Issue 41 — Who Still Chooses a Wharton MBA?

For the incoming Class of 2028, some top U.S. MBA programs have seen application drops, with some reporting declines of 20% this year. Wharton’s MBA program remains in a stronger position than most, consistently receiving more than 7,000 applications annually, including for the most recently completed Class of 2027 cycle, and maintaining an acceptance rate just under 20%.

Wharton is unlikely to see the most dramatic application declines because of its program strength and reputation, repeatedly ranking as one of the top MBAs in the country. But it is not immune to broader shifts reshaping the overall MBA applicant pool.

As the value proposition of business school changes, application numbers fall, the job market becomes more competitive, and paying for graduate school becomes harder with the disappearance of Grad PLUS loans, Penn must think carefully about how to protect the value of a Wharton degree.

The shrinking MBA applicant pool extends beyond the 20–30% declines reported by some schools. This spring, The Wall Street Journal reported an overall 1% decrease in U.S. MBA applications, while applications soared 7% world-wide. They also announced a “fire sale” on MBAs, with schools lowering tuition and increasing flexibility to entice applicants. 

This shift in value and applicants is due to a confluence of factors. All-in costs for top MBA programs have skyrocketed to over $130,000 per year compared to $40,000 twenty years ago. At Penn and other elite undergraduate schools, many students graduate and immediately enter consulting or finance directly after college, the top industries for many business school graduates.

Even jobs traditionally reserved for MBA graduates, like venture capital and private equity, are now more accessible to undergraduates from top-tier schools either directly or after two to three years in consulting or investment banking. And employees can often be promoted to top-level Partner roles without ever receiving an MBA.

As a result, many of these graduates and others who might have once viewed an MBA as the natural next step are choosing to remain in the workforce instead.

The trend of “job hugging” has also become widespread, with people staying in jobs — even when they are unhappy — because of fear about an uncertain job market. MBA applications are usually counter-cyclical, increasing when the job market dips. But now, growing fear across the job market about AI’s impact on white-collar professions appears to be overriding that pattern.

Those concerns of potentially not finding a better job after an MBA are valid. For Wharton’s Class of 2025, 87% reported job acceptances and 90% reported offers. In 2021, those figures were 96.8% and 99%, respectively.

Further changes are expected in who applies for, and who can afford, an MBA as the federal government caps federal student loan borrowing. Beginning this summer, MBA students have a $20,500 per year federal borrowing limit, compared to previous unlimited federal borrowing up to the full cost of attendance .

Overall applications are also down in part because of a decrease in international enrollment. Last year, although Wharton saw a 4% overall increase in MBA applications, it also saw a drop in interest from international students, with international enrollment shrinking from 31% to 26%.

This decline extends to the strongest American students as well. About 20 years ago, more than 7% of graduates from the most selective undergraduate schools (the Ivy League Plus and the six most selective liberal arts colleges) enrolled in MBA programs within five years of college graduation. Since 2009, enrollment from these top schools has steadily declined. In the most recent year of data, 2020, only 4.6% of these graduates enrolled in MBA programs within five years of graduation. The drop is amplified when looking at a broader time horizon of 10 years after undergraduate graduation.

So while Wharton is still receiving high numbers of qualified applicants, it is not drawing from the same pool of applicants that it did 15 years ago.

These shifts may change the composition of Wharton's applicant pool (and therefore student body), raising questions about how the school maintains the same caliber of students and outcomes that have historically defined the MBA program. And Wharton can remain highly selective and competitive while standards lower, which may threaten Wharton’s commitment to academic excellence.

Penn has several options.

It can continue admissions as usual, potentially enrolling students from a different mix of undergraduate schools, career paths, income brackets, and risk profiles. It can lower prices to attract top talent, increase flexibility for students to remain employed while attending, or reduce class sizes to maintain a profile more similar to previous cohorts.

The right response depends on the diagnosis. If affordability is the problem, pricing matters. If the main problem is opportunity cost, flexibility matters. If it’s applicant quality, class size and communicating the value of the degree matter. And if the problem is the value of the MBA, then Wharton needs to reevaluate its curriculum and how well it prepares graduates for their careers.

The answer may be all of the above, and Penn may not know yet. But it should be asking the question.

However Penn chooses to act, it will likely see a shift in what Wharton’s MBA class looks like over the next few years.

The MBA is becoming a different product for a different set of people. Wharton must decide how it wants to respond and how to ensure that, even as the applicant pool changes, it will preserve the highest caliber of students, outcomes, and academic excellence that have long defined the degree.

Curated highlights from this week’s Penn news

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