Normally, schools offer scholarships to entice students to enroll. This year, the Massachusetts Institute of Technology’s business school handed them money to go away.
The Sloan School of Management’s full-time M.B.A. program, usually about 400 students, was oversubscribed by an unusually high number of students this year. Rather than expand the class size, the school asked for volunteers willing to wait a year to enroll, sending out an e-mail just a couple of weeks before the Aug. 23 kickoff barbecue. By that point, many expectant students had quit jobs and secured housing in the Boston area.
So what did MIT’s Sloan School do?
After realizing they had a student surplus, school officials emailed the incoming class on Aug. 7, offering “guaranteed admission to the class of 2015 for the first 20 admitted students who request it.” The school gave them until Aug. 13 to respond, according to one student’s copy of the letter, which was reviewed by The Wall Street Journal. But it didn’t get enough takers.
So, like an airline offering vouchers to travelers willing to hop off oversold flights, the school put money on the table, offering students who expressed an interest a $15,000 scholarship to be applied to next year’s tuition. Students still balked, and on Aug. 21, a day after pre-term refresher courses began, Sloan raised the offer to $20,000 for the first 10 respondents. (Tuition for the 2012-2013 academic year is $58,200, with total expenses–including books, housing and food–estimated at just under $89,000.)
Four incoming Sloan students volunteered, said Mr. Garcia, and the school started the year with an M.B.A. class of 413, up from 404 last year. The $80,000 in funds will come out of next year’s fellowship pool. He added that the school expects some deferring students won’t end up enrolling next fall. (If they don’t enroll, they won’t get money from MIT.)
This is from Melissa Korn, “Bad Math: MIT Miscounts Its Newest B-School Class,” Wall Street Journal, September 26, 2012.
READER COMMENTS
Silas Barta
Sep 26 2012 at 2:26pm
Am I the only one who finds it funny that the business school had this mishap?
Brent Buckner
Sep 26 2012 at 3:44pm
Seems reasonable enough on the face of it. Airlines overbook flights and then offer incentives if too many fliers actually show up. Similarly, perhaps better for Sloan to overbook than risk an empty $58,000-tuition seat!
dave smith
Sep 26 2012 at 3:48pm
What does this say about the expected earnings increase of having an MBA from Sloan?
gwern
Sep 26 2012 at 5:38pm
Silas, at least give them credit for using an ascending price auction!
Silas Barta
Sep 26 2012 at 6:26pm
@gwern, if it didn’t look like grasping at straws, and didn’t end in “too little, too late”, I would…
Liam McDonald
Sep 27 2012 at 1:42am
I am curious if they extended the final offer to the students who took the original offer. It looks like they didn’t. I think it would certainly be worth petitioning.
MG
Sep 27 2012 at 9:24am
Dave Smith asks a fascinating question. The scholarship value should offset the “damages” component of the involuntary deferral (all the stuff related to quit job, leased appt, etc.) PLUS (in its simplest form) the NPV of earning an expected $-premium in 2 years versus current comp plus scholarship today. (Almost all other financial differences other than tax effects, wash-out.) The price at which an applicant would hit Sloan’s bid would reflect recouping damages plus an expected future $-premium (which is probably higher in absolute dollar terms to those with higher current comp) and the applicant’s discount rate. If you were able to segment the pool of those accepting a given offer into subgroups with common “damages expectations” you could probably infer the expected $-premium post Sloan. (The more you knew about their current comp, the better a risk-adjusted %-premium would be across comp levels.) I think Sloan is more likely to fill its quota of deferreds from those with no damages to pay and at the low end of the expected comp increase distribution (someone with relatively low current comp who expects post Sloan jumps to be anchored somewhat to his current comp, say one who is just adding credentials for his current firm.)
ColoComment
Sep 27 2012 at 3:37pm
How many do you think will take the first offer next year?
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