How Declining Applications Have Created a Buyer’s Market for MBAs

Suddenly, it’s a buyer’s market for MBA degrees. This may be the best time in history to enroll in MBA programs in the United States—and it’s certainly the best time to apply for MBA degrees since the dot-com boom of the late 1990s.

Applications to U.S. MBA programs had been sliding for some time, with the 2017-2018 academic year marking the fourth straight year of decline, but nobody had predicted the way that MBA applications would fall off a cliff that year, which shocked many observers.

For the first time in history, applications plummeted across-the-board, even at the top-ranked business schools in America. Not even M7 schools like the University of Pennsylvania’s Wharton School or Harvard Business School escaped a decline in applications. Harvard’s 4.5 percent loss was the greatest annual drop in 14 years.

The average application drop at the top ten schools amounted to 4.9 percent, but some schools sustained much greater losses. Among the M7, the University of Chicago’s Booth School of Business—currently ranked third by U.S. News and World Report—was the most severely impacted, with an 8.2 percent decrease. Wharton, the top-ranked school, followed not far behind at 6.7 percent.

At Rice University’s Jones Graduate School of Business, whose full-time applications plummeted almost 28 percent to 587, the associate dean of degree programs George Andrews told the Wall Street Journal “People are thinking, ‘Oh my gosh, if the top is struggling to find applicants, what are the rest of us going to do?’”

“Those top-tier programs were, until recently, thought to be immune to the shakeout plaguing less-prestigious programs,” wrote Wall Street Journal’s management education reporter Kelsey Gee. (Interestingly enough, Gee herself holds a degree from one of those top-tier universities, the University of Chicago, in political theory.)

What’s more, the next 15 highest-ranked schools on average sustained double the 9.7 percent decline of the top-ten schools. Here are the stats that shocked analysts:

University Percent Decline (%)
Rice University 27.7
Vanderbilt University 23.9
University of Minnesota 20.5
University of Texas–Austin 19.6
University of North Carolina 18.3
University of Virginia 16.7
Georgetown University 16.2

Among United States business schools, 70 percent reported declines in applications to their MBA programs. These schools also reported a seven percent decline in overall application volume, according to GMAC, the Graduate Management Admissions Council.

2018-2019: “The Falloff Has Been More Severe”

According to sources who spoke to Poets & Quants, last year, “the [application] falloff has been more severe.” Although the schools won’t release official statistics for several more weeks, many observers expect the 2018-2019 academic year to make history as the second consecutive year of application declines at top-ranked business schools. The publication suggests that last years’ demand at these schools has been even weaker than in 2017-2018, with application declines “between 5 percent and double digits.”

In an April 2019 report, P&Q relayed comments to that effect from several admissions officers. For example, the candidates offered admission to the Tuck School of Business at Dartmouth College this year landed double the number of offers as usual from competing schools, said Tuck’s Executive Director of Admissions and Financial Aid, Luke Anthony Peña.

Some senior admissions officials at top ten-ranked MBA programs provided comments on conditions of anonymity. One told Poets & Quants:

I would not be surprised if schools had to go deep into their waitlists or have to shrink their classes. It’s the collective impact of so many schools being down that is unique. When you have this many schools down, and many are down for two years in a row, yield is going to be a nightmare because everyone has had to dig deeper in the pool.

Admissions consultants weighed in as well. MBA Mission’s Jeremy Shinewald observed, “To say that it is a buyer’s market would be an understatement.” From the MBA Exchange’s Alex Min:

This is an unprecedented period of ‘buying power’ for admits that won’t last forever and shouldn’t be ignored. It’s a great time to be an MBA admit, especially for those who have more than one offer of admission in hand. As many top-tier schools experienced flat or reduced applicant volume this past year—and anticipate more of the same in the upcoming year—adcoms are under pressure to protect their yield by digging a bit deeper into their applicant pool. We are seeing some clients getting accepted or waitlisted by one or two more schools than usual.

Tuition Freezes at Top-tier MBA Programs

In May, both Harvard University and the University of Chicago froze MBA tuition at the previous year’s levels. U.S. News and World Report currently ties both HBS and Booth in third place in their Best Business Schools ranking of on-campus programs.

This is a shocking effect of this buyer’s market for several reasons. First, this may be the first time in history that two top-three MBA programs froze tuition simultaneously.

Second, the move sends a message to prospective applicants that these schools understand that MBA program sticker prices are too high and are discouraging candidates from applying. Arguably, a bubble has developed in the market for MBA programs. When the price range of a product exceeds the inherent value of that product, economists say that a bubble has developed in that product’s market. Some analysts have warned for years that steady annual tuition increases at such schools of about 4.5 percent on average—price hikes that now have pushed total costs above $218,000—have greatly outpaced increases in salaries for MBA graduates.

Third, big-ticket schools like HBS and Booth rarely—if ever—take such steps unless they are forced to do so. Competitive pressure may have been one of the factors that drove the freezes.

It’s perhaps no coincidence that Booth and HBS froze tuition during the same week that the University of Illinois announced the school would end their on-campus MBA programs to shift resources to its $22,000 iMBA online program. The Illinois iMBA program is growing so rapidly that the school is on track to receive about 3,900 applications next year. That volume would exceed applications at every residential MBA program below the M7. It also would fall just below the current application volume at two such M7 schools: Booth with 4,289 applications and Northwestern’s Kellogg School of Management with 4,471.

