford’s five-year MBA gain is $92,500, which is boosted by hefty stock options. One-third of Stanford respondents from the class of 2012 reported receiving options with a median value of $380,000.
Stanford’s five-year gain was dinged by the extremely high cost of living in the Bay Area (we adjust salaries for living costs when calculating the five-year gain). Sixty-percent of the class of 2012 took jobs in the West upon graduation.
Stanford remains nearly impossible to gain entry to with a 6% acceptance rate – the lowest in the world (Harvard and MIT Sloan are next lowest at 11%). But upon graduation, members of Stanford GSB have their pick of jobs with highly sought-after landing spots Apple, Bain, Boston Consulting Group McKinsey and Warburg Pincus the top employers for last year’s class.
Students rave about their two years at Stanford citing the people (both students and professors), the network and the entrepreneurial spirit. “Stanford GSB is not a destination of education, but an ignitor for lifetime learning,” says Frances Kang, class of 2012.
Harvard Business School ranks third with a five-year gain of $89,600. HBS students benefit from the school’s massive endowment, which was $3.3 billion in 2016 and nearly $2 billion higher than Stanford’s $1.4 billion. The result is roughly half the 900-plus person class receives a non-repayable scholarship award of more than $65,000 on average. The money helps offset the cost of Harvard which is the highest in the nation for the Class of 2018 at $154,000 for tuition and required fees.
Tuition and fees at a top 25 MBA program average $119,000 these days with HBS at the top. The cost is up 60% over the past decade for top MBA programs, but schools are supplementing the costs like never before. The average scholarship award has doubled during the same time and they are reaching a greater percentage of the student body.
Rounding out the top five schools on our list of U.S. MBA programs are Northwestern’s Kellogg School of Management ($84,800) and the Tuck School of Business at Dartmouth ($81,200).
Incomes five years out of school were up $18,000 for 2012 Wharton grads compared to their classmates two years prior, but many top schools witnessed a decline. Stanford’s total comp was off by $40,000 and Harvard dropped $28,000 to $212,000. Columbia and Chicago (Booth) had smaller decreases. Yet in many cases in the 4,000-plus surveys we received, incoming salaries were also lower, which kept the five-year gains high.
The average five-year gain at the top 25 schools was $70,100 or $8,400 more than two years ago.
Even with increased financial aid, an MBA is a huge investment, topping $300,000 in tuition and forgone salary at an elite school like Harvard, Stanford or Wharton. But our numbers show that a degree from a top school invariably pays off.
Yet, many students are getting MBAs outside of the best programs, with the number of degrees granted in the United States more than double the total from 20 years ago. There were 106,919 MBAs awarded during the 2014-15 school year, according to the U.S. Department of Education. It appears some potential students are reconsidering the hefty cost of getting an MBA. The number of MBAs issued has declined for three straight years for the first time in at least a quarter-century.
Update: The original rankings included an incorrect tuition figure for the University at Buffalo School of Management. The change improved Buffalo's rank from 52 to 42 and moved schools previously ranked 42 to 51 down one spot.
