I will be borrowing some money to fund my upcoming MBA. Whether it is recommended I think comes down to an NPV calculation, and the details will depend on things like your current salary, expected salary after graduation and beyond, and the interest rate on the loan. There's not a one size fits all answer, but in general I think it would probably make sense to borrow if you can get into a ranked program and expect to see a sizable boost in your income. I think for a lot of the top programs the cost of the program or the interest you might pay on a loan are pretty small factors in the decision.

When I was considering schools I was looking at programs that had big differences in costs as well as big differences in reported salaries. I did an NPV to compare the programs, and included the fact that I would have to borrow a lot more for the more expensive programs than for the less expensive ones, but the average salaries were such that even over a very short period (I looked at only 5 years) the NPV for the programs with higher average salaries more than made up for their higher costs and the fact that I would have to borrow more money to attend. In the end I still ended up in a program with lower costs and lower average salaries, but that was because increased salary was not the top reason for my decision to go back to school.

Are you retiring in five years? Why use five years for the NPV?

[quote]Are you retiring in five years? Why use five years for the NPV?[/quote]

Because the purpose of the exercise wasn't really to find the NPV of any particular program, instead it was to compare programs to each other and 5 years gave me enough information to do that, adding on more years would make the NPV of every program go up, but in a similar ratio. The other part is I figure I have less information on what happens to salaries the farther out you go. I made a simplifying assumption to hold salaries constant after year 3, which is not realistic, but I don't know if there is further divergence in results, or perhaps a catch up period.

What was interesting to me was that even assuming a 100% loan fur tuition fees, and paid off within 4 years, the 5 year NPV was positive for all programs and much better than my options without the degree.

It would not go up in a similar ratio. That's why NPV is better than RoI. Over a five year period a two year investment might have a negative return, but a positive return return over ten years or 20. Too short a time-time will focus managers away from highest NPV and towards low-cost options.

[quote]It would not go up in a similar ratio. That's why NPV is better than RoI. Over a five year period a two year investment might have a negative return, but a positive return return over ten years or 20. Too short a time-time will focus managers away from highest NPV and towards low-cost options. [/quote]

That's true in general, but doesn't happen to be true in this case. Even with just 3 years of post-degree work experience all programs have a positive NPV and are ranked in order of those with the highest average salary, even though the program with the highest salary was also more than double the cost of the less expensive programs. Adding in more years gives me higher NPVs across the board of course, but doesn't do anything to change the relative rankings.

But my comparison is for an EMBA which means I won't be giving up my existing salary while I'm in the program. So the only expense for me is the tuition plus some travel costs. I can pay that off over 3 years, and still have a sizable increase in my earnings each year compared to what I make now if I was to get in the vicinity of the average salary for each program. (Of course for an EMBA program like mine the only salary data I've been able to find is from FT, and I'm not sure how much PPP is distorting the results since ~3/5 of my cohort will be from EM countries, so I don't know how confident to be in the salary data from a US/EU perspective).