Krystelle Bolivar holds a green notebook as she stands in front of lockers
Opening doors: A scholarship enabled Krystelle Bolivar to take up a place on the Insead MBA © Magali Delporte, for the FT

Without a €45,000 scholarship, Krystelle Bolivar would have given up her MBA place at Insead in France and Singapore.

“I don’t think I would be able to otherwise raise the funds,” she says. As well as the €91,225 tuition fee that she paid, wage inflation in a tight labour market has increased the opportunity cost of taking time out of the workforce to study.

That mattered less to Bolivar than it will to many aspiring students, as the Filipina was working as an independent financial consultant in Asia before enrolling at Insead in 2022. “I have no regrets. I’m certain the MBA will pay off,” she says, believing it will enable a switch to a sustainability-linked career in Europe.

But many people who might otherwise apply for an MBA are choosing to stay in the job market rather than put their career and earnings on pause. Global applications to business schools slipped 3.4 per cent from pandemic highs in 2022, according to the Graduate Management Admission Council (GMAC), which runs the GMAT entrance exam.

Despite high inflation and fears economies around the world are heading into recession, unemployment is low and companies are offering pay rises to attract and keep talent. That makes getting an MBA less attractive for some. “If you’re a strong performer, no one wants to let you go,” says Benoit Banchereau, executive director of MBA marketing and admissions at HEC Paris.

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He reports an uptick in students pulling out of their MBA courses before the start of term, as companies are willing to cover the cost of their €9,000 deposit to keep them in the workforce. HEC responded to the drop in demand by reducing its MBA class size from 350 to 300 candidates in 2022.

Banchereau says the decrease also reflects a process of normalisation after two bumper years for applications. Demand for MBAs is countercyclical; it grows as the economy contracts and workers seek shelter and a way to upgrade credentials. That was the case in 2020, when the pandemic struck and demand rose 2.4 per cent year-on-year. Demand was also fuelled by schools extending application deadlines and waiving admissions-testing requirements.

In 2021, applications fell as economies recovered, and this trend continued in 2022. Stacy Blackman, a US-based admissions consultant, sees this as an opportunity for prospective students. “It’s a more favourable time to apply, as you’ll be incrementally more likely to gain admission because of the decrease in MBA demand,” she says.

But there is an expectation that impending recessions will soon buoy demand for MBAs. Several business schools have made overtures to recently laid-off workers at technology companies including Meta and Twitter. Northwestern University’s Kellogg School of Management waived standardised test scores for those former employees.

“Many economists predict we are going to have a recession,” says Greg Hanifee, Kellogg’s associate dean for degree programmes and operations. “That tends to lead to more interest in going back to school and getting an MBA.” He adds that the number of people starting an MBA application has risen during the test-waiver period, which began in November and has been extended to April.

One bright spot for business schools was a rebound in applications from international students in 2022, particularly for those applying to programmes in the US, as Covid travel restrictions eased. But that has not offset the drop in US domestic demand, says Joy Jones, the new chief executive of GMAC. However, she adds, candidates in Asia are increasingly opting to study locally, notably those in China, where strict pandemic controls limited student mobility.

The big question for business schools is whether they may have priced some students out of the market. In the past decade, the average fee for MBA programmes ranked by the FT has increased by nearly 29 per cent in dollar terms, slightly higher than the average salary.

“This is a really big issue, because the sticker price is so high that more people see it as a risky proposition,” says Ilian Mihov, dean at Insead. “With interest rates increasing, we’ll see even more risk aversion and more concern about borrowing,” he adds.

Despite that, Insead is raising tuition fees by 6.4 per cent (to €98,500) for the January 2024 intake because of inflation and to compete with other schools on pay for professors. At the same time, Insead is raising money for scholarships to attract a broader intake of students.

Lower demand has pushed some schools to close their MBA programmes. In August, Penn State’s Smeal College of Business said it would shut its two-year residential MBA in 2024 and transition to a one-year programme. The school’s dean, Charles Whiteman, attributed the decision to decreasing interest in the traditional programme, and increasing demand for more flexible learning options.

Several other US schools have closed their MBAs in recent years, including the University of Iowa, University of Illinois and Wake Forest University. Bill Boulding, dean of Duke University’s Fuqua School of Business, points to a “flight to quality”, whereby students only apply to the elite institutions. “That’s why you’ve seen slowly, over time, this attrition of some of the MBA programmes, and I expect that pattern to continue,” he says.

While he believes the skills imparted through an MBA — which Fuqua is continuing — remain relevant, he says that people have more ways to acquire them, such as by taking online courses. “The reality is that, in order to be in the business community, you don’t have to have an MBA,” Boulding says. “It is not a golden ticket.”

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