MBA Advisor: GMAC Survey: 70% Of U.S. Schools See Drop In Apps

The Graduate Management Admission Council strives mightily to put a happy face on bad news in its latest report, but it’s a tough task. As Poets&Quants has been reporting, data from multiple sources over the last year has shown a large, consistent drop-off in application volume at U.S. business schools — and the annual Application Trends Survey from the organization that administers the GMAT corroborates the downturn. It also explains where some of those students who eschew the States are taking their talents and tuition dollars.

According to GMAC, which looked at graduate- and doctoral-level programs that saw a combined 466,112 applications during the 2018 application cycle, U.S. business schools experienced a nearly 7% decline in app volume from last year, including a 1.8% decline in domestic applications and a 10.5% drop in international volume across all program types. Most U.S. programs (53%) surveyed by GMAC reported application declines, including 70% of full-time two-year MBA programs.

GMAC does a good job of focusing on the positive, noting that demand for graduate business education is “stable” overall since application volumes are up in Europe, Asia-Pacific, and Canada — really everywhere but the U.S. Asia-Pacific programs had an 8.9% increase, Canada realized 7.7% growth, and Europe had a 3.2% increase in application demand across all program types — allowing GMAC to note that the total number of applications received by the 336 MBA programs that participated in both this year’s and last year’s surveys did, in fact, remain stable from 2017 to 2018 (+0.04%).

“Demand for graduate management education is stable year over year. Non-U.S. programs continue to thrive,” says Sangeet Chowfla, GMAC president and CEO, “highlighting the continued emergence of enhanced educational and professional opportunities outside the United States.”

HARD TIMES ON THE SECOND TIER

Christie St. John, Vanderbilt Owen director of MBA admissions. Vanderbilt photo

Inside the United States, well, that’s another matter. In the 19 years GMAC has been conducting its application trends survey, the 58% of U.S. full-time MBA programs (including one-year programs) reporting declining application volumes in 2018 is the second-highest percentage of schools, after 2004, when 76% reported declines; similarly, the 65% of full-time two-year MBA programs in the U.S. reporting declining applications this year is the second-highest, eclipsed only by 2004’s mark of 73%.

Chowfla points to a few well-discussed factors to explain the lag in U.S. business school demand, including a low unemployment rate, which means “young professionals have an increased opportunity cost of leaving their jobs in pursuit of an advanced degree,” and “a disruptive American political environment and the emergence over the past decade of tremendous educational and professional opportunities abroad.” Combined, he says, these factors help explain “why demand in the United States has dropped from previously record-high application volumes at some schools.”

The disaster in demand at U.S. schools is pervasive, but let’s be honest: MBA programs at Harvard, Stanford, Wharton, and the rest of the elite U.S. B-schools aren’t going anywhere. The real pain is being felt further down the food chain. So what’s to be done at the second tier?

John Roeder, assistant dean of graduate admissions at Southern Methodist University Cox School of Business in Dallas, Texas, says change is coming at the smaller schools. Recruitment adjustments are likely necessary to stave off real pain. “Smaller programs that rely significantly on the international intake will likely be impacted by a diminishing applicant pool prior to those schools who have more selective and smaller international intakes,” he tells Poets&Quants. “Some programs that are heavily reliant on the international applicant pool will be forced to change their recruiting strategies to ensure that they are able to fill their classes with a more balanced intake. If programs continue to see a decline in application volumes, they will need to find a way to increase yield, which will mean increasing scholarship funding to admitted students. Right now is an excellent time to be applying to US schools as an international applicant.

“From the applicant perspective, there is less competition and more scholarship funding available.”

AT SMALLER SCHOOLS, STRATEGIES FOR ADAPTATION

What about Roeder’s home, the Cox School, a relatively small program with 123 members in the Class of 2019? Cox’s 2017 intake was 16% international, with nine countries represented. While it saw an overall increase in full-time MBA application volume this past year, Roeder says, there was a “noticeable” decrease in international applications within the overall applicant pool — but the school saw the downturn coming and prepared. “Our strategy for the past few years has been to focus on a strong domestic intake with a highly selective international intake,” he says. “This ensures that our international students that we do bring into the program are successful in the employment market at graduation.”

Before joining SMU Cox, Roeder was the director of MBA admissions at Vanderbilt University’s Owen Graduate School of Management in Nashville until 2012. His successor there, Christie St. John, says that relatively small MBA program — the Class of 2020 numbers 179, 16.4% of whom are from one of 15 countries outside the U.S. — will focus on reaching smaller markets, “where the big MBA fairs do not go,” to find candidates.

“We are offering one-on-one counseling to prospectives to help them decide if and when an MBA is right for them,” St. John tells Poets&Quants. “We are also doing more personal outreach to prospectives in our database, especially those who may have been in the system for two or more years. We are soliciting help from our students and alumni to connect with prospectives and applicants to talk about their experience at Vanderbilt. We are hosting visits more often and tweaking our visit agenda so candidates have a better understanding of our culture and values. It takes a lot of time and energy, and we are a small staff. That said, we all love Vanderbilt and are enthusiastic about telling prospectives why, so the extra work seems worth it.

