An In-Person Or Online MBA? Why Not Both, Asks Kelley

The hidden cost of getting an MBA degree forces many applicants into a difficult choice: Do they give up a paycheck for two years to attend a full-time residential program or do they continue to work and pursue an online MBA. It’s a dilemma that Indiana University’s Kelley School of Business hopes to resolve.

The school will now allow MBA students to come on campus for their first year of study and then opt to either stay in Kelley’s residential program or take all of their courses online during the second year. The new Kelley Full-Time +Flex MBA Program, announced today (Oct. 1) would enable students to shave time and money from their MBA education.

Besides tuition and fees, the opportunity cost of getting a two-year MBA can be high. At Kelley, for example, it’s estimated that MBA students leave jobs that pay an average of $77,172 a year or nearly $150,000. A student who takes advantage of this new innovation would not only conceivably save some $77,000 in opportunity costs from their MBA, but they could also take advantage of a job offer that may come out of a summer internship. At Kelley, starting MBA pay is about $145,000 a year.

‘BIGGEST CONSTRAINT TO MBA: THE OPPORTUNITY COSTS OF LEAVING A JOB

“The single biggest binding constraint is the opportunity cost of leaving a job for two years,” believes Patrick E. Hopkins, vice dean at Kelley. “We know we have potential students who span the horizon of needs. We are saying no two students are alike. Some will benefit from a fully immersive two-year experience on campus, but on the other end, we have students who want to lean in on the flexibility of the online program. There is a middle there.”

Kelley believes it is the first prominent business school to offer an in-person/online MBA combo and thinks it has a competitive advantage over rival players who are in both the full-time residential and online MBA market. Among other things, the school already has an extensive portfolio of MBA electives online, some 90 courses in all that allow students to choose among seven majors, along with opportunities for global and domestic immersions.

“I think it is a little more complicated for some of our competitors because I don’t think they have the depth of electives to deliver online,” adds Kelley Dean Ash Soni. “I think we are one of the very few schools that have this large selection of online electives all taught by full-time faculty. No adjuncts. We only have one MBA at Kelley. My MBA is from the full-time program, but someone getting the MBA from the Kelley Direct program gets the same MBA as me.”

THE PRICE OF TUITION IN THE SECOND ONLINE YEAR IS THE SAME AS RESIDENTIAL TUITION

By and large, most business schools keep their residential and online MBA programs completely separate. Online programs can have different admission standards and less career support, while courses can often be taught by adjunct faculty, and operate on different schedules at lower tuition rates.

A few schools offer more flexible options. At UCLA’s Anderson School of Business, for example, part-time MBA students can opt to attend elective courses in-person and online. Carnegie Mellon’s Tepper School of Business permits full-time MBA students to transfer into its online hybrid format. UC Davis Graduate School of Management allows full-time residential MBA students to transfer online in their second year but does not actively promote that feature.

Still, the scale of Kelley’s online offerings and the effective merger of a full-time residential MBA with a long-distance option would far outweigh what other schools can offer. “Our market research says we are the first mover to do this,” maintains Hopkins. “You don’t have online programs that have the scale and choice for the second-year elective set. We have this crown jewel in Kelley Direct MBA that affords us this opportunity.”

One intriguing twist to the new +Flex format is that students who opt for a second year online will still pay the residential tuition. For non-residents, annual MBA tuition at Kelley is priced at $55,695 or $111,390, without a few mandatory fees, housing, and food. That compares with a total price tag on the online MBA of $94,949. On the other hand, Indiana residents pay just $29,573 in annual tuition or a total of $59,146.

SCHOOL EXPECTS OPTION TO INCREASE FULL-TIME MBA ENROLLMENT

“A student who takes this option is a residential MBA student for the entire duration,” says John D. Hill, faculty chair of the Full-Time +Flex MBA program. “So they are classified as such the entire time. We are treating them as if they are in the full-time program.”

