US MBA Degrees Struggle to Sustain Applications

The full-time MBA degree is losing lustre. Prospective students, who are high-earners, are less willing to quit the workforce and forgo plush jobs in order to earn the three-letter acronym. Enrolments to full-time programs in the US plunged by 20% between 2006 and 2016, according to business school accrediting body AACSB. Conversely, enrolments to specialized master’s degrees, such as the Master’s in Management, have nearly doubled over the same period.

At the heart of the trend are the sacrifices that a traditional, campus-based MBA demand. Students must put their career on pause for two years, lose out on salary and promotions, and accrue significant debt to pay for their tuition. Totted up, the total opportunity cost of an MBA including tuition fees can exceed US$300,000. 

There are other reasons for the shift. The Graduate Management Admissions Council attributes the decline in US MBA enrolment mostly to international students. In 2017 only 32% of US business master’s programs grew applications from foreign students, down from 49% in 2016. Internationals are increasingly attracted by quality education and jobs in their home regions, says GMAC chief executive Sangeet Chowfla. He adds that the negative perceptions about the US as a study destination, under US president Donald Trump, have added to American schools’ woes.

Some schools are responding to the flagging demand for their MBAs by shuttering the programs, which can become unprofitable to run. The University of Iowa’s Tippie College of Business scrapped its program earlier this year because of falling applications. Tippie is not alone. Wake Forest University ended its two-year program in 2014, while Virginia Tech did the same. 

Increasingly, more flexible online, part-time or specialized courses are launched in place of MBAs. They are cheaper in fees and require that students spend less time out of the workforce. Tippe will introduce a master’s program in finance in fall 2018, for example. “Adapting to the market is key for growth in any organization, and we’re seeing clear shifts in what students and businesses need,” says Sarah Gardial, dean of the school. “Both are expressing preferences for non-career-disrupting options for the MBA, while others are increasingly drawn to the focused education provided by master’s programs in specific subjects.” 

Minnesota’s Carlson School of Management is also increasing options for students, though it does not plan to close its full-time MBA. “It's a changing market and a changing environment,” Phil Miller, assistant dean of MBA programs, told the Associated Press. “We're evolving and we're adapting.” Carlson offers six specialised master’s programs along with part-time and executive MBA courses, and plans to boost online elements to sustain applications.

While the MBA degree is struggling at some US schools, global demand for the course rose by 6% year-on-year in 2017, according to GMAC. The MBA is still the most sought-after graduate management degree.

Europe is one bright spot, where MBAs are generally 12 months long. Currency fluctuations have also made courses priced in euros and pounds more attractive when compared with US fees. Some 67% of European programs have seen growth in international student applications, says GMAC, along with two-thirds of MBA programs in the UK.

At ESMT Berlin, applications from India and the US are up by 50% and 20% respectively. For the Master’s in Management, applications are up by more than 100%. “That momentum is [partly] fed by the negative immigration rhetoric coming out of the US,” says Nick Barniville, associate dean of degree programs. 

Juliane Iannarelli, Senior VP of AACSB, suggests that many US business schools will maintain their MBAs as a marketing ploy. “The major publications rank full-time MBAs, which are considered prestigious. Schools benefit from that exposure,” she says.

That may be partly behind the decision in October 2017 of the Wisconsin School of Business to reverse the closure of its full-time MBA, pending a review, following wide-spread media coverage.

GMAC’s Chowfla says: “Indications are that the MBA will continue to be the most sought-after business degree at the graduate level. For every program closure in one part of the world, we routinely see new ones opening or expanding in other parts.”

The MBA remains a good investment, and the benefits have not diminished. According to the QS TopMBA.com Return on Investment Report: Full-Time MBA 2018, the average payback period is no longer than seven years and typically no more than four years. Graduates see significant salary increases, and many typically go on to become the chief executives of publicly traded companies. “The price tag obviously makes some people shy away, but the MBA remains a great opportunity to advance a career in business,” says Chuck Wood, an MBA student at Duke Fuqua in the US.