Even in the worst of times, when they appear to be facing a crisis, business schools won’t even think of putting up a sign in front of their swanky buildings that says: “Going cheap. Your favorite MBA seat at a discounted rate. Run to grab it while stocks last!”
But b-schools, and business education, are also a business. Like any other enterprise, they need their customers as much as their customers need them.
Their product, the MBA degree, has become ludicrously expensive over the years, thanks to the high tuition fees, presenting a major hurdle for many MBA aspirants, who also have to forego their salaries in order to attend full-time programs.
Now, schools, faced with falling number of applications, have realized the need to sell their MBA seats by defraying the cost to their students through higher financial incentives.
One of the most important forms of financial incentives that schools offer students is scholarships. The two main types of scholarships are merit-based scholarships and need-based scholarships.
Need-based scholarships are approved based on the financial need of a selected candidate, and is mainly intended to ensure diversity in economic backgrounds in each cohort. Other forms of aid include assistantships, fellowships, reduced tuition, stipend, and work study.
Schools didn’t suddenly start offering higher scholarships when the demand for seats in their institutions began to decline; they have practically always offered merit-based and need-based assistance.
But now the drop in the number of applicants even at the top schools, and the increasing competition for the top candidates, have pressed them to take proactive steps to hold on to the “most desirable” candidates, make them accept the admission offer, and ensure that they aren’t abducted by other schools.
One of these proactive steps is big hikes in scholarships to a larger number of the top candidates. A consulting company reports in a blog that there has been 10 percent increase in scholarships annually between 2017 and 2020. A few other consultants quoted in an online MBA magazine report scholarship hikes of 30 percent to 50 percent.
Even the top schools go after the most desirable candidates. They know these candidates have been likely selected by other top schools, too, and that only higher scholarships could make certain that the candidates join their schools. This trend has been going on for at least the three years mentioned.
According to the online magazine, the number of applicants at even elite schools have dropped. As the number of applicants has dipped, the competition among them to attract the top candidates has increased.
A business and investment magazine reports that in 2018, the top ten business schools recorded a decline of 3,400 applications (nearly 6 percent) compared with the previous year.
The figure for HBS was 4.5 percent, Stanford 4.6 percent, and Wharton 6.7 percent, to take just three examples. Some schools in the top ten reportedly suffered double-digit losses.
The situation seemed to be such that the dean of a reputed school predicted that between 10 percent and 20 percent schools in the top 100 would close down in a few years. Second- and third-tier schools would be the most affected.
A losing preposition?
The rising cost of attendance, along with the opportunity cost of being jobless for two year, is arguably the most important factor for MBA aspirants—a Poet and Quants survey found that a dozen schools stuck a $200,000 price tag on their MBA degrees in 2019, up from nine in 2018 and four in 2016.
The business and investment magazine points out that the other main factors driving down the number of applications include:
- A strong US economy (which persuades aspirants continue in their jobs instead of quitting to do a full-time MBA).
- Doubts over the efficacy of the MBA degree.
- The anti-immigration rhetoric that’s keeping away international students.
- The success of undergraduate business degrees, the increasing popularity of online MBA programs.
- The availability of specialized master’s business programs in disciplines such as finance, analytics, and supply-chain management.
Moreover, potential candidates also fear a huge student-loan burden if they are unable to secure adequate scholarships at a top school.
What is the strategy devised by the institutions to combat the problem of falling number of applications, caused by the rising tuition fees for MBA programs? Increase the number and value of scholarships.
Not surprisingly, the number of scholarships has increased by at least 30 percent in 2017-2020 and the value of scholarships by 50 percent. The top award has touched $200,000, according to the online magazine, quoting consultants.
Bigger scholarships, and higher numbers of top candidates accepting admission offers, also ensure that the top schools’ “yield” (the number of selected applicants who actually join a school) is maintained at high levels.
As mentioned, since top schools make admission offers to the highest-qualified candidates, they know that these candidates would probably have been selected by other top schools, too, and that they better increase the value of their scholarships to get the candidates to accept their admission offers.
They may take weeks to increase the value of the scholarship to a top candidate where once they might have made a flat, non-negotiable scholarship offer along with the notice of selection.
One admissions consulting company claims that candidates trained by it received $5 million in financial incentives in one admission season, with those selected for admission with scholarships receiving between $10,000 and $200,000, the latter figure amounting to a “full-ride” scholarships (ones that cover the entire cost of attendance, including tuition, other fees, and room and board).
Higher scholarships were not offered to ordinary candidates but to exceptional ones. By offering scholarships, schools were sending a signal that said “we want you,” to the top candidates.
Although it may be a rare instance, one candidate is reported to have received scholarship offers of $80,000-$110,000 from seven schools. The candidate held an engineering undergraduate degree, worked in an “unusual sector” for an engineer, had submitted an application that showed she had leadership skills that would break through the glass ceiling, was knowledgeable about her industry, and had faced multiple challenges in her personal life.
However, despite the attraction of the scholarship “deals,” the candidate chose an eighth school, another top school that’s rated as the best in the business, but which offered only a need-based scholarship that amounted to about 20 percent of the biggest incentive from among the others, for its brand value and network.
