U.S. News Data: Online MBA Not Always a Cheaper Option

When Alexander Mabin was choosing his online MBA program, the decision came down to cost.

His two choices would have been envy-inducing for many: Indiana University--Bloomington's Kelley Direct program or the University of North Carolina--Chapel Hill's MBA@UNC, both tied for No. 1 in the U.S. News Best Online MBA Programs rankings.

[Explore the most expensive public online MBA programs.]

In the end, the Virginia resident opted for Indiana's program, which was easier on his wallet than UNC's.

Although price played a large role in Mabin's decision, he was only comparing online programs. Mabin, an executive vice president of a marketing agency, says he didn't think much about whether his online degree would be more or less than a business degree at a brick-and-mortar school.

"My gut would say that it shouldn't be quite as expensive as the on-ground, traditional version," says Mabin, who assumed online programs would be cheaper since they don't have the overhead associated with maintaining buildings.

While that may seem intuitive, online part-time MBA programs aren't always cheaper than their brick-and-mortar counterparts at the same school, according to a U.S. News analysis. In-state students attending part-time MBA programs online pay the same or more per credit in 2014-2015 than their in-person counterparts at 44 of the 48 ranked public schools that submitted comparable tuition data to U.S. News.

At the 15 private schools that reported the data, all but one charges part-time online students the same per-credit price or more. Attending school part time is a popular choice for online students, many of whom are working while in school.

The fact that online MBA tuition is not always a bargain comes as little surprise to Jay Halfond, who teaches management and higher education at Boston University, where online students also pay more -- a $50 technology fee per credit -- for their master's degrees in business.

"I'd be very surprised if any university undercuts its own prices in terms of an online degree," says Halfond, former dean of Metropolitan College, Boston University's adult education arm.

By charging online and in-person students the same amount, he says schools are sending a message that each program is of equal quality.

[Learn why it may be easier to get into online MBA programs.]

That doesn't mean that students can't find cheaper online options, especially if they're willing to look around more broadly. Among the 48 public schools that submitted comparable part-time tuition data to U.S. News, more than half charge their out-of-state students less per credit for attending online than for attending in person.

And while individual schools may charge similar rates for both types of programs, part-time students pay less on average per credit for online MBA tuition, U.S. News data show, though students should keep in mind that the number of credits required varies by program.

Online students pay an average of $690 per credit for in-state tuition and $748 for out-of-state tuition at the 188 schools that reported data to U.S. News. That compares to an average per-credit cost of $803 for in-state students and $1,063 for out-of-state students who attend part time in person at the 228 schools that reported that data.

Still, Halfond and others argue that online education is just as costly for universities as their brick-and-mortar programs.

While online programs don't have all those classrooms to maintain, they say virtual programs require specialized faculty training, tech support, online academic advising and other components that quickly outpace savings gained from operating without buildings.

At the MBA@UNC program at Chapel Hill, for example, each course needs to have 50 to 80 hours of high-quality video produced, says Dan Bursch, director of the program. Live classes are capped at 15 students, so the school needs to hire more faculty than a program that puts 50 students in a course, he says.

While current students in the MBA@UNC program pay a total of $96,775 -- the highest total program cost of any school that reported the data to U.S. News -- Bursch is not apologetic.

"If you see a degree program putting significant resources into the program, then it's worth the cost," he says.

But not everyone agrees that online programs are just as expensive to run as brick-and-mortar operations.

"I think they should be cheaper because the overhead costs required to deliver an online MBA are lower," says Phil Powell, chairman of Kelley Direct, the online branch of Indiana University's business school.

He likens online MBA programs to virtual office space. When employees work from home, their company saves money by not having to fund a large, expensive headquarters, he says.

At Indiana, online students pay a total program cost of $61,200, whereas the full-time MBA is $88,920 for out-of-state students, Powell says.

[Learn how to become a good candidate for MBA scholarships.]

"I think there is a fixed cost to establishing a program, but after you have done it for two or three years you don't have to incur those costs anymore," he says. "Schools need to recognize that online MBAs are a disruptive change in the marketplace and with any disruptive change you deliver a better product at a lower cost."

Mabin agrees that paying lower prices for online programs makes sense, though the Indiana student wouldn't want to see the price of his program fall too far.

"I don't think you want it to be a bargain-basement situation," he says. "There's probably a sweet spot somewhere in the middle."

Trying to fund your online education? Get tips and more in the U.S. News Paying for Online Education center.

Devon Haynie is an education reporter at U.S. News, covering online education. You can follow her on Twitter or email her at dhaynie@usnews.com.