Military MBA

There are two costs to consider in acquiring an MBA: out-of-pocket costs and opportunity costs (or foregone income). Out-of-pocket costs (including living expenses) at well-known schools can total $50,000 to $60,000 per year although at some state-supported institutions, the amounts can be 20-30% lower.

Most MBA candidates for a full-time program expect to pay these costs from a variety of sources. The most-often cited sources are: personal savings, loans, and grants or scholarships. Some plan to continue working on a part-time basis.

Individuals who have recently served in the military are likely to have access to benefits under the GI Bill. Currently, for full-time students, these benefits are close to $1,000 per month for up to 36 months. Most MBA programs offer financial aid, particularly for applicants who are well qualified (based on GMAT score, work experience, etc.). While the amount of aid and the percentage of the incoming class receiving it can vary widely, it is not unusual to see as much as 50% of an entering class receive some aid with the amount ranging from 20% to 50% of tuition. In some instances, such scholarships or grants are larger with a few covering full tuition and providing a modest stipend for other expenses.

Low interest loans are also readily available because the perceived earning power of MBA degree holders is reasonably high. Currently, interest rates on these loans are in the 6% range. In most cases, all interest and principal payments are deferred until after graduation.

Finally, many MBA students work part time. In addition, spouses will often supplement household income with a full- or part-time position. In addition, often individuals with military experience may retain the benefit of shopping on military bases (assuming one is near the school attended), partially lowering living costs.

The second cost, foregone income, is recouped by the enhanced earning prospects associated with obtaining an MBA. Recent research indicates that military officers who obtain an MBA from a recognized school immediately after separating from the service earn approximately $105,000 per year in their first position after graduation. If we assume that salary at separation from the service is $50,000 and it takes two years to obtain a degree, the opportunity cost is $100,000. It is fairly easy to see that, on a simple payback basis, those funds will be recaptured in 2-3 years, even if earnings are reduced by repayment of an education loan of some reasonable size.

So, for an individual with access to GI Bill benefits, a simple cost-benefit analysis might look like this.

Out-of-pocket costs:	$120,000	(including living expenses)
Less (GI Bill benefit):	$ 24,000
Less (Scholarship):	$ 21,000	(@ 30% of $35,000 tuition for 2 years)
Less (Savings):	$ 25,000
Less (Part-time work):	$ 10,000
Amount to be financed:	$ 40,000
Or loan payments of approximately $1,000 per month for 4 years

Forgone Income:	$100,000	(2 years @ $50,000)
Salary differential:	$ 55,000	(annually $105,000 versus $50,000)
Loan payments:	$ 12,000	(per year)
Available to offset forgone income:	$ 43,000
Or, a payback of approximately 2-3 years assuming no bonuses or salary increases.

Obviously, the numbers will vary based upon whether the school you attend is in a big city or a small one, the size of your family, etc. Still, even a 25% increase in cost only results in loan payments for an additional 2-3 years.

This is a simple analysis using averages. However, it shows, like the opinion shared by most military officers who are satisfied with their MBA, that the benefits of doing so far outweigh the costs associated with getting a graduate degree.