“Luckily, we don’t have to bring in a class of 500. We are small and intend to remain that way. We can continue to be selective in our admissions to bring in the type of student we want and the type of student who will thrive in our community. Dean (Eric) Johnson and our faculty are responsive to the needs and desires of our corporate recruiters and our students with the result that we have increased the hiring of professors who can and who want to meet those needs by updating and revising the curriculum.

“Yes, this downward trend is disturbing, but it isn’t the first time and it likely won’t be the last time that we will see this. Strong schools will survive by examining their offerings, and by looking at new options for the two-year MBA. Vanderbilt will be one of those schools.”

Poets&Quants has been reporting on the impact to U.S. schools of international students choosing to study outside the United States since before there was data to show the phenomenon was happening. But fluctuations in demand are nothing out of ordinary, if the situation is looked at with a long enough lens.

“In my 20-plus years in MBA admissions, I have seen demand rise and fall for the MBA,” Christie St. John says. The big changes usually come in response to economic conditions — the collapse of the Argentine and Brazilian economies, the dot.com boom, and the U.S. real estate collapse a few years ago — or because of international events like 9/11, the Afghan and Iraqi wars, and the current administration’s hostility to immigrants, including students. “So it is not too surprising to see that the number of GMAT test takers and application numbers are once again on a downward trend,” St. John says. “This is never easy to link to just one specific event, but in a general sense, I think it is partially due to fear and uncertainty — fear that the ROI is not what it once was, and uncertainty about where the economy is headed.

“What is most concerning is the marked decrease in international applicants to U.S. schools. For years, we have seen a steady stream of candidates from all over the globe, the majority of whom were headed to the U.S. Foreign national students add so much diversity of thought and experience in the classroom. This is beneficial to U.S. students and to the foreign national students, because it helps both to understand the intricacies and importance of cultural differences, not just in a business sense but in a political and economic sense, and it dissipates mistrust of ‘the other.’

“With the cost of education reaching all-time highs, young people are deservedly anxious about taking on more debt for the MBA and leaving a secure job. And another factor in the decrease in popularity of the ‘traditional’ MBA is a bit of our own doing: By trying to remain relevant and to ensure a revenue stream, B-schools are launching more and more one-year programs, which cannibalize the two-year MBA. That isn’t news to anyone, but the question is, will specialized master’s degrees end up winning the race? Will companies decide to take on employees with less experience and who also cost less?”

St. John believes the two-year MBA will survive because it remains the best choice for those interested in graduate business education, especially for those seeking to change careers. “One gains a broader and deeper understanding of business practices, one has the chance to try out a new function or industry with no detrimental effect on the resume, and one’s overall experience is much richer,” she says.

Source: GMAC

STUDENT MOBILITY REMAINS A KEY DETERMINANT

The ability to attract top international talent continues to be a critical determinant to programs’ overall application volumes. This year, 65% of Canadian programs and 63% of European programs report an increase in international applications over 2017, with the majority of applications received by Canadian and European programs this year coming from international applicants. By comparison, just 28% of U.S. programs reported growth in international application volume.

But even as most programs in the U.S. reported declining demand from non-U.S. students, application volumes from domestic candidates also were soft this year, with only 4 in 10 reporting growth in domestic application volume. One bright spot for U.S. programs: Master of Data Analytics programs, most of which report application volume growth this year — and counter to the overall trend, they report more international application growth than domestic application growth.

“Access is a critical issue facing higher education,” says Bill Boulding, dean of Duke University’s Fuqua School and chairperson of the GMAC board of directors. “Economic indicators in the U.S. are strong, but if we are to maintain such growth and productivity we need to make it possible for people from all different regions and backgrounds to study and work in the location they desire.

“If that doesn’t happen, we limit not only the possibility of an individual, but also continued economic prosperity in the U.S. and growth around the world.”

OTHER SURVEY FINDINGS

Full-time, two-year MBA programs are still the most in-demand program type overall, reporting a similar volume of applications in 2018 compared with last year. The majority of European Master in Management and Master of Finance programs report growth in demand. Meanwhile, nine in 10 participating programs report that the applicants this year are similarly or more academically qualified than candidates last year — and more programs reported application growth among women than men, with 1% growth in applications from women in Asia-Pacific, Canada, and the U.S.

GMAC conducted its 19^th annual Application Trends Survey from early June to mid-July 2018. Survey findings are based on responses from 1,087 graduate business programs at 363 universities worldwide. Participating programs are located in 44 countries, including 43 states and the District of Columbia, and include MBA, business master’s, and doctoral-level programs.

MBA PROGRAMS Y-O-Y CHANGE