College vs Grad School

newmassdad
Mon, 09 Jun 2008 11:43:09 +0000

Sakky,

I presume you mean the FINANCIAL payoff.

I take it you give no consideration to quality of life, intellectual challenge and such in your “payoff” mental formula?

As long as we’re being strictly financial, let me take issue with your earlier comment about the PhD approach being a good deal.



So let’s work out the math. Let’s say that you graduate from college and get a good job for 2 years, paying $60k a year. I think that’s highly optimistic for somebody with an anthro bachelor’s, but let’s just say that it’s true. Then, assuming you go to HBS for 2 years, you pay about 50k a year in tuition and other fees. So, after all that, you’re a net positive 20k.

Cost Summary - Harvard Business School MBA Program

On the other hand, you go to Harvard for an anthro PhD right out of undergrad. You don’t pay any tuition, and indeed, you actually get paid a stipend of around 23k or so. So at the end of 4 years, you’re a net positive $92k. If you both end up with the same McKinsey associate level job, it is quite clear who came out ahead. In fact, her strategy turned out to be a brilliant way to get into consulting. Why pay to get a degree from Harvard if you can get paid to get a degree from Harvard, especially when, career-wise, you both end up at the same place anyway?



Unfortunately, you forgot opportunity cost in your quickie calculation. The correct math goes like this:

Year MBA PhD
1 -110 -60
2 -110 -60
3 120 -60
4 120 -60
5 120 -60
6 120 -60
NPV 168 -295

this is at a discount rate of 6%, 60K foregone salary and 50K annual cost for the MBA, A Even if you assume the “true” yearly cost of a PhD is “only” 37K (i.e. 60K forgone salary less 23K stipend), the PhD is still in th ehole 182 K at graduation.

If this is your idea of a good deal, Sakky, go for it!