Tally those fees up with the opportunity cost of not earning a salary and the total bill for an MBA will dismay all except the richest candidates.
Business schools have recognized this problem and are trying to relieve the financial burden: they are offering more aid to help less fortunate students fork out on an MBA. Bursaries, grants, scholarships and stipends are now the largest funding source for all business school courses.
Some scholarships are awarded based on merit, others are handed out on the basis of need to those who have limited cash piles, like entrepreneurs or people who work in sectors such as international development.
At Virginia’s Darden School of Business, a generous donation this month created a $30 million scholarship program to enable every full-time MBA student to attend additional courses at the school for free. “It makes the school more affordable,” says Darden dean Scott Beardsley.
Harvard doled out $36 million in scholarships in 2017, up $2 million from the year before and the largest amount awarded in the school’s history. The average annual award per Harvard MBA student is $37,312.
Because admission to Harvard is needs-blind, which means members of the admissions board don’t look at applicants’ income, the initiative may spur a more diverse range of candidates to apply to Harvard’s MBA. “And over 50% of our students receive need-based fellowships from Harvard, which do not need to be paid back,” says Chad Losee, the school’s managing director of MBA admissions and financial aid.
Some schools are offering an entirely free ride. The WP Carey School of Business said in 2015 that it would reduce the price of its full-time MBA from $90,000 to zero. Carey saw a sizeable increase in applications from students who may one day give thanks to their alma mater via a donation, which could make up for the lost tuition fee revenue.
These initiatives highlight the lengths business schools are going to provide financial assistance to prospective students.
Yet while scholarships have been a way to enable the less well-off to receive a business education at elite institutions, they are increasingly being used to lure the brightest candidates, regardless of how wealthy they already are.
Some prospective students are even negotiating their own award packages, pitting one school against another to offer the highest sum to secure their acceptance of an MBA place. “From an INSEAD perspective, admits are seriously considering offers from other schools to a greater extent than they were in the past,” says Caroline Diarte Edwards, co-director at Fortuna Admissions and previously INSEAD’s admissions and financial aid director.
Attracting the best candidates makes sense for business schools, whose coveted position in MBA rankings is largely determined by the salaries their alumni earn. Students also benefit from having the best talent in the classroom, as they learn from one another just as much as they do from their professors. But it will do little to improve social mobility among cohorts that already have an elitist image.
That may not be the intention, of course, given that MBA students are usually high-fliers who have already achieved success in their careers. Yet any hint of unfairness in the admissions process can cause quite a scandal.
Earlier this year, it was revealed that Stanford Graduate School of Business gave women and domestic MBA candidates preferential treatment when awarding financial aid. The school was criticized heavily and said it would conduct an external review of its financial aid policies.
Ultimately, it is a good thing for both business schools and their students that schools are increasing the provision for financial aid. But it will need to be carefully and fairly distributed to make the intended impact.