Asking for more
Not all scholarships are freely offered without any negotiation. “Less desirable” but admitted candidates may often need to negotiate for higher financial incentives. Some candidates approach admissions offices after receiving their notice of selection and present their life situation that requires higher funding of their studies by the school.
A few may succeed: one admissions consultant claims that a school that had initially offered $80,000 came back to the admitted candidate with an offer of $100,000 to match another school’s offer. But not always can candidates persuade a top school to make sizeable offers in line with their real requirement if they had not already presented their case well in their applications in the first instance.
A consultant is quoted as saying that a reputed school in the US Midwest used the scholarship strategy “most aggressively,” along with an equally well-known school in the same city and one on the eastern seaboard. This consultant claims that the average scholarship offered to his clients by one school has increased two-fold to nearly $100,000 compared with a couple of years ago.
According to a consulting firm quoted in an article, the value of scholarships secured by the firm’s candidates increased 40 percent in 2019-20 compared with the previous year. The number of candidates who were offered scholarships increased 33-50 percent, the firm claims.
The percentages may wary, but similar claims by various consultants and firms indicate that b-schools may have increased their largesse and to more candidates than ever before. Lower-rated b-schools cannot afford to be left behind in this game, if they are to have cohort sizes that are feasible from a business point of view and that include more than a few quality candidates.
Raising the scholarship fund
The decision-makers of one school that has steadily improved its world ranking in the past three years and is now among the top 20 schools has launched a fundraising campaign to motivate philanthropic donations and thereby increase the value and number of scholarships.
The scholarship strategy is targeted at attracting the best students, those with high GPAs and GRE and GMAT scores, who, upon graduation, would attract the top recruiters, all key matrices that would help improve the school’s ranking.
Also, having been recruited by the top companies with high salaries, the ex-students are more likely to write big checks to help their alma mater. Higher rankings would also help attract the best faculty.
But candidates tend to accept an admission offer from HBS or Stanford, regardless of whether a big scholarship, even a full-ride, comes their way from schools with even slightly lower rankings.
An industry analyst has been quoted as saying that not even 2 percent of candidates selected by these two schools would reject their admission offer and go to another school for a bigger scholarship.
The reason should be obvious: Selected candidates believe that a degree from HBS or Stanford would land them jobs/careers with much higher salaries, and they would easily make good the investments in their MBA education even without a big scholarship.
For international students
There’s good news in all these for international applicants, too, who are now getting large scholarships at the top-branded schools. The fall in the number of international applicants has a lot to do with a “new discovery” of global MBA talent.
But international applicants, including Indian candidates, are not always swayed by big grants, and would readily choose a top school with little or no scholarship in favor of a slightly-lower-ranked school. In case they were to choose between two good schools that offered scholarships, a $50,000 difference in the financial incentives might make a difference, according to an analyst.
This doesn’t mean that even some of the top schools are resting assured thinking their brand value will take them through the scholarship game. They use different methods to make it easy for candidates to decide.
HBS, for instance, has reduced the price tag of its degree program by increasing its fellowship aid, and also now offers fellowships to 50 percent of its MBA students, which covers 50 percent of the annual tuition fee. Between 2014 and 2019, it also increased its two-year MBA fellowship award by 33 percent to $80,000.
Most schools won’t readily admit to holding negotiations with selected candidates on scholarships already granted.
But it’s an open secret that many of them do, if they really badly wanted a particular candidate as part of their cohort. Nevertheless, they don’t always entertain candidates who try to negotiate stridently for bigger scholarships.
Negotiating scholarships doesn’t seem to be a popular game in Europe, and aid has remained steady at top schools in that continent. Perhaps, one reason is that European schools don’t have big scholarship budgets as those in the US tend to have.
The importance of aid
Many candidates accept admission to schools giving bigger scholarships to make their studies more affordable or to avoid a huge loan burden. Some choose a school for particular aspects of the school’s program that would help their careers along.
Others do so to give themselves the option of not having to return to their pre-MBA employers, who may have funded their studies, and to reset their career goals afresh.
Tips to improve your chance of getting a big scholarship
Based on the experience of the MBA Crystal Ball admissions consulting team, here are a few more tips for you to consider, if scholarships are important for you.
- Remember, the best candidates win the largest scholarships
- Ace your UG degree academic record, GRE, and GMAT
- Research the scholarships offered by your targeted b-schools
- If you’re from a specific interest group, know the scholarships available to you
- In your application, mention why you need/deserve a scholarship
- Craft your personal story beautifully
- Don’t hesitate to ask for a bigger scholarship; it’s not going to affect the admission offer
- Initiate scholarship negotiation as early as you can, since schools have more money in the early rounds
- Prepare hard for any scholarship discussion; use your negotiation skills
- Present your case well, but don’t dramatize your situation
Drop us an email if you’d like professional help with your MBA and masters applications: info [at] mbacrystalball [dot] com
We’ll get one of our best MBA admissions consultants to work with you to improve your odds of getting admits (and hopefully scholarships!) from your dream schools.
– MBA scholarship success stories, strategies and tips
– Poets & Quants reviewed this MBA Crystal Ball scholarship story
– Higher Education Scholarships for International Students
References: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11