MBA students at the McDonough School of Business in Washington DC were recently given unexpected good news: Georgetown University extended a five percent discount on annual tuition fees for the spring semester this year.
The graduate fee cut, decided at the university level in the fall, came after a petition of 2,000 students accused Georgetown of “highway robbery” for maintaining tuition despite classes being taught largely online, which they argued diminished the education.
“A Zoom education is objectively not worth a $28,000 per semester commitment,” the students said. The McDonough School declined to comment.
Georgetown’s move has piled yet more pressure on other business schools that are facing calls for cuts to tuition fees for this year, as well as refunds on fees already paid by students with buyer’s remorse.
When the pandemic struck last year, petitions circulated among thousands of MBA students who felt short-changed by an overnight switch to what they viewed as inferior online teaching after coronavirus forced campus closures.
For the forthcoming academic year, finance is front of mind for many students, given the sharp recession. But so far only a small number of business schools have made such a concession, with many facing their own financial difficulties in the pandemic. Some have even increased fees for the 2020/21 academic year to reflect their rising costs and shrinking revenues.
Data from the Financial Times show that average tuition fees increased by three percent in dollar terms this year, with a quarter of schools hiking fees by five percent or more. The increases, which reflect the high demand for MBAs, outpaced the rate of salary growth reported by alumni in a challenging job market.
Administrators cite their sunk charges such as teaching facilities and staff payroll. Many are running lower operating budgets with income sources such as bespoke executive education courses for corporations hit hard by Covid-19.
At the same time, schools have had to invest vast sums in technology to keep degree programs running remotely. “Many schools were forced to shift their programs online quickly, which required a tremendous amount of time and resources,” says Brandon Kirby, director of marketing, sales and admissions at Rotterdam School of Management (RSM) in the Netherlands.
The Dutch school has increased MBA fees by €2,000 for 2021. “We took this decision based on the increased costs associated with us running the program – not an adjustment to increase our margins,” says Kirby.
Other business schools are hamstrung because tuition rates are set by their parent universities, which often rely on business schools for the bulk of their income.
Some have found ways to lower the cost of attendance without hitting their already falling revenues. The concessions include extended payback periods and refunds for overseas study trips that were shelved due to coronavirus, and fees for student accommodation that many students are unable to use due to Covid restrictions.
The Simon Business School at University of Rochester in New York is waiving application fees, but has ruled out any further tuition reductions after slashing tuition by 14 percent in 2014. The dean, Sevin Yeltekin, appointed last year, says the MBA is as valuable today as it was in the pre-Covid world.
The school continues to offer the same range of extracurricular activities that are a fundamental component of the MBA, through a combination of in-person and online learning, she says.
“The obvious advantage is that the business world operates in mainly the same format. Learning how to collaborate, innovate, connect and grow within a team from anywhere, in any setting, is now critical for every professional.”
Business school revenues set to fall, across the board
The problem for schools in some markets is that they are bracing for a big financial hit from Covid due to overseas students deferring their places because of coronavirus travel restrictions.
A survey of 39 deans by the UK’s Chartered Association of Business Schools found half of respondents expect revenues to fall moderately or significantly in 2021. In Britain, international students typically pay much higher fees, effectively underwriting schools’ operating budgets. UK universities have warned of a “cash black hole” due to foreign students studying closer to home.
Facing similar problems are schools in Australia and Canada, countries whose higher education sectors have also been “marketized” and have grown dependent on income from outsized fees levied on overseas students.
But the tuition fee issue is most vexed in the US, where the fees are high relative to overseas standards and some richer institutions have huge financial endowments that critics say should support concessions on fees.
US-based MBA admissions consultant Stacy Blackman expresses sympathy for the business schools. “When no one knew how long the pandemic would last, schools didn’t want to go down the slippery slope of losing revenue during an economic downturn that impacted them as well,” she says.
“If they dropped their prices, even for an online experience, then they may have worried that their reputation and perception of quality would be impacted.”
However, the position taken to not lower fees is all the more difficult to maintain because so many business schools offered their online MBAs at knock-down prices before Covid hit.
An MBA is still a serious investment
An outlier is UNC Kenan-Flagler Business School in North Carolina, which charges roughly the same rates for its online and full-time MBA programs. “To produce high quality education, residential or online, is expensive,” says Douglas Shackelford, the dean. “We need top faculty, experiences, student services and career support, whichever format our students chose to earn their MBAs in.”
The steep cost of an MBA was already a vexed issue before coronavirus hit. Six-figure fees at the top schools were blamed, in part, for a five-year drop in demand in the US before the Covid-induced recession boosted applications.
The astronomical fees are overlooked by many students because an MBA degree has long been linked to vast pay increases after graduation. However, the pandemic has upended the job market.
Brad Staats, associate dean of MBA programs at UNC, says the focus is on preparing students for long-term success, not only for their first job after graduation. “We provide a broad base of skills so students understand business. Covid hasn’t changed this. If anything, it has highlighted how important it is that individuals be ready to reinvent themselves.”
Other schools say that this year’s MBA cohorts are more competitive than ever before. “They have the unique advantage of completing an MBA during very uncertain times,” says Kirby at RSM. “The resilience displayed by these students, hiring companies will find valuable.”
He says that schools can maintain fee increases if they can demonstrate value for money. “Often times the cost of an MBA is down to the strength of the brand of the school, which is why some can charge a premium.”