Are MBA Application Fees A Ripoff?

piggybankmoneyMBA applicants who plan to try their chances at a half dozen of the best business schools this year could easily spend more than $1,200 in application fees–more often than not, for the pleasure of getting a rejection notice.

At least six business schools collected more than $1 million last year in application fees to their full-time MBA programs. But no school scooped up more than Harvard Business School which booked nearly $2.4 million alone last year in MBA application fees, according to a new analysis by PoetsandQuants.com.

REJECTED MBA APPLICANTS PAID HARVARD $2 MILLION & STANFORD $1.8 MILLION LAST YEAR

With an acceptance rate of only 12%, some 8,197 people in Harvard’s applicant pool forked over more than $2 million only to get rejected by the school.

Harvard’s big fee stash was followed by Stanford, which picked up more than $1.9 million last year and has raised its application fee by an additional $10 this year to $275, the highest application fee for an MBA program in the world. London Business School’s fee is right behind Stanford’s at 175 British pounds, or $272, at current exchange rates. For the privilege of a rejection letter at Stanford, which accepted fewer than 7% of its estimated 7,200 applicants this past year, MBA candidates handed the school nearly $1.8 million in application fees.

The University of Pennsylvania’s Wharton School was next, collecting an estimated $1.6 million, while Columbia Business School racked up more than $1.4 million in full-time MBA application fees.

CHICAGO BOOTH PUT FORTH THE BIGGEST SINGLE INCREASE IN FEES THIS YEAR

The largest single fee increase for a highly ranked MBA program this year has been put through by the University of Chicago’s Booth School which is charging applicants $250 to apply to its MBA program, a 25% increase from the $200 fee last year. Booth’s fee hike will add nearly a quarter of a million dollars in additional revenue this year, putting the school in the $1 million-plus category.

The Poets&Quants’ analysis shows that the fees to apply to an MBA program have become a significant source of revenue for many business schools. In fact, applicants to the top 25 full-time MBA programs in the U.S. this past year paid $17.8 million. How much a school collects varies widely from Harvard’s chart-topping numbers to zero collected by Vanderbilt University’s business school which does not have an application fee. The lowest fee charged by any Top 25 program is at Indiana University’s Kelley School which charges $75 to apply to its full-time MBA program.

Do schools use the sums they collect to offset the costs of processing applications? Or have the fees become something of a profit center? It’s depends on the school. “As cynical as I am about all aspects of admissions and the B-school experience, I don’t think most schools are running app fees as a profit center,” says Sandy Kreisberg, founder of HBSGuru.com and a prominent MBA admissions consultant.

THE COSTS OF RUNNING AN MBA ADMISSIONS OFFICE

“Start with HBS’s staff of about 20, many of them full-timers, throw in lots of necessary travel, road shows, and  interviews in distant cities, and do some math. It costs HBS more than $2 million to run that circus. All that said, there may a scale/marginal cost issue, the same staff could probably process 25% more apps without breaking out into a sweat, so as essays go down, and GRE is allowed to sub for the GMAT, and the number of recs goes down, well, total apps and fees may go up, but that is not driving the ‘slimmer-app’ movement.”

Stanford, believes Kreisberg, may be in a different position, in part because the admissions staff does not do applicant interviews. “My guess is, Stanford may have the cheapest fixed costs vs. income of the top schools,” he says. “For one thing, the interview (which does not really count in the Stanford decision, by the way) is out-sourced to under-employed/sucker alums, and is basically free to the adcom.”

Several business schools, including Columbia and Northwestern University’s Kellogg School of Management, also waive fees for certain applicants. Columbia waives its $250 fee for full-time students, active duty military personnel, members of the Peace Corps, Teach for America and Teach for India applicants. Kellogg waives its $250 fee for anyone who has served in the military during the past three years.

  • Nidjd Nufh

    Great point, Shaniq’!

  • Lastimoso

    It seems Owen has recently changed their policy. Their site says the application fee is now $175.

  • bolzano

    FYI at last years HBS presentation, a (famous) Adcom mentionned that they were considering to lower the application fee to $150 but decided to freeze the price eventually.
    Hence they likely don’t see this as a source of revenue to cover the admission process cost.

  • Shaniqua James

    You do realize that people who apply to b-school are competing to be exempt from competition?

  • anony

    I don’t agree with the incredibly high application fee, but I really like the idea of accepted students getting that fee deducted from their expenses. That’s a great idea, but it’s never going to happen.

  • JohnAByrne

    Believe me, I’m not laughing at anyone. I have great respect and admiration for those who are trying to get access to a superb graduate education to better themselves and to improve their chances of leading a more productive and meaningful life.

  • ReallyLazy

    John, sorry for this, but why do not you change your profile picture? with your left hand on face, look like someone laughing on those MBAs wannabe!

  • TWerle@RockHouseatRoss

    Michigan Ross should charge spicks, chinks, gooks, Nigg@s, whetbacks 3X than it does WASPS such as myself

  • Capitalist900

    I believe application fees should be much much higher (say >$1500) BUT, will be deducted from the tuition fees in case of acceptance.

  • JohnAByrne

    You’re making a very valid point.

  • Shaniqua James

    You’re looking at this the wrong way. The fee serves to limit the number of applications. Imagine how many tens of thousands of applications Harvard would get if they eliminated the fee and imagine what their process would look like if they got, say, 100,000 applications a year. In each case, higher fees assure that applicants won’t be ranked by a computer program.

    At the same time it appears that Harvard isn’t trying as hard as Wharton and Stanford to limit the number of applications. Stanford is obviously trying really hard.

  • JohnAByrne

    The total revenue for last year reflects last year’s application fee and not the increased fee for this coming year.

  • JohnAByrne

    Thanks for letting us know.

  • CSJ

    Just FYI, Vanderbilt will begin charging an application fee in the coming year of $175. It costs a significant amount to process all the applications and this barely offsets the charges we have for employees. However, we will waive the application fee for military and for low-income candidates and for others on a case-by-case basis.

  • Popandfresh

    Shouldn’t Booth’s be higher or the fee be brought down to $200 per the article? 4,424 x 250 = 1,108,500,

  • Socrates

    Duke gives 1/2 off the application fee if you visit campus before applying. Big props to Fuqua for that.