Is it still worthwhile to study abroad?

As China's economy continues to grow and its post-secondary institutions become more prestigious relative to global elite schools, undergraduate students these days may wonder about the merits of studying abroad. Could it be better to complete a master's degree in China? Or better yet, to begin working with an undergraduate degree and possibly pursue an MBA later to accelerate one's career?

Today, I hope to shed some light on this topic. To facilitate quantifiable results, I’ll primarily address the issue from a “return on investment” (ROI) perspective. (There could be other reasons why you may want to study abroad, such as a desire to make a career/major change or to experience life in another country. These are also legitimate reasons.) Additionally, since I only have expertise with graduate business programs, I’ll focus my discussion on such programs and the careers related to them.

If ROI is the most important metric, then I think the following three scenarios cover the vast majority of cases where studying abroad could be worthwhile.

1. If you want a Beijing/Shanghai hukou, studying abroad is probably the easiest way to get it.
2. If you planned to work immediately following your undergraduate studies but you didn't get a return offer from your summer internship or you received no offers from fall recruitment in your senior year (秋招), applying to programs abroad is a good plan B in case spring recruitment (春招) also does not work out.
3. If you are unable to get into a master’s program at a “target school” in China for your desired jobs, studying abroad provides more options.

Hukou considerations

For students with families who wish to relocate to a tier 1 city in China, studying abroad presents a compelling ROI. Aside from programs in the US, which are generally more expensive, the total cost of attending a graduate program abroad is between 300,000 and 500,000 RMB. In return, we receive a master's degree from a reputable university (which has the happy side effect of making us more employable) and eligibility for a hukou in a city such as Shanghai if we find a job here.

Tier 1 cities in China enjoy greater economic growth than the country as a whole, higher average incomes, and better long-term prospects in various sectors from technology to real estate. To give one ROI example, having a Shanghai hukou makes one competitive for purchasing an apartment in a new complex. Such developments normally sell for below market price and are reserved for Shanghai residents with families who currently do not possess property in the city.

Plan B

Things don't always go according to plan. Perhaps there was an economic downturn, or you could be faced with a regulatory armageddon like what happened with the Chinese K-12 industry a few weeks ago. Your return offer from your summer internship could have been rescinded, or your fall recruitment didn't work out.

In such cases, if you can afford to, it’s better to invest in a graduate degree abroad than to be unemployed (or to agree to work at some year-long internship with no guarantee of a return offer).

Normally, spring recruitment is the plan B. That said, it doesn't hurt to apply to a few graduate programs just in case. A sluggish economy takes a while to turn around, and pursuing a graduate degree gives you the right amount of time on the sidelines to wait it out.

Target schools

The tables below give an approximate idea of which university backgrounds match with which types of careers/roles. The starting salary figures are annualized, after-tax rough estimates.

In general, plan to study abroad if:

• Your current undergraduate background is not enough to get you into at least Base Case roles, and your GPA is not high enough to guarantee you admission to a "target" graduate program in China (保研).
• You are capable of getting Base Case roles, but you want to reach Good Case or Ideal Case roles and a top graduate program overseas would make you a competitive candidate.

Return on investment

The following chart shows very rough calculations for salary growth for Base Case, Good Case, and Ideal Case roles over 10 years, as well as cumulative differences between the three.

Keep in mind that this is for illustrative purposes only - salary growth is generally quite high during the early career stage, but it's uneven (depending heavily on whether you change companies) and could stagnate during the mid-career stage (which is why professionals sometimes pursue MBAs).

It's clear that so long as we achieve our employment-related goals through our studies abroad, the payback period should be three years or less. Of course, the key consideration here is how confident we are in achieving our career goals. (This is an approximate expected value calculation and different for everyone.)

What about an MBA?

Many students think that they must choose between pursuing a master's degree now or an MBA later. Actually, these degrees are not mutually exclusive, and many people do both.

In terms of ROI, there is likely to be little difference between the following two paths:

• Undergraduate degree, work in Base Case role for 4-5 years, top MBA, Ideal Case role
• Undergraduate degree, graduate degree abroad, work in Good Case role for 4-5 years, top MBA, Ideal Case role

Obviously, the above progressions are by no means automatic. Ultimately, an MBA's function is to make certain transitions possible - for example: moving from a Chinese firm to a foreign firm; from working in Shanghai to working in Hong Kong or Singapore (or maybe even London or the US); or from a tier 2 consulting firm to MBB.