The 1990s are the Golden Age of MBAs. Since 1990, average starting salaries for graduates of the top 25 business schools have jumped 30%, to about $77,500, according to data from BUSINESS WEEK's student surveys. Applications to B-school have soared, and this fall some 30,000 students at 300 accredited schools are starting the two-year program they hope will transform their careers from mediocre to meteoric--and make them rich in the bargain. There's just one smudge on this otherwise bright picture: You could practically start a business on the $75,000 to $200,000 it costs to get through B-school today.

That raises a question: Just how good a deal is an MBA? Is the return on your mortgage-size investment worth trading your current profession for two years of B-school hell? Before you say "Duh!," remember two things: Demand for MBAs fluctuates with the economy and stock market. And the amount of time it takes to earn back the cost of a degree varies dramatically, depending on the school you attend and the job you land. While you can't do much about the economy, you might want to factor in a school's return on investment (ROI) when making your picks.

To help you do that, BUSINESS WEEK once again asked Jens Stephan, academic director of MBA programs at the University of Cincinnati, to help us figure out which schools offered the fastest and slowest ROI (table). Stephan, who helped with BUSINESS WEEK's first ROI project in 1996, this time used the data collected from 6,020 members of the Class of 1998 at 61 B-schools.

The winner for the second time in a row was the University of Pittsburgh's Katz Graduate School of Business. The one-year program produced the best projected return--a median ROI of 3.7 years. Close behind, with a median ROI of 3.8 years, was Clark Atlanta School of Business Administration, a small minority-oriented two-year program based in Atlanta. At the other end of the spectrum, grads of Case Western Reserve-Weatherhead School of Management are expected to need 7.2 years to break even on the cost of their MBAs. Harvard Business School grads will need 5.7 years.

WRITING CHECKS. On balance, the news is good: Business school looks like a better deal than it was in 1996. Stephan says it will take four to seven years for the Class of 1998 to recoup its investment--down from the five to eight years projected in 1996.

That's an encouraging sign, since B-school is the biggest investment most entering MBA students, with an average age of 26, will have made. The costs average $40,000 for two years of tuition (based on pretax dollars) plus $80,000 or more in missed salary from the jobs left behind. (Nearly all B-schools in our survey require work experience.) Those who like writing checks can head for Harvard or Stanford, the two most expensive B-schools, where costs (including foregone salary) are $196,923 and $183,846, respectively.

To calculate a school's ROI, Stephan first looks at a student's investment--the two years of tuition and the two years of foregone earnings from the previous job. Next, he adds a grad's post-MBA salary to a signing bonus and other compensation (guaranteed yearend bonus, relocation costs, etc.) and subtracts the pre-MBA salary. He then determines a grad's MBA pay increase, starting the ROI clock in Year One of B-school. In Year Two, he uses the salary increase plus half of the first year's signing bonus and other compensation. That's because it's unlikely students will take a huge pay cut after their first-year bonus. From that point on, Stephan assumes a 10% salary increase; less than a Wall Street banker sees, but about double the average raise for U.S. managers.

Pitt tops the list because its MBA program lasts only one year, halving the investment of its students. Moreover, the Class of 1998 walked away with a 69% salary increase over its pre-MBA income. For the rest, all of which require two years of study for most of their students, there are essentially two paths to the top of the ROI list: particularly low tuition or unusually high pay gains over pre-MBA incomes for new grads. The first group is populated mainly by public schools, such as the University of South Carolina, University of Tennessee at Knoxville, Arizona State, Michigan State, and the University of Iowa, which boast an average payback period of 4.2 years for out-of-staters. In-staters get an even better deal: 3.8 years.

On the salary side, the leader is the Yale University School of Management. Even though Yale's tuition was $23,100 a year, starting pay for its class of 1998 averaged $80,000, an 111% gain over grads' pre-MBA salaries and the highest percentage increase in our universe. A reason for the big gains: Yale attracts a large group of nonprofit and government workers, who tend to be lower paid. Clark Atlanta and Brigham Young University's Marriott B-school, also private, turned in high ROIs with a mix of modest tuition and high percentage salary gains.

HEAVY HITTERS. Most laggards on the ROI list are private schools. They tend to charge the highest tuition, and, in some cases, students come from high-paying jobs, so their percentage increases in post MBA pay are only average. Harvard, for example, charges $25,000 for tuition, while its grads leave the school with only a 50% pay increase from their pre-enrollment $60,000. That compares with an 81% average salary increase for grads of the top 61 schools.

For the first time this year, we also calculated ROI by career choice--and found that the occupations posting the best ROI were finance, consulting, and marketing (table, page 178). It's not surprising, then, that 63% of the survey respondents chose finance or consulting for a post-MBA job. Other tracks were operations, information technology, entrepreneurship, accounting, human resources, and nonprofit. MBAs who went into consulting gained an average salary increase of 96%, while students who chose to work for not-for-profit ventures, the lowest paying job track, ended up with only a 40% raise.

Oddly enough, the heaviest hitters in finance and consulting--University of Chicago, University of Pennsylvania's Wharton School, Columbia, Stanford, and Harvard--don't stand out any more in the job-track comparison than they do in the school-by-school comparison of ROI. Instead, it's Yale's grads, again, who pull down the highest increase in starting salary. Yale placed 39% of its 998 grads into consulting positions, netting them a 154% pay increase.

Bart Borosky, a 1998 Yale grad, is a case in point. A product manager in the high-tech industry, he wanted to switch careers. "Getting your MBA, you can do anything," he says. "But you have to pay for your education, so I was hoping to make more [money] coming out than going in." His new job as an operations consultant at Booz Allen & Hamilton pays in the low six figures, twice what his old one did.

In the finance track, Iowa and Brigham Young provide the quickest return as low tuition and pay gains of 105% and 148%, respectively, give them a payback period of just 3.5 years. In info tech, Arizona State had the fastest ROI time--four years, thanks to salaries more than doubling.

While the ROI analysis offers a lot, it doesn't take into account intangibles such as the all-important alumni network. Says Stephan: "It does not capture the long-term benefit of the MBA or the `reputation effect' of a school. It's a short-to-intermediate-term analysis." That point was dramatized by a survey BUSINESS WEEK did in 1992 of alumni who had graduated from one of the top 25 MBA programs five years earlier.While the difference in average starting salary for StanforD and Indiana grads coming out of school in 1988 had been $30,000, five years later the gap had more than tripled.

Still, investing $180,000 in a degree from a top-tier B-school vs. half that amount in a school that isn't quite as prominent is a tough decision. Take Nathan Manwaring, a 28-year-old accounts manager at Procter & Gamble in Salt Lake City and a '98 grad of the University of Tennessee-Knoxville's B-school--No.4 on the ROI roster. He worked for a Chinese transportation company before returning to school. He concluded it was cheaper to attend UT as an out-of-state resident than to apply at the University of Virginia's Darden School as an in-stater. In his new P&G job, he has tripled his earnings, not including his signing bonus. He has no loans, and, like the typical UT grad, will earn back his entire MBA investment in roughly four years, including the two he spent in school. That's not a bad deal--one among many that merit a close look at a B-school's ROI.

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