Business is bad on Wall Street, and business schools across the country are bracing for the impact: A surge in applications this year to their full-time MBA programs.
With financial markets in turmoil, the economy slowing down and Wall Street undergoing a profound structural change, many people are deciding that now is a good time to head back to school. Some would-be students are the victims of layoffs roiling the financial industry. Others think their jobs could disappear soon. Even some applicants whose jobs are currently stable are deciding that it makes sense to go for a graduate degree now, since promotions and new opportunities could be hard to find in the next few years.
Schools don't have application tallies yet, as deadlines for the first round of admissions are in mid October for most top-tier schools, but many already are reporting big increases in interest.
New York University Stern School of Business reports a 30 percent increase in attendance at off-site information sessions this year. Northwestern University Kellogg School of Management has had a 22 percent increase in applications so far. University of Chicago Graduate School of Business says it is seeing significant increases in inquiries online and attendance at information sessions. And University of Michigan Ross School of Business says that campus visits by prospective students have more than doubled.
People are also registering for the graduate management admission test in greater numbers this year. According to the Graduate Management Admission Council, a McLean, Va.-based organization of 165 graduate business schools, U.S. GMAT registration volume for the first nine months of this year totaled 129,902, up 5.1 percent from the same period last year. Veritas Prep, a test preparation and graduate-admissions consulting company, says its GMAT test-preparation registration has gone up 50 percent since June.
The numbers underscore a trend that has occurred in previous economic downturns. Graduate admissions are countercyclical, meaning that they move in the opposite direction of the economic cycle, business schools and economists say. "When you look back over the last several decades, there is a strong correlation between changes in graduate-school enrollment and changes in the unemployment rate," says Linda Barrington, research director and labor economist at the Conference Board, a New York business research group.
But the severity of the financial crisis and the demise and consolidation of financial powerhouses that in previous years have nabbed top talent at schools make this year's flight to business school different. When this year's MBA applicants graduate, they will enter a dramatically different Wall Street and potentially smaller job market that has been altered by the ripple effects of the credit crunch.
"The demand for managing money and the demand for banking skills, that's going to be here," says Stacey Kole, deputy dean for the full-time MBA program at the University of Chicago Graduate School of Business. But "it may migrate to different firms." Kole says the school is seeing more boutique firms recruit on campus, as well as employers in other sectors recruiting for finance jobs. "People who may have gone to Wall Street will go to Main Street in a finance role," she says.
This year's newly minted graduates already encountered a tougher job market. At the University of Chicago, the percentage of 2008 graduates who either had offers or had already accepted them dropped roughly 3 percentage points from the previous year, Kole says.
Schools say not knowing what the job market will look like upon graduation could deter some prospective applicants who have stable jobs. "If you are in a good position and you are not confident of how the picture is going to look two years from now, you may stay in that position," says Peter Johnson, executive director of admissions for the full-time MBA program at the University of California Berkeley Haas School of Business.
Some applicants are taking their chances. Scott Valins, a former residential-mortgage-company owner, started thinking about business school when the credit crunch worsened in late 2007. Now, he wants to get a job in capital markets at an asset-management firm after graduating. "I might have to be patient after school and take a slightly more indirect path to get to my goal, but I have faith in the overall system," he says.
Other graduate schools are also expecting increases in applicants. There were 28,939 law school admission tests administered in June, up 15.3 percent from a year ago, said the Law School Admission Council, a group of 212 law schools.
Some people in finance jobs have left for degrees in other fields. Also a factor for students to consider this year: The credit crunch has roiled the market for student loans. In the past year, 144 education lenders have suspended private and federal loans, says Mark Kantrowitz, publisher of FinAid.org.
Still, Kantrowitz says business-school students should be able to find loans. For lenders, "graduate student loans are the most profitable because the loan balances are the highest," he says. But students may face tighter credit requirements in getting private loans and pay higher interest rates.
MBA applicants will also likely find the competition for spots particularly fierce this year. While the number of applicants is expected to rise, most schools say their number of slots will stay the same. "I'm going to have to work a lot harder to get into the school I want," says Kunal Das, 25, a search media strategist at Microsoft Corp. in New York.
Das is applying to three to five top-tier MBA programs this year. He plans to highlight in his application experience that may help set him apart from financial-services refugees who are applying - namely his two years in advertising at Microsoft and the businesses he launched in college.
Those who applied for business school in response to the 2001 recession caution that applicants should be sure they aren't just doing it because of job-market conditions.
"This is an investment," says Colin Gallagher, who was laid off from a start-up in late 2001 and attended an accelerated part-time MBA program at Northeastern University in Boston. "It's a lot of money and a lot of work."
Things worked out in his favor, he says. In 2004, he found a job through a classmate as a product manager at EMC Corp. "If you've thought about going to business school, and you've put it off because you don't have the time or energy, now is a good time to go," Gallagher says.