The New B-School Arms Race for the Best & Brightest

Above all else, the school wants to insure that it consistently gets the best and brightest candidates in the applicant pool each year. And it wants to make sure Harvard students graduate without a crippling amount of debt that would constrain their career choices. At several business schools, including Wharton, Columbia, and NYU, graduating MBAs are leaving their schools with average debt loads in excess of $100,000. At Harvard, by contrast, MBA debt burdens are nearly a third less: $77,880 on average.

The war has become so cutthroat that some highly talented applicants are leveraging their scholarship offers to get even better deals from schools, say several admission officials. “Certainly, they’re trying to get the best deal,” says Sara Neher, assistant dean of MBA admissions at Darden. “It is absolutely competitive and every year I am surprised at who received scholarships from other schools,” adds Neher. “Every year, we lose good people because of scholarships.”

That’s why her boss, Dean Bob Bruner, has made raising student fellowship and financial aid the school’s number one philantrhopic priority. In the past five years, Darden’s average annual scholarship has risen by 96.3% to $28,243, the third highest average among the top 20 U.S. business schools, from $14,440 during the 2004-2005 academic year.

According to a recent publication for donors to Darden, Bruner invested the school’s reserves to fund student fellowships during the economic downturn to maintain Darden’s ability to attract the best possible applicants. “As business school tuition has continued to rise, we are trying to make the net cost lower for those who we think would be the best fit for our school,” says Neher. But she insists that Darden has a strict policy against negotiating with applicants. “There are schools that do negotiate, but the answer for us is ‘no,’” she adds. “We make our offer on the basis of their admission.”

At UNC’s Kenan-Flagler Business School, which has the second-highest average scholarships reported, $31,565 a year, a group of so-called “Premier Fellowships” that pile one gift on top of another tends to inflate the total, according to Sherry Wallace, who heads up the school’s admissions office. A stipend called the “Falls Prize,” for example is given to up to six students per year who have already been awarded a scholarship. It is a $25,000 total stipend paid in $12,500 increments per year, per recipient.

Most of the Falls Prize recipients have already received one of the school’s so-called “Premier Fellowships” that cover tuition and provide $5,000 stipends per year on top of that. “These highly selective awards contribute to the school’s average award amount,” says Wallace. She points that average scholarship grants fail to completely reflect the amount of support a school brings to its recruitment efforts for students. “One would also need to know the total number of fellowships awarded in order to accurately compare fellowship support across schools,” she adds.

Schools that can’t afford to keep up, such as Columbia Business School, appear at a major competitive disadvantage. Columbia’s average scholarships, for example, are just $10,000–a third or less of what MBA students get at Harvard, Darden, or the University of North Carolina’s Kenan-Flagler Business School. In the past five years, Columbia managed to increase its average scholarships by 38.5%, compared to increases of 82.7% at Kenan-Flagler, 96.3% at Darden, and 146.1% at Harvard. In effect, Columbia lags far behind not only its peer schools, but schools that would rarely be considered in the same competitive set.

Some rationalize the flood of scholarship money pouring into the MBA market, viewing it as little more than an offset to annual tuition increases that have outstripped inflation for more than a decade. Others believe the widespread discounting of tuition sticker prices is not dissimilar to the flexible pricing of airline tickets. The only difference: Instead of price being a function of airplane seat inventory, the actual pricetag of an MBA program is discounted based on the level of skill and talent of an applicant in the market. Like airline passengers, they sit side by side but each has paid a different price for admission.

The money takes two forms: pure scholarships (see table) and then financial aid (see table of how the leading schools stack up on financial aid), a package of loans, assistantships, and scholarships. While USC’s Marshall School is handing out the highest average MBA scholarships in the nation, MIT Sloan now offers the biggest financial aid packages of any business school that publicly reports these numbers. Last year, Sloan’s average annual package for MBA students was $67,288.

As the scholarship race has intensified, several of the most prominent business schools, including Wharton, the University of Chicago’s Booth School, and Duke’s Fuqua School of Business, no longer disclose their average scholarship grants, and fewer still want to engage in the topic. A spokesperson for the University of Southern California’s Marshall School, which hands out the highest average scholarships in the nation at $35,490 a clip, declined comment for the story.

As Davis-Blake puts it, “Nobody wants to talk about it becuase it is such a sensitive, competitive issue.”