The question of how to fund an MBA has always been a key consideration for prospective students. But in the past year, inflation and the uncertain economic outlook have started to frame the choices that would-be MBA candidates make about where to study.
“I think the biggest impact we’ve seen is that students are starting to think about programs that are closer to home, or at least charge tuition in their same currency,” explains Liam Kilby, associate director of MBA recruitment and admissions at Saïd Business School, part of University of Oxford.
“The conversion rates in some parts of the world have fluctuated dramatically over the past few months, and we’re beginning to see a growing number of people that are getting in touch to say that the money they’ve saved to fund their MBA is now worth significantly less.”
As a consequence, he wouldn’t be surprised to see a drop in international applications and a rise in domestic demand if economic uncertainties continue. There is a stereotype of MBA students being among a privileged elite, but schools say they’ve seen a rise in inquiries about financial support because of the uncertain economic outlook.
“There is an increasing number of people from all backgrounds that are seeking financial support in order to attend their MBA,” says Kilby. “The financial burden of funding an MBA is beginning to touch more people, and people who once might have considered themselves in a strong position to be able to afford it.”
Using scholarships to fund MBA programs
Even so, he says that funding is not a “dealbreaker” for MBA candidates, but it does have a huge influence on where they end up studying. “It’s not a new development that MBA candidates will spread their applications over a number of different institutions, but we’re beginning to see how much of a component of the final decision comes from where they might receive funding support or a scholarship,” Kilby adds.
“We are seeing some candidates who have Oxford at the top of their list choose to attend a second or even third option for their MBA because they’ve received a higher scholarship and, therefore, financially it’s a more realistic proposition for them.”
Even though applicants may experience a bit of “sticker shock” when researching the average cost of an MBA program, the good news is that funding is readily accessible, says Matt Wakeman, director of student financial services at Rice University ’s Jones Graduate School of Business, in the US.
In addition to internal scholarships -- some even covering full tuition and fees -- many students are able to use either US federal or private student loans to cover the balance of their program.
Rice Business provides merit-based scholarships to more than 75 percent of its full-time MBA cohort each year. All admitted students are automatically considered for a variety of scholarships as part of the application review process, with the average award covering over half of tuition.
The need for such funding has only grown because of the bleaker economic backdrop, including higher interest rates and inflation. “Although it hasn’t been dramatic, we’ve definitely seen an increase in student loan inquiries over the past couple years,” says Wakeman, noting that the US government temporarily set interest rates to zero for eligible federal student loans during the Covid pandemic, a benefit that expires in August 2023.
“Once students learned that interest wouldn’t immediately begin accruing on their loans, even students who may not have been interested in the past, began reaching out to discuss funding options,” Wakeman explains.
Demand for MBAs still outstrips supply
Even though cost is becoming an even bigger factor for prospective MBA students, demand for the degree continues to outstrip supply, with competition for places at top schools only intensifying.
“Even with the current economic uncertainty and sky-high inflation, domestic applications for our full-time MBA program are up over 10 percent from last year; international applications are up over 20 percent,” says Wakeman.
He insists that an MBA will pay off, regardless of the economic climate. “Although there is no such thing as a risk-free investment, even in the current economic climate, an MBA is an excellent way to increase employability and earnings potential,” he adds, noting that 96 percent of the school’s class of 2022 received job offers within three months of graduating, earning an average salary of $142,000.
Back at Oxford, Kilby agrees. “Regardless of the economic climate, the diverse cohort around you, your future collaborators and colleagues that you’ll meet, your ability to gain knowledge and experience across a broad range of business principles, and the practical skillset you can develop, means that an MBA is still a hugely solid investment in your own development and your future career,” he says.