Why a Top Investor Passed on the MBA: Which Grad Degrees Pay Off

Is a graduate degree worth the price? Personal finance writer Nick Maggiulli says the answer depends less on the degree than on what you would have earned without it.

Maggiulli faced the question at 27. He was five years into a career, earning six figures, and facing a ceiling on pay. An MBA looked like the way up. After checking the numbers, he found that post-MBA salaries in 2017 were not much higher than his own. Paying around $150,000 and giving up two years of income to land a similar paycheck did not add up.

The deeper issue is what economists call the counterfactual: what you would have earned anyway. Preston Cooper of the Foundation for Research on Equal Opportunity (FREOPP) built return-on-investment estimates by comparing graduates with similar people who skipped the degree. He then netted out tuition and lost income, and adjusted for completion rates.

The MBA fares badly. Its graduates have median earnings of $88,000 at age 45, but comparable people without the degree earn $83,000. MBA programs recruit from high-earning undergraduate majors like business and accounting, so the bar they must clear is high. Among master's degrees, only arts, humanities and theology rank worse on ROI, and an estimated 64% of MBA programs deliver a negative return.

Prestige matters. Higher-ranked schools tend to post better ROI across their master's programs, and many top MBAs do pay off. But the benefit is uneven. Research by Joseph Altonji and Zhengren Zhu, using Texas administrative records, found that students from lower-paying undergraduate majors gain more from an MBA or JD. Someone earning $60,000 gains far more from a top program than someone already making $200,000 or more, Maggiulli argues.

Elsewhere the picture is brighter. Master's degrees in computer science and engineering, nursing, social work and biology are less likely to lose money. Professional degrees do best. Almost 40% of medical programs and over 20% of law programs show a lifetime ROI above $1 million, with some top programs producing earnings above $350,000 a year at 45.

Doctorates are a trap for many. Among non-STEM doctoral programs, 81% have a negative ROI, and the figure for education doctorates is 84%. Length of study does not guarantee pay. The earnings premium does.

One caveat is that all of this data comes from graduates of the pre-AI era. Maggiulli guesses that graduate degree premiums, especially at elite schools, may rise. If AI hollows out entry-level work, the counterfactual earnings of people without degrees would fall, which lifts the relative return. He is skeptical that AI will take over advanced professional roles, and notes that even a capable model is not allowed to argue before a jury.

His advice is to go only if you are interested in the field, since the data can show the cost of that interest but not whether you will stick with it. Maggiulli skipped the MBA and started a weekly personal finance blog in 2017, which he says has paid off both financially and personally. He admits that is a story shaped by survivorship bias.

For anyone weighing a degree, the practical test is simple: compare the projected pay with what a similar person would earn without it, subtract the full cost, and be honest about the odds of finishing.