HBS Sets New Record For MBA Scholarships

Students at Harvard Business School’s 2016 graduation

MBA TUITION & FEES BROUGHT IN $127 MILLION LAST YEAR

Though the school brought in $127 million in MBA tuition and fees last year, up from $120 million a year earlier, the school made clear that those revenues “do not fully recover MBA program operating expenses at HBS, much less the school’s long-term investments in academic innovation. The shortfall is offset primarily with income from gifts given by alumni and friends of the school.”

And the school made clear why it continues to up the ante on scholarship support. According to the report, “making education at HBS affordable to a broad cross section of applicants, regardless of their country of origin or their financial resources, is a long-standing goal of the School. The prospect of entering or returning to the workforce with high levels of education debt can deter strong MBA candidates from applying to HBS and can restrict their career choices upon graduation. This is particularly true for younger stu- dents, women, those from outside the United States, and students whose early career paths have not enabled them to reduce their undergraduate loans.

“Consequently, the school strives to assist students in minimizing their debt at gradu- ation by ensuring that fellowship support keeps pace with tuition and fees. Extending a long-term record of annual increases in financial aid, total fellowship expense for fiscal 2016, including assistance for doctoral candidates and a limited number of executive education participants, as well as for MBA students, increased by $3 million, or 6.8%, from fiscal 2015 to $47 million. Funding for fellowships comes from restricted endowment and current use giving by HBS alumni and friends, supplemented by unrestricted funds as necessary—$3 million in 2016.”

TOTAL REVENUE FROM ENDOWMENT & GIFTS WAS UP $20 MILLION TO $210 MILLION

Although income from its publishing operations and executive education makes HBS less reliant on endowment than other schools at Harvard, the school acknowledged that philanthropic revenues are crucial to its economic model. In fiscal 2016, total revenue from three sources—-endowment distribution as well as unrestricted and restricted current use gifts-—increased to $210 million, or 28% of total revenues, from $190 million, or 27% of total revenues, in fiscal 2015. In contrast, for Harvard University as a whole, the corresponding amount for fiscal 2016 was 45% of total operating revenues.

The largest of the school’s three philanthropic revenue sources is the annual endowment distribution. The endowment distribution for fiscal 2016 increased 9% from the prior year to $138 million, amounting to 18% of HBS’ total revenue. The school said the HBS endowment currently consists of more than 1,000 discrete funds established over the years by individual donors, corporations, and reunion classes.

“Fiscal 2016 was a difficult investment year for all endowments and pensions, the worst since the 2008–09 financial crisis,” wrote Richard Melnick, HBS’ chief financial officer. “The Harvard endowment generated a –2% investment return, net of all expenses and fees, compared with a +5.8% investment return for the prior year.” In fiscal 2009, the endowment return was a negative 27.3%. The best returns over the past ten-year period was in fiscal 2011 when returns reached 21.4% and fiscal 2007 when return was 23.0%.

The fiscal 2016 year-end market value of the HBS endowment, plus the school’s current use gifts, was $3.2 billion at June 30, 2016, compared with $3.3 billion a year earlier. This decrease reflected the 2 percent net decline in market value and the subtraction of the school’s annual distribution and decapitalization, offset by the $51 million in endowment gifts received by HBS during the year.”

NEW GIFTS & PLEDGES TOTALLED $161 MILLION, DOWN SLIGHTLY FROM $166 MILLION IN 2015

Through The Harvard Business School Campaign, the school scooped up $161 million in new gifts and pledges during the year, down from $166 million during fiscal 2015.

HBS said it received gifts from more than 12,800 donors in fiscal 2016. Approximately 27% of the school’s MBA alumni gave to HBS last year, unchanged from the prior year. Total cash received from gifts, including new endowment gifts and gifts for capital construction projects, payments on prior years’ pledges, and restricted and unrestricted current use giving, was $141 million, compared with $157 million in fiscal 2015.

Unrestricted current use giving to HBS, meantime, grew in fiscal 2016 for the seventh consecutive year. The school said revenue from these flexible gifts was up 11% to $40 million, from $36 million in fiscal 2015. Revenue from restricted current use gifts increased more than 18% to $32 million, from $27 million a year earlier. Reflecting normal year-to-year variability in the timing of payments on pledges, cash giving to the endowment declined to $51 million, from $69 million in fiscal 2015, and cash giving for construction projects decreased to $16 million from $23 million.

Source: Harvard Business School 2016 annual report

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