Why Business Schools are Offering More Scholarship Money

North American business schools are getting cheaper, according to the Wall Street Journal. Of course, tuition continues to rise. But MBA programs are offering more scholarship money than in the past to attract young professionals.

To understand why this is happening now, you simply have to look at recent history. Enrolment to full-time MBA programs in the United States fell 20% from 2006 to 2016, according to the accrediting body AACSB and as reported by QS in “US MBA Degrees Struggle to Sustain Applications.”

During that period, the US experienced the Great Recession, the closest the country has ever come to another Depression. This had great repercussions throughout the continent, and the world. Many of the newly minted MBAs of 2008 and 2009 had a hard time finding a job, and others from years past found themselves getting laid off. For some of those considering graduate business school, the thought of giving up a salary to pay hefty tuition prices in uncertain times seemed like a bad idea.

In addition, North American business schools have experienced more competition from abroad. Other countries have begun offering comparable programs, sometimes consolidated into one year, which can bring with it a quicker return on investment. More applicants have considered foreign degrees as multinational corporations seek leaders with a global mindset.

Also, domestic and international business schools are beginning to offer more than just a traditional MBA. To cater for those who want to go to school at a younger age, or require flexibility not found in a full-time program, business schools are creating different options.

In the late 1990s and early 2000s, business schools were a bastion of brilliance. While undergrads earned scholarships, MBA students did not. They were few and far between. Back then companies often sponsored all, or part, of an MBA education, especially part-time programs. In the last 20 years, the number of companies paying for employees’ education has significantly dwindled. The onus is now usually on the individual to cover costs. Schools recognize this might deter qualified applicants from coming forward.

All this is to say that the competition for top talent is fierce. Getting the best and brightest to apply and enroll in a full-time MBA program requires creativity. Financial considerations are a big part of the decision process of prospective MBAs. Hardly surprising when top business schools charge upward of $150,000 for a two-year program. As a result, scholarships have become one tool in the arsenal for wooing qualified candidates.  

“The competition for the top talent has probably never been more intense. I think one of the things that this says about the greater happenings across business schools is that there is a heightened awareness about the value that students bring to the experience,” says Jamie Young, director of the full-time MBA Recruitment & Admissions at University of Toronto Rotman School of Management. “As MBA candidates, you're likely going to learn as much from your peers as you will from anyone/anything else in the program, and the value of those lifelong relationships post-MBA is still a strong motivation for prospective students.”

In other words, schools recognize the caliber of student they attract influences the perception and quality of the program itself. They also play a pivotal role in the education, because they bring with them work experience that adds to the discussion and networking. Therefore, offering them financial incentive is worth it.

“Schools want to attract the most competitive candidates,” says Shelly Heinrich, interim associate dean of MBA Admissions and director of marketing at Georgetown University McDonough School of Business. “Since the scholarships of most schools’ MBA programs are merit-based, schools utilize scholarships in order to attract the best and brightest. Crafting the class and building a cohort is very important, and each student is chosen specifically for what he or she will bring to the classroom.”

Scholarships are also a means for attracting a more diverse student body. For example, in February 2017, the New York University Stern School of Business began offering the NYU Stern Advancing Women in Business Scholarship, which covers the first year of tuition and mandatory fees. It is meant for applicants “who demonstrate a deep and abiding commitment to advancing women in business.” Stern alumnae and members of the school’s Board of Overseers are paying for the scholarship.

The Stern school is also trying to appeal to veterans through the establishment of the Fertitta Veterans Program, which was the result of 1993 Stern alumnus Lorenzo Fertitta and brother Frank J. Fertitta III’s $15 million endowment gift. The scholarship allows qualified veterans to receive tuition at a flat fee of $30,000 per year, even if they are eligible for other veteran’s benefits, such as Yellow Ribbon funding.

“Given the importance among MBA students to seek a return on investment for their degrees, Stern has been proud to offer a diverse set of funding options for well over a decade and has expanded our funding options over time,” says Paula Steisel Goldfarb, associate dean of MBA Admissions, Financial Aid, and Academic Affairs at Stern.

Universities with endowments are indeed setting aside funding for MBA scholarships in ways they had not always done in the past. Schools handle the distribution of merit scholarships in much the same way they do it for undergraduates. When the applications come into admissions committees, they look them over and make decisions about who is deserving of a scholarship. 

In some cases, the schools work with other organizations to recruit outstanding candidates and provide them with financial incentive to attend. McDonough, for instance, works with a number of groups, including the Consortium, Forté Foundation, and the Peace Corps, to provide qualified candidates with scholarships.

Whatever the means, scholarships are now very much a part of the application process, even at MBA programs. How much such gifts will influence decisions on where to enroll is still up in the air. Heinrich says students are savvy about the schools they pick, which has only made the competition for talent steeper.

“The degree and brand name you graduate with will become a part of your personal brand for the rest of your life, so it’s important to choose wisely,” says Heinrich. “Scholarships certainly play into that decision, but they are not everything.”