The proliferation of expensive Executive MBA programs: All sizzle and no steak?

Private liberal arts colleges are under severe financial stress, and many are struggling to lure undergraduates through their doors. Mom and Dad are increasingly unwilling to pay $50,000 a year for their children to attend obscure run-of-the-mill liberal arts colleges.  After weighing the cost and benefits of a private college education, enrolling at a nearby public university often looks like the best option.

To attract new revenues, a lot of private liberal arts colleges are investing heavily in graduate education. They are finding that many young professionals are willing to pay big bucks for graduate degrees, particularly the MBA. Moreover, in the past at least, employers have been willing to pay tuition costs for promising mid-level managerial employees to get MBA degrees.

To tap this market, colleges began rolling out executive MBA programs (EMBA). Most of these programs have two attractive features: 1) Classes are offered in intense weekend sessions, allowing students to continue working full time. 2) Many EMBA programs include international experiences, such as a two-week excursion to China, that expose students to the world of international business. Generally, the EMBAs include some razzle dazzle like catered lunches for weekend classes and upscale classroom settings.

And the colleges price their EMBA programs as high as the market would bear. Even MBA programs at public universities have become shockingly expensive. And, to wring out every last dime from the MBA market, universities all over the country began ramping up off-campus EMBA programs to tap urban markets, and they also rolled out online programs, which can be delivered inexpensively to large numbers of students.

But in their greed, the colleges may have killed the goose that laid those golden eggs. Some employers have concluded that the extravagant cost of EMBA programs is not justified and are pulling back from funding EMBA programs for their employees. And students are becoming more sensitive to price. LSU's EMBA program, for example, may be more prestigious than ones offered by Louisiana's regional institutions, but the regional degrees are much cheaper.

In short, I think American businesses and business employees have figured out that EMBA programs are all sizzle and no steak.  One of my young relatives just finished an EMBA program that included a China excursion, and he told me that his professors often did not know as much about the subject they were teaching as he did. He was grateful that his employer paid for his degree because, in his opinion, the degree was not worth the cost.

And I know an attorney who thought he could enhance his marketability by adding an MBA to his JD. He borrowed money to get his MBA credential, and now he regrets that decision.

It is hard to know how to advise a young person who wants to obtain a post-graduate degree in order to land a better paying job. When I was young, getting a law degree was a no brainer; a JD degree from a reputable law school was a ticket to a good career. Now there are thousands of law school graduates who have six-figure student-loan debt and no job.

I think MBA graduates are beginning to experience the same disappointment with their graduate degrees that JD graduates have been experiencing for the last 10 years. Unfortunately, graduate education is not opening the door to opportunity for many bright young Americans; it is only leading to mountains of student-loan debt.

Where's the beef?

References

Rick Seltzer. Deans see challenges for off-campus E.M.B.A. programs in the United States. Inside Higher ED, August 24, 2017.

Rick Seltzer. Marygrove College to end undergraduate programs after fall semester. Inside Higher ED, August 10, 2017.

Middle-Aged People Should Probably Not Go to Graduate School: Conner v. U.S. Department of Education (March 28, 2016)

Wages for American workers have been stagnant for more than 20 years; everyone knows that. In fact, many American workers have seen a decline in their real wages as inflation eats away at their paychecks.

A college degree supposedly enhances earnings, but not for everyone More than a third of college-educated workers are holding jobs that do not require a college degree.

As we drift into middle age, we search for ways to make more money. So why not go to graduate school? Maybe job opportunities will open up if we get an MBA. Or maybe we can unleash our creative capacity if we obain a master's degree in creative writing. Why not go to law school?

Of course, American colleges want people to think that going to graduate school is good career option. Undergraduate enrollments are declining at many universities--especially the second-tier liberal arts schools. The colleges have got to keep the money flowing, and many have been rolling out new graduate programs to enhance their revenues.   Juicing up MBA programs has been a favorite strategy.

Graduate programs can be expensive, and most people who pursue graduate degrees have to take out student loans to finance their studies.  But, hey--what could go wrong?

At least three things:

Age discrimination. Although federal laws protect people from age discrimination in the workplace, many employers discriminate against older workers. So if you are 45 years old and recently obtained a law degree or an MBA, you will be competing against much younger workers.

Law firms in particular are looking for bright young attorneys who have the drive and energy to work 80 hours a week.  The firms like to mold their new hires into the firm's corporate culture, and it is easier to mold a 25-year old than a 45-year old. And the firms definitely discriminate in favor of people who graduated from top-ranked law schools.

So if you graduated from a second- or third-tier law school at age 45, the chances of landing a high-paying job at a blue-chip law firm are virtually zero. And if you borrowed $140,000 to get your law degree (the average amount of debt for new law graduates), you are in real trouble.  In fact, your decision to borrow money to go to law school was probably a mistake.

Many graduate programs don't give students useful skills. Second, a lot of graduate programs do not teach skills that will enhance their students' marketability in the workplace.  The United States now has hundreds of MBA programs, but I have talked with people who got MBA degrees from non-elite colleges, and several told me they didn't learn much.

I myself was a sucker. I enrolled in the doctoral program at Harvard Graduate School of Education, thinking a doctorate from Harvard would open doors for me that I couldn't open with just my law degree.  In fact, I learned virtually nothing useful during my two years of study at Harvard other than the fact that HGSE is a pretty mediocre place.

Unsympathetic bankruptcy courts.  Several recent bankruptcy court decisions have involved middle-aged people who accumulated a lot of debt going to graduate school.  Some of these people argued that their advanced age should be considered--that they simply didn't have enough working years left to pay off their enormous student-loan debt.

But not all bankruptcy courts are sympathetic. In Conner v. U.S. Department of Education, for example, Patricia Monet Conner accumulated  $214,000 in student-loan debt to pay for graduate education in three fields: business administration, communications, and education.

Conner was a school teacher who had an annual income of about $60,000 during the years before she filed bankruptcy, and she never made a single voluntary payment on her student loans. When she came before the bankruptcy court, Conner was 61 years old, and she argued that her advanced age should be considered in her favor.

But the bankruptcy court rejected Conner's argument and refused to discharge her student-loan debt.. Conner appealed, and a federal district court, was equally unsympathetic."[C]ourts have regularly held that one's age cannot form the bases of a favorable finding for a debtor who chooses to pursue an education later in life," the court ruled.

Conclusion: Middle-aged people should be very cautious about going to graduate school.  Many Americans enter middle age not having achieved the goals they set for themselves when they were young. I myself am such a person. Going to graduate school may seem like a way to expand life opportunities--a second chance to obtain success.

But be very cautious. Gamblers who lose at the gaming tables often double down, hoping a big win will nullify their earlier losses. But unlucky gamblers who keep betting generally wind up losing more money. Universities, like the casinos, want you to think the odds are in your favor; but in fact they are not.

I do not give this advice out of a sense of superiority. As I said, I made a big mistake going to Harvard in midlife only to find that some of my professors were not as smart as I am. I wound up with a mediocre education and a lot of debt.

References

Conner v. U.S. States Department of Education, Case No. 15-1-541, 2016 WL 1178264 (E.D. Mich. March 28, 2016).