MBA remains the most popular master‘s degree among Indian aspirants and considered a holy grail towards a successful and well paying corporate career. Last year, about 2,15,000 aspirants appeared for CAT and approximately 30,000 undertook GMAT in India.
There are more than 3000 Business schools in India offering MBA to aspirants. While evaluating whether to go for MBA or not one should objectively evaluate the decision on parameters of overall Return on investment, opportunity cost, tuition fees, preparation cost, badge value, alumni network, choice of career etc. to clearly understand the real cost of doing an MBA. The impact of the decision to pursue an MBA on personal finance can be long lasting.
1. The tuition fee and cost of living
This is the most significant cost one needs to consider. A two year residential PGP programme at premiere institutes in India will cost one an average of Rs 12-15 lakhs. B-school participating in GMAT generally accepts more experienced candidates and fee levels are higher. One should be ready to spend an average of Rs 20-25 lakhs in India and about Rs 70 Lakhs abroad. Education loan is available from various Indian banks against collateral security and/or co-signors at 10.5 to 12% floating rate of interest.
2. The opportunity cost
The whole idea of going for an MBA is to either accelerate or change one’s career. While deciding on MBA one should carefully consider the opportunity cost. Opportunity cost includes foregone salary, professional experience and perhaps a promotion. One should also evaluate the future value of any asset (by retirement age) which one could have invested into using the tuition fee and cost of living mentioned in Point 1 above.
3. Preparation cost:
There are many players in the education industry solely focusing on MBA. An average cost of classroom coaching for written exam is around Rs 25000. Add another Rs 25000 for interview preparation and essay writing especially for GMAT aspirants.
4. Cost of application
CAT application fee is around Rs 1600 where you are eligible to apply to programmes from IIMs. If you want to apply for other B-schools accepting CAT, you must pay for their application forms separately which costs approximately Rs 1500-Rs 2000. For GMAT costs are higher. Cost of taking GMAT once is US $250 and cost of sending additional score report for each b-school is US $28. Besides, one need to buy application forms of each Business school which costs about US $200 for each school.
Cost of doing an MBA has a significant impact on individual and his family. One not only needs financial support but also emotional support from the family. It is important to clearly evaluate MBA option along with the impact on personal finance both in short as well as long-term. It’s important that benefits of doing an MBA considerably outweigh financial costs associated with it.