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You are here: Home / Business School / Can The Benefit of B-School Keep Up With The Cost?

September 13, 2012 by Eric Butts 4 Comments

Can The Benefit of B-School Keep Up With The Cost?

 

Business School Dilemma
Business school dilemma: cost vs. earning potential

Business Week ran a recent story on business schools suffering a decline in applications.

“In the last few weeks, a handful of top business schools have reported single-digit, and in some cases double-digit, declines in applications for their full-time MBA classes, including most recently Columbia Business School and New York University’s Stern School of Business. It turns out they’re not alone. Full-time MBA applications have sunk at at least a dozen of the top 30 B-schools, according to class profile data of 17 business schools obtained this week by Bloomberg Businessweek.

According, to Business Week’s survey, the impact of the b-school application decline was felt disproportionately and groups that are traditionally underrepresented. “This year, competition was especially stiff for women, underrepresented minorities, and students from nontraditional work background.” What’s interesting about the article is that when discussing the drought in applications and the resulting drop in selectivity of top business schools, the author fails to explore a couple of key points that you should consider before you pencil yourself in as Booth’s valedictorian for 2015.

First, there is no real mention of the root cause that applications are down: cost. The article cites a financial aid officer from the University of Indiana with the following explanation for the shift top schools are seeing:

“The decline in applications to increased competition from rival business schools and a plethora of available choices, including part-time and online programs. Second-tier schools are working more aggressively to recruit top MBA candidates and entice them with hefty financial aid packages.

This may be true but the elephant in the room is the rising cost of education. People simply are not seeing a rise in earnings potential that can come anywhere near the pace that education costs are increasing. When I started at Kellogg in 2007, I was told that to expect an average tuition increase of 7% each year. Salaries for graduates have been relatively flat at best, so declining return on investment (ROI) leading to reduced demand shouldn’t come as unexpected.

Second, the notion that “getting an offer to a top business school has become slightly easier” all but implies that the standard for students being admitted has been lowered. While getting into a top school  may be mathematically “easier,” this statement is a bit misleading. What’s really happening is that  if the school has to randomly decide between equally qualified candidates, your name now will be put into a pool of six for a random draw instead of seven. A more accurate statement to make would be “all else equal, getting an offer to a top business school has become slightly easier.” You’re still going to have to work just as hard during the application process as students have in the past, and expectations of candidates from top business schools are as high as they’ve eveer been.

Do you think there are other factors business school applications are down? Let me know in the comments.

Filed Under: Business School

About Eric Butts

I’m a management consultant, MBA and CPA who has a passion for helping others in their career pursuits. Grab my FREE cheatsheet on 12 simple habits of highly successful consultants.

Comments

  1. Anonymous says

    September 14, 2012 at 7:04 pm

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  2. Collin says

    September 18, 2012 at 1:17 pm

    Eric, the increase in specialty Masters programs in subjects such as finance and Supply Chain Management has undoubtedly decreased applications to MBA programs. Examples inlcude programs offered by Kelley through Kelley Direct and MIT’s Master of Finance programs. More programs coupled with a similar ROI (assumption) and less time out of office (or wherever your work location is) lead to a decreased applicant pool for MBA programs. For the most part, I think the metrics show a constant, or even rise in the quality of the MBA class profiles.

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  3. Eric Butts says

    September 19, 2012 at 2:03 am

    Thanks, Collin. I need to get more data on this, but I suspect that the rise in specialty programs explains only a small portion of the decline in MBA applications. I also don’t think those programs are exempt from the exorbitant rise in educational costs that we’re seeing, so unless employers are paying for these students to go back to school, I’d expect the same ROI issues to arise.

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  4. Eric Butts says

    September 20, 2012 at 10:32 am

    I’m glad people are finding the blog helpful!

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