Do online MBAs broaden access to business education?

With a need to save for her children’s university education, and to fund her own sustainability consulting business, Jennifer Saxe could not afford an MBA. Or so she thought, until last year.

That’s when Saxe enrolled in the iMBA run by the Gies College of Business at University of Illinois Urbana-Champaign. It is a fully online degree, taken part-time, so she can continue growing her company. And, while many top schools charge six-figure fees for a full-time, classroom MBA, the price for the iMBA is $22,000.

“I had already liquidated my retirement savings to fund my business,” explains Saxe. “Even if I got a loan, as a single mother, I could not afford to pay $100,000 for an MBA.”

Her story demonstrates the potential for online learning to democratise business education, by making quality training cheaper, more flexible and more accessible to a far larger number of people than expensive, on-campus MBAs.

Jennifer Saxe: ‘Even if I got a loan, as a single mother I could not afford to pay $100,000 for an MBA’

The iMBA has 4,432 participants currently enrolled, compared with just a few dozen full-time MBA students in 2019 — the year Gies discontinued that programme. Economies of scale lower the iMBA’s cost base, as it uses fewer professors, who command high wages, to teach larger class sizes than would be possible on campus.

“People think scale is inversely related to quality, but it’s the exact same degree you would get in person,” says Brooke Elliott, executive associate dean of academic programmes at Gies. “We chose inclusivity over exclusivity.”

In principle, many online MBAs could be much cheaper than they are, as virtual classes cut overhead costs such as bricks-and-mortar teaching facilities. Yet, many schools still charge similar rates for their residential and online programmes — Carnegie Mellon University’s Tepper School of Business, for example, charges about $140,000 for its various MBA formats.

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“Online learning is inherently scalable, but quality online learning is expensive to produce,” notes Nick Barniville, associate dean for degree programmes at ESMT, the European School of Management and Technology in Berlin.

The costs include paying faculty to design and refresh asynchronous course components — which students can complete whenever their schedule permits — on top of career services, periodic residential modules, and extras such as global study trips. Regular investment is also needed to keep IT infrastructure and software up to date, and to train teaching and support staff.

“There’s always the dilemma for a premium business school between a prestige price positioning and a strategy which focuses more on accessibility, scale and reach,” says Barniville.

Some institutions say smaller class sizes improve academic outcomes, underscoring a divergence in approaches to online learning.

“In a smaller group, there’s lots of interaction between participants,” says Leonardo Meeus, academic director of the online MBA at Belgium’s Vlerick Business School. “We didn’t design our programme to be cheaper. We wanted the same experience as a regular MBA — so we didn’t go for a huge cohort.”

Compared with campus students, financial considerations are less of a concern for online participants, because they are typically senior working professionals looking to increase their already significant earning power.

“For online students, funding is not such a big issue, because you just pay the fees — there’s no opportunity cost of not working, no sacrifice of income,” explains Amir Michael, associate dean for MBA programmes at Durham University Business School in the UK.

However, against a backdrop of rising wealth inequality, that can mean that online MBAs play only a limited role in spreading opportunity more evenly across society, according to Will Geoghegan, chair of the Kelley Direct Program at Indiana University Kelley School of Business in the US.

He cites a “perverse incentive” to hike fees to attract the highest earners, who will have the strongest career outcomes and boost their alma mater’s position in MBA rankings. “The game is almost stacked,” he says. “There is a self-perpetuation in terms of some of the inequality.” 

One of the greatest levers to broaden the demographic is financial aid, with many schools discounting the cost of tuition through merit- and needs-based scholarships.

“We make a strong effort to have diversity not just in terms of nationality, which is what our sector focuses on, but socio-economic diversity, which we think is just as important,” says Norman Kurtis, dean of programmes at IE Business School in Madrid. “There are many regions that are relatively well off locally, but it’s difficult for people to pay fees in stronger currencies.”

There are many regions that are relatively well off locally, but it’s difficult for people to pay fees in stronger currencies

Although, in principle, online learning could be a global playing field, online MBAs appeal largely to local learners. This is partly because some countries — notably China and the US — either do not recognise online degrees from overseas institutions, or restrict access to post-graduation work visas for online, as opposed to on-campus, foreign students.

Furthermore, co-ordinating live lectures across multiple time zones poses a challenge for course administrators, and relatively few business schools have a globally recognised name. “You would have to spend a lot of money to get the brand off the ground overseas,” says Paulo Prochno, assistant dean of online programmes at the University of Maryland’s Smith School of Business.

While some business schools partner with digital platforms, such as Coursera, to teach students in countries that they probably could not reach on their own, they have to share revenues with those platforms in exchange for hosting and marketing their MBAs.

However, with online learning coming of age during the pandemic, ESMT’s Barniville predicts competition for students in a free-market system will push fees down. “When you are one player of very few in a market, you can charge what you like. But, as more competitors come in, the landscape will change.”