For more about the shockwave Illinois iMBA announcement detonated throughout the industry, see our trend report “The Exploding Demand for Online MBA Programs.”

The Effects on MBA Scholarship Offers

Besides more admission offers, some candidates are receiving more scholarship offers. According to ApplicantLab’s Maria Wich-Vila, most business schools don’t typically offer scholarships. However, this year certainly isn’t typical.

Both Booth and HBS decided to boost scholarship funding as well as freezing tuition. The 50 percent of MBAs fortunate to receive Harvard’s fellowship grants will on average receive $40,000, a $3,000 increase over 2017, with most grants between $30,000 and $70,000 annually. That’s about a 30 percent discount off the sticker price of an education at the Harvard Business School.

MBA Mission’s Shinewald also observed:

We are seeing massive amounts of scholarship dollars being thrown at applicants, regardless of need and, in some cases, clearly where there is no need at all. We also are seeing international applicants receive scholarship offers in a way that has in the past been highly unusual—an international applicant with a lower than average GMAT and no financial need received $50K per year from an M7 school.

Alex Min told P&Q that “schools are being more liberal with merit-based aid. In turn, savvy admits are being more assertive in requesting and negotiating financial awards before they commit to enroll.”

He recounted a case where one of his clients won entry to three top schools during the second round. Two of the schools offered her scholarships. She negotiated for even more money, and both schools boosted offers by up to 20 percent.

Master Admissions’s Betsy Massar also reported seeing tuition discounts and “more money to lure candidates:”

I’ve seen a few cases of students having their financial awards increased, without even asking pretty please. Having said that, it is mostly women who are getting financial attention. It is a buyer’s market if you have all the right boxes checked.

Causes of the MBA Buyer’s Market

Besides the overpriced tuition bubble at many highly-ranked MBA programs, other causes for this buyer’s market exist.

The hot economy in the United States is one cause—although there is evidence that a downturn is coming. Graduate management education is well-known to be counter-cyclical: during economic contractions, MBA program applications surge as applicants seek a safe harbor. But during expansions like the one we’re in currently, applications decline because jobs and opportunities for career growth are abundant, and many potential applicants see less of a need for an MBA degree.

But during the last few decades, the United States has experienced several other expansions, and none of them resulted in such dramatic drops in MBA program applications, tuition freezes, or surges in scholarship offers.

What other causes are in play?

Immigration and the “Disturbing Question”

After declining gradually since 2009, interest among students outside the United States in coming to study for a graduate business degree at a U.S. university tanked during the past 24 months.

According to the Wall Street Journal, international students submitted 11 percent fewer applications last year. Then, according to an April 2019 report by GMAC, a preference for studying in the U.S. plummeted from 48 percent in 2016 to 40 percent in 2018—a 17 percent decrease overall. During this interval, the preference for studying in Western Europe skyrocketed from 31 percent to 40 percent—a 29 percent increase.

GMAC attributed the cause of the decline in international student MBA program applications at U.S. to “likely driven in part by the current political climate.” Most other observers agree, including this admissions officer: “It’s the opposite of a welcoming environment when babies are being separated from their parents at the border,” says one director of MBA admissions, not wanting to be quoted by name.

Andrews adds,

One hundred percent of our decline was international, with applications from India and China down by 40 percent, give or take a percent. Our domestic applications were actually up. When we talked with other schools about the falloff, the political climate was something that got mentioned regularly.

The Trump Administration’s anti-immigration policies have discouraged many potential candidates who are citizens of other nations from applying to U.S. business schools. Typically, international students who study for graduate management degrees in the United States also need employment visas so they can interview on campus and accept summer internships and their first post-graduation jobs in the same country. But obtaining U.S. work visas no longer amounts to the certainty that it once was.

What surprised many about GMAC’s report was that prospective students were less likely to select the United States than other destinations because of concerns over physical security and safety.

Starting in mid-2017, Bill Boulding—GMAC’s chair and the dean of Duke University’s business school—started to hear a disturbing question during overseas trips. Boulding told Poets & Quants that “parents in India want to know if their children will be safe” on a university campus in the United States.

“It is terrible. To hear that question is so opposite of the community we’ve worked so hard to build. It hurts to hear it,” he said.

Boulding said the drop in applicants from outside the United States largely drove Duke’s 6.2 percent decrease during the 2017-2018 academic year. “There’s no doubt that immigration policy is having a negative impact on U.S. business schools,” he said.

With a possible economic correction on the horizon, applications to MBA programs may pick back up, but in fall 2019, it’s still a buyer’s market.

Douglas Mark
Douglas Mark

While a partner in a San Francisco marketing and design firm, for over 20 years Douglas Mark wrote online and print content for the world’s biggest brands, including United Airlines, Union Bank, Ziff Davis, Sebastiani, and AT&T. Since his first magazine article appeared in MacUser in 1995, he’s also written on finance and graduate business education in addition to mobile online devices, apps, and technology. Doug graduated in the top 1 percent of his class with a business administration degree from the University of Illinois and studied computer science at Stanford University.

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