The MBA scholarship wars

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Highly regarded institutions across the U.S. are increasingly providing deep MBA discounts as they fight ferociously over the most talented applicants.

(Poets&Quants) — “Discount MBA degrees. Get ‘em while they’re cheap!” It’s not a sign you’ll see hanging from any respectable business school, but highly regarded institutions across the U.S. are increasingly providing deep MBA discounts as they fight ferociously over the most talented applicants.

Rivers of scholarship cash are flowing from schools to candidates—well over $200 million a year from the top 25 U.S. business schools alone—drastically cutting MBA costs for many students. As the money pours forth, it’s countering the rise in tuition costs, creating a two-tier market for a business education. There’s the high sticker price for the degree, and then there’s the discounted price for the most sought-after candidates.

At the moment, the battle for students has become so frenzied that several prominent schools are quietly negotiating with candidates, often competing with rival offers from other MBA programs. And some second-tier institutions have quietly contacted at least one major admissions consulting firm to present a highly unusual proposition: send your most impressive clients to us, and we’ll give them scholarship funds that we’ve set aside especially for your clients.

Surging numbers of international applicants and a growing number of MBA spaces globally have ratcheted up the intensity in the battle for students. In turn, schools are spending more and more money on scholarships, says Alison Davis-Blake, dean of the Ross School of Business at the University of Michigan. Some buy candidates who will improve a school’s standing in business school rankings, which measure incoming GMAT and GPA scores and outgoing salaries and job offers. Other schools are simply hoping to land the best and brightest to their programs in the expectation that their future success will reflect well on the institution.

“It’s a nuclear arms race,” Davis-Blake says, before switching metaphors to address the tug-of-war over stellar applicants. “It’s more like hand to hand guerrilla warfare, it’s fought sort of person by person. We see scholarship amounts increasing. We see more large awards. We see a broader array of students getting awards.”

The top 25 business schools in the U.S. annually dole out more than $220 million in scholarships to their MBA students, according to estimates compiled by Poets&Quants. When it comes to cash, no school beats Harvard, which has a $31.5 million scholarship war chest for little more than 1,800 MBA students, up from $22 million just four years ago. All told, Harvard Business School’s scholarship money constitutes roughly 29% of the school’s gross tuition revenues. Another way to look at this: HBS routinely discounts its MBA sticker price by 29%.

Yet, as significant as that support may be, other prestige MBA programs offer more. Rice University’s Jones Graduate School of Business, with a $6.7 million scholarship budget for just 216 MBA students, is handing out scholarship support equal to 59% of the school’s MBA tuition revenue…