Currently, some 200 students are enrolled in Kelley’s full-time MBA program, while 1,400 students are studying for an MBA online. This year, Kelley enrolled 103 full-time MBA students and 473 online MBA students. It’s not clear how many students in the future would opt for a second year online. Kelley’s online MBA program has ranked first in the world by Poets&Quants for the past two years. Four years ago, the Kelley Direct online MBA was named the MBA Program of the Year by Poets&Quants.

“This is the big question,” adds Hill. “We don’t really know how many full-time students would opt for this. Most of our current full-time students are here for a two-year, fully immersive experience. We believe this will open up another market to us that other schools can’t compete with. We do expect to grow the numbers in our residential program.”

STUDENTS CAN CHOOSE THE SECOND-YEAR ONLINE OPTION AT ANY POINT IN THE FIRST YEAR

Hill sees an important upside for students who can convert internships into full-time job offers. “A student who lands the internship and comes back with an offer could now stay there and take that full-time offer right away. The students who need the residential experience will stay here and those who don’t will go for the flex option.

“This is an ideal program for students who want the benefits of a Top 20 full-time in-residence MBA program, but who need flexibility due to geographic preferences for networking, for family obligations or to pursue employment opportunities during the second year,” he adds. “Student needs have evolved in recent years, and this is an opportunity to provide the experience they need with fewer compromises.”

Students will be able to choose at any point during their first year whether they will return to IU Bloomington for their second year. Students who choose the +Flex option could spend as little as 10 months on campus. This option will be offered to students enrolling in the fall of 2025 and may be available to eligible first-year students currently in the program.

THE FIRST CONVERSATIONS ON THE MOVE OCCURRED BEFORE COVID

Kelley made clear that students who take the option would still benefit from its professional development program, Me, Inc., which features one-on-one career coaching and preps students for internship recruiting. Students also would be able to take advantage of the school’s career foundation academies. Students are required to participate in one of a half dozen of these academies: in business marketing, business operations and innovation, capital markets, consulting, consumer marketing, and strategic finance. The academies connect students with a variety of employers, informing students about career paths and roles they might wish to pursue. The academies also provide experiential learning opportunities that build students’ skills and prepare them for success in their internships and beyond.

Students who take the online option, however, would not be able to particpate in the school’s optional in entrepreneurship innovation, leadership or life sciences. Kelley’s second-year academy builds on what students learn in their initial year in the MBA program.  While the first-year academy focuses on functional knowledge, the second year provides a cross-functional learning experience.

Kelley officials first began to discuss offering the option before the pandemic. “This has come up in conversations pre-Covid,” says Hopkins.  “But two years ago, when our alums were expressing concern over the future of the full-time MBA, they wondered how to maintain the value of their degree. A lot of it has to do with meeting the market.  We know we lose students who say they just can’t take two years off and go to Bloomington.”

NO DOWNSIDES TO THE MOVE

The school had to overcome institutional hurdles to make the move. The full-time MBA, for example, operates on a semester schedule, while the online format runs on a quarterly schedule. “We had to wade through all of these things,” adds Hopkins. “In the registrar’s world, these are two different journeys even though students get identical degrees. Under the hood, there are these differences institutionally.” 

Kelley officials see no downsides to the move. “We have capacity for traditional learners,” says Hopkins. “If no students take this up, we’re fine. There is no marginal investment. But if a bunch take it up, we can staff more electives in KD. This is a major benefit at operating at scale. The culture here is highly entrepreneurial. We don’t have a lot of prima donnas prancing around. We have people who roll up their sleeves and get it done.”

Soni agrees. “Kelley has always been very good at responding to the needs of the students. If this takes off, we’ll add one or two staff members. It’s an option for our students. We have looked at what could be downsides but I don’t see anyway.” 

DON’T MISS: POETS&QUANTS 2023-2024 ONLINE MBA RANKING or KELLEY DIRECT: POETS&QUANTS MBA PROGRAM OF THE YEAR IN 2021