Are MBAs elitist?

An MBA is one of the most expensive qualifications in the world. 

A two-year program at a leading business school could cost up to $225,000. To put that into context, a $200,000 (£162,074) salary in the United Kingdom would put you in the top 1-2% of national earners.

What’s more, the top MBAs are getting even more expensive. In 2014, the cost of the two-year full-time MBA at NYU Stern was $121,488. Today, that figure stands at $164,452; an increase of around 35%.

With these hefty price tags, it’s little surprise that 60% of all prospective applicants see cost as the biggest challenge to studying an MBA. However, cost is an even bigger obstacle within certain demographics.

In the US, candidates from underrepresented minorities (URMs) research the cost of an MBA more thoroughly than non-URM applicants. While 41% of URM candidates do “a lot” of research on the cost of the program, that figure falls to 31% for non-URM candidates. There is a similar disparity in researching financial aid options (25% vs. 12%), and return on investment of the degree (40% vs. 30%).

In addition, 72% of URMs will consider scholarships, fellowships, or grants to cover the cost of their MBA. On the other hand, less than half (49%) of non-URM candidates consider these funding sources. They’re also much more likely to rely on personal savings or family loans to fund their MBA.

Given the costs involved, it’s difficult to shake the notion that an MBA is a qualification that only an elite few can afford. But it’s an image that business schools are fighting hard to dispel.

What are business schools doing to make MBAs more accessible?

Business schools place more importance on diversity than ever before. It’s partly to try and shake off the elitist tag of an MBA, but it’s also because a diverse cohort brings extra benefits to an MBA class.

Let’s take the example of an MBA class tasked with analyzing a business case. It’s important to look at a case study from every perspective before plotting the best route forward. And a diverse set of classmates can help you look at the case study from fresh angles. It will make you better placed to make a better decision.

A diverse cohort also gives MBA students the chance to work with students from all over the world. This international exposure is crucial in today’s globalized world with its myriad of cultures and work styles.

But although a diverse class is clearly a valuable asset for an MBA program, achieving it remains a huge challenge for business schools. Here are some of the things they’re doing to tackle the problem.

More financial aid opportunities

More MBA students receive financial aid than you might think. For example, 70% of the MBA class at the Gabelli School of Business typically receive a merit-based scholarship. At Cambridge Judge Business School, 60-70% of their MBA students receive financial aid of some kind.

Yet, even these generous financial aid packages aren’t enough to cover the program’s costs. Cambridge’s scholarships do not exceed £35,000 and only make a dent in the program’s total cost of £82,000-£83,000. The £50,000 shortfall can still be prohibitive for many students.

Waiving of test requirements

A growing number of business schools are waiving the requirement to take the GMAT, which is the industry-standard test for MBA applicants. Given that it costs $250 to take the test, this is one less barrier for lower-income applicants to navigate.

The benefits of this waiver aren’t just financial; there is also a discrepancy in results. Since there have historically been fewer URM candidates in MBA programs, there are fewer URM mentors for taking the exam. On the other hand, non-URM applicants are more likely to have friends or family who have taken the GMAT.

Given the comprehensive MBA application process, this waiver only goes a small way towards solving an MBA’s diversity challenges.

Implementing diversity quotas

Some business schools have started to limit the number of MBA students from certain demographics. For example, Esade Business School in Spain tries not to have more than 15-20% of the class from any single country or region. 

While this certainly helps applicants from underrepresented minorities, it perhaps doesn’t address this inequality’s root cause. While a higher percentage of URMs are admitted, the number of URMs applying to business schools remains stubbornly low.

Is the picture changing?

Business schools are removing many of the traditional barriers to studying an MBA. Financial aid is widely available for students, programs are implementing diversity quotas, and schools are placing increasing importance on diversity. Additionally online MBA programs tend to be more affordable than their traditional counterparts, reducing the financial barrier for many.

Yet these measures appear to be having little effect on the demographics of MBA applicants.

Between 2007 and 2017, the demographic profile of GMAT-takers hardly changed. In 2007, 5.5% of US citizens taking the GMAT were Hispanic Americans. In 2017, that figure rose slightly, to 7.7%. In the same time period, the number of African American test takers actually fell; from 8.1% to 7.9%.

In 2019, 67% of two-year MBA programs in the USA actually reported a decline in applications from URMs. And in the four years prior, around three in five schools reported stable or falling numbers of applications from these same demographics.

Perhaps the biggest difficulty for business schools is challenging the preconceptions surrounding MBA accessibility. If an MBA is perceived as a qualification for the privileged, then many people will simply decide that it is not an option for them. That would certainly explain why as financial aid options have increased, applications from URMs have remained stable.

Therefore, the challenge facing business schools is one of perception more than anything else. And as long as the perception exists that MBAs are elitist, they are likely to remain that way in practice.

If you want to learn more about studying an MBA, feel free to reach out to one of our MBA ambassadors.