B-Schools Confront the High Cost of Change

Two state-supported schools are making bold moves to ratchet up the quality of their MBA programs. Their method of choice: massive tuition increases

By Geoff Gloeckler

At McGill University's Desautels Faculty of Management in Montreal (Desautels Full-Time MBA Profile), students paid $1,500 a year for tuition, a tiny fraction of the average annual cost for MBA programs, which now hovers around $26,000.A bargain, no doubt, but not enough to attract students unfamiliar with the quality of the B-school.And the school was struggling to make ends meet because of waning provincial support and the government's unwillingness to permit tuition increases.In contrast, other Canadian MBA programs such as Queen's (Queen's Full-Time MBA Profile) and Western Ontario (Western Ontario Full-time MBA Profile) that had sworn off government support years earlier and had essentially gone private, were thriving.

Meanwhile at the University of Wyoming's College of Business, Dean Brent Hathaway was in charge of a solid, but dated, MBA program. While Wyoming's program was as good as any other in the country 30 years ago, "today it's not," he says, noting the lack of curriculum features that are now common at even mid-tier schools. To make matters worse, the low tuition cost—just $7,700 for Wyoming residents—was giving prospective students the wrong impression about the quality of the program. "It drove me insane," Hathaway concedes.

For Wyoming and McGill, it was time for a change.

In both cases, that change has come in the form of major tuition hikes for the MBA programs—increases designed to raise the stature of both institutions in the eyes of prospective students, who see a high price tag as a sign of academic quality, and to improve the quality of the programs to justify the heftier price.

Steep Tuition Increases

At Wyoming, administrators have torn apart the old MBA structure as well as the facilities and created a new-look MBA to convince the state government the program was worth a much higher price tag. McGill, meanwhile, has decided to follow the lead of its peer schools in Canada and cut its government ties entirely.

Percentage-wise, the price increases are staggering. On average, MBA programs increase tuition between 4% and 10% annually. At Wyoming, the increase for in-state MBA students will be 178%. At McGill, students from Quebec will face an astounding increase of more than 1,600%. But because the base prices were so low, the new annual costs—$21,378 at Wyoming and $29,500 at McGill—are still within the typical range for MBA programs.

While the tuition hikes at Wyoming and McGill are unusual by virtue of their size, the economic pressures that drove them to take such drastic steps are anything but unique. Across North America, rising costs, declining endowments, and reductions in state aid are putting schools, including B-schools in a bind, forcing many to impose tuition increases sometimes far in excess of inflation. At Johns Hopkins University, undergraduate students at the Carey Business School last year were hit with a 43% tuition hike to pay for expanded academic programs, new technology, and improved classroom facilities. In Illinois, the state has yet to make good on $770 million it owes the state university system, and furloughs and hiring freezes are the order of the day. At the University of California, Berkeley, a 32% undergraduate tuition increase has triggered violent demonstrations and the occupation of one campus building, leading to dozens of arrests.

On the surface, the increases at Wyoming and McGill couldn't come at a worse time. True, MBA applications are up across the board.

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