The MBA Market: Just Another Cyclical Downturn Or A Major Reset?

For as long as anyone can remember, interest in MBA programs falls when the economy is strong and increases when economic storm clouds begin to gather. That counter-cyclical ebb and flow has consistently defied the most sobering predictions of the death of the MBA.

But with domestic applications down by 25% last year and with many elite business schools unable to fill their classes this year, many are seriously wondering whether the MBA market is going through just another cyclical downturn or if a bigger shift is occurring in the demand for the full-time MBA.

Evidence is now emerging that it is the latter. Several top-ranked schools saw declines in domestic applicants on the order of 30% last year and report that round-one apps from U.S.-based applicants declined by 20%. While those severe downturns were somewhat offset by international candidates, the trend is clear: Fewer and fewer prospective students in the U.S. are applying to MBA programs, and the reasons for the downturn can be attributed to more than a robust economy that has made graduate school less desirable.

‘WE’VE SEEN IT GETTING HARDER AND HARDER FOR SOME SCHOOLS TO FILL THEIR CLASSES’

In many cases, schools have priced themselves out of the market. A recent Clear Admit survey of more than 1,500 young professionals who considered applying for an MBA but opted not to do so cited cost as the biggest issue. More than half of the respondents—52.6%—said cost was a concern. Gen Z and older millennials don’t want to invest $150,000 to $250,000 in a degree when they already have strong earning power and growth potential in their current positions.

“I think we’ve seen it getting harder and harder for some schools to fill their classes,” says Wharton Vice Dean Nicolaj Siggelkow in a recent interview with Poets&Quants. In fact, this fall’s entering classes at many top business schools, including MIT Sloan, UC-Berkeley Haas, Duke Fuqua, UCLA Anderson, UNC Kenan-Flagler, UT-Austin McCombs, and Emory Goizueta were all down in double digits. Some 24 of the top 26 MBA programs enrolled smaller cohorts this year (see table below), with Goizueta experiening a year-over-year decline of 31.5% and the University of Washington’s Foster School of Business seeing a drop of 23.8% in its latest entering class of MBAs.

“It might become harder and harder for some universities to justify a residential, two-year MBA because I think the time is over when people could basically just buy the three letters behind their name for their resumes. That’s really hard to justify at $150,000.”

FUTURE APPLICATION PEAKS WILL NOT BE AS HIGH AS THEY ONCE WERE

Dawna Clarke, executive director of admissions at the University of Virginia’s Darden School of Business, agrees. She believes that application flow at the top schools will still rise and fall as the economy slips and recovers but the peaks will be lower than they have been in the past. That is a view shared by many in the industry.

Besides the pricetags of full-time MBA degrees, more and more people are choosing online versions that allow students to stay in their jobs and continue earning income. For the first time ever in the U.S. during the 2020-2021 academic year, students enrolled in online MBA programs now outnumber those who are enrolled in full-time residential programs. The growth of specialized master’s degrees in business as well as undergraduate business programs also is keeping more young people out of full-time MBAs.

One-year graduate programs in business analytics, supply chain management and sustainability are attracting larger numbers of students that may have opted for an MBA in the past or would have chosen to return to school to get an MBA at a later date.

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