After eight years as a marketer at a small financial planning firm, Diana Awed wanted to speed up her career. But the 34-year-old wasn't interested in taking on the $100,000 of debt that often comes with getting a full-time MBA. She turned to the part-time program at the Stern School of Business at New York University. Tuition was going to total $75,000 over three years, but by keeping her job she wouldn't go into debt. Halfway through her degree program she leveraged her network of contacts at Stern into a higher-paying job as a marketing manager at Swiss banking giant UBS. On track to graduate next spring, Awed says, "I didn't want to to take any time out of my career, but I wanted to accelerate the pace of it."
Only 20 percent of business school students are enrolled in two-year, full-time programs. Part-time evening and weekend programs account for half of current students; the rest are enrolled in executive, distance-learning and other smaller programs. The cost of full-time studying, in forgone salary as well as tuition, is just too great for a lot of prospects. And then they don't have the confidence their predecessors did that when they get out they can breeze into high-paying jobs that will liquidate the debt in short order. In 2000 Goldman Sachs hired 46 graduates from Columbia Business School. Last year Goldman took only 18.
Our fourth biennial ranking of business schools shows why students are embracing part-time programs. Our survey ranks schools based on return on investment — meaning compensation five years after graduation minus tuition and the forgone salary during school. The top part-time school, Stern's Langone Part-time MBA Program, had a median five-year gain of $166,000, greatly helped by the absence of forgone salary. That sum beats the $134,000 gain of our top-ranked full-time program, Tuck School of Business at Dartmouth College. In a combined ranking of part-time and full-time U.S. programs, Tuck and the University of Pennsylvania's Wharton School are the only full-time schools that would make the top five. (For the first time Harvard Business School is not the top-ranked school.)
"Part-time programs are the staple now," says John Fernandes, president of the Association to Advance Collegiate Schools of Business, the MBA accreditation group. "Growth in these programs is reflective of society at large. Everyone is too busy to stop their careers and go through a concentrated two-year program."
The Graduate Management Admissions Council, which issues the GMAT exam, found that 46 percent of part-time programs reported an increase in applications this year versus 20 percent of full-time programs. For the 90 full-time programs that completed our MBA survey, only 3 saw an increase in applications (HEC School of Management-Paris, the University of Alabama and the University of Connecticut), and there was an average decline of 33 percent between 2002 and last year. Top-ranked schools like Tuck and Kellogg at Northwestern saw declines of 47 percent and 44 percent, respectively. Harvard, the gold standard of MBA programs to many people, saw a 31 percent drop in applications. (The number of MBAs awarded in the U.S. has increased 6 percent annually over the past 35 years, to an estimated 130,000 last year.)
Many business school deans blame demographics for the drop in full-time applications. The 25-to-29 age group (the most popular for full-time applicants) has been flat in the U.S. since 2000. A bigger issue is the decline in students from overseas. In the Class of 2006, 28 percent are from outside the U.S. Four classes prior, 31 percent of students came from outside the U.S. In the last five years hundreds of programs have started outside of the U.S., in places like Germany and China (for foreign schools, see "Brain Drain"). Students outside the U.S. have also had to struggle with getting student visas as a result of the Patriot Act. Applications for student visas to the U.S. fell from 323,000 in 2002 to 289,000 in 2003.
Too expensive for potential students
But the biggest reason for potential students shunning full-time programs is the monetary cost, according to Albert Niemi, dean of the Cox School at Southern Methodist University. "Part-time programs are going to dominate the MBA market as far as we can see because of the large opportunity cost at a full-time program," Niemi says. A degree at a top full-time MBA program like the Johnson School at Cornell University costs $71,000 in tuition plus something like $130,000 in forgone compensation. Tuition at the top part-time programs is pushing $80,000, but these students get to keep their jobs. In addition, employers often foot part or all of the tuition for part-time students.
The MBA isn't quite the golden ticket that it was in years past. The average base salary for a graduate of a U.S. school was $75,000 last year, the same as in 2000, while tuition has jumped 8 percent annually during that time. And getting a job isn't as easy. In 2000 the top schools placed 90 percent of their students in jobs by graduation. Last year only 70 percent of students at these schools had jobs. Cox's Niemi thinks that banks are hiring more undergrads with business degrees because they are cheaper and come with less of a sense of entitlement.
Geoffrey Ley was working in research and development for PepsiCo's Frito-Lay division when he weighed his options for business school. Full-time tuition would have come to $70,000 atop $150,000 in two years of missed salary. So Ley went to the part-time program at SMU's Cox, where tuition was $50,000, and he was able to keep working. "I thought I could integrate my MBA education more effectively to build my career while studying part-time," he says.
Part-time programs are more flexible than ever. The road-warrior salesman never could get an MBA, but now schools such as Duke University offer online MBAs. "Students don't have to fit themselves into programs anymore. The programs will fit the students lifestyle," says Fernandes of the accreditation body. E-mail and instant messaging allow students and faculty to seamlessly communicate even if they are 2,000 miles apart.
Sharad Sundaresan, a programmer for Microsoft in Redmond, Wash., entered the part-time program at the University of Chicago. For three years Sundaresan boarded an 11 p.m. flight out of Seattle on Friday and arrived in Chicago at 5 a.m. He hung out at the airport until the school's shuttle bus picked him up for a full day of classes and then went back to the airport on the shuttle and caught a 7 p.m. return flight to Seattle. Tuition was $75,000 and flights cost another $30,000. E-mail, instant messaging and conference calls allowed Sundaresan to work on group projects with classmates in four different cities. "No regrets," says Sundaresan. "It afforded me the chance to keep my job, and the quality of the education and the networking opportunities were the same as the full-time program." The reward for his degree: a management consultant job at McKinsey & Co. and no debt.
Business schools are trying different strategies to increase enrollment. Harvard ramped up its recruiting on college campuses and this year accepted 20 undergrads straight from school; it took only 5 the previous year. MBA programs are also admitting a higher percentage of applicants, 42 percent last year versus 32 percent two years prior. Guidance experts say full-time programs are probably best for students who want to change careers or industries.
Tuck's dean, Paul Danos, thinks that full-time is superior to part-time. "The total immersion experience students get in a full-time program allows them to create skills and get a depth of understanding that you can't get any other way," says Danos. But in a nod to current trends, Danos admits that even Tuck is considering a part-time program, possibly in New York or Boston, because tiny Hanover, N.H., isn't near employers. Says Danos, "Every major MBA program is going to have an alternative way of being delivered in the next ten years."