My four decades in management education were great. The demand for what business schools make, that is to say that the markets work and the operation of organizations, has been strong. US business schools have been much sought after by students from around the world. And many schools have constituted endowments by billions.
But by entering the 2025-26 academic year, American business schools faced the greatest challenge in their collective history for two easy-to-identify reasons. First, international students admitted to US business schools cannot get the visas they need. Even if the State Department takes up the planning of the necessary appointments, the welcome carpet for international students is in tatters. For many, the question will be why go to the United States?
Second, the budget bill before the US Senate offers tax rates of up to 21% on endowment income from private universities with large endowments. These universities of course house many American elite business schools.
Potential loss of income for tuition fees and endowment income will have large -scale effects. You might think that schools at the top of the hierarchy will be able to adapt because they are the best schools. I don’t think.
Expect fundamental changes
Unless American policy is reversed, the loss of international students and endowment taxes will lead to fundamental changes.
- The competition for domestic students will be intensifying. Some students admitted to a “next seven” school will get a place in “M7” schools.
- Diploma programs portfolios of many American schools will be rebuilt. Specialized programs at the level of masters with high percentages of international students will shrink or disappear.
- The endowments will fall. As the economy teaches it, if you tax something, you will get less.
- The price discrimination model by which international students pay higher average education rates will vacillate. Expect more flat prices and increases in lower annual tuition fees.
- Budgetary pressures will hit teachers and staff. Expect unless hiring and remuneration.
- New doctorate. Students will have to extend their geographic horizons.
- As the budgetary pressures on a university level go up, the capacities of the deans to protect their franchise while being good university citizens will be tested.
- Business schools outside the United States will become even greater competitors for American schools.
- HBS and Stanford “will remain Pat”. With their stratospheric performance rates, they can fulfill their national and international students’ courses that can register.
- Other American schools will seize the moment and continue new strategies involving non -American campuses, partnerships, consortia and technological innovations. Some schools will send their faculty to international students.
The success of tuition fees
International students represent around 45% of full-time MBA programs in the United States. International students often explain the vast majority of students in specialized teacher programs. Here is my calculation “at the rear of the entrance”: consider a business school with a class of MBA of 450 students and three programs of specialized masters with a total of 150 students. A loss of 120 international students could reduce the income for tuition fees by $ 16 million per year. A loss of 240 international would reduce income for tuition fees of $ 32 million per year.
Can American schools fill the gaps left by fewer international students? The challenge is more difficult since schools charge “complete tuition fees” or “almost complete tuition fees” for students from China, India and other countries, and, at the same time, invoice reduced tuition fees to many domestic students. So, if two Students “full payment” do not register, school may need three Domestic students to cover lost tuition fees.
Harvard and Stanford can fill most of the gap because their rates of return are so high. If they have chosen it, they can admit more domestic students and use deeper waiting lists if necessary. But I doubt that other American schools can fill the gaps. Most will not be “net winners” in the battles of domestic students.
Could schools go up the clock until the early 1980s when business schools completed half of their students’ lessons from the start? This adjustment would take a long time. In addition, a relevant question is whether talented students see enough value to pay $ 90,000 in tuition fees and costs.
I expect the finely paid price discrimination model by which international students pay higher average education rates than domestic students will disentangle. This price discrimination has worked because the value proposal for international students has had three parties: the American educational experience; the possibility of competing for jobs in the United States; and the possibility of a permanent residence or citizenship. Now, with each of these doubts, fewer students want to come to the United States and their desire to pay. In addition, the implacable increase in school rates will finally end.
Tax on endowment income
The size of the budget has reached the proposed endowment taxes will depend on the tax rate – 14% or 21% for most universities with substantial allocations. Here, again, a calculation. Take a business school with $ 1 billion endowment which earns an 8% yield ($ 80 million before taxes). As a rule, payment payment is approximately 5.5% and the school obtains $ 55 million at the start of the financial year. The difference of $ 25 million is reinvested.
If the school’s tax rate becomes 21%, the yield drops by $ 16.8 million. The school can avoid a direct blow, that is to say that it will always receive the same payment. But with the new taxes, the endowment will increase more slowly for two reasons. One, less reinvestment. Two, less giving to the endowment. Another big problem is how domestic universities will react to a multidimensional budgetary crisis. From the outside, business schools may resemble autonomous units. But they are anchored in universities. The University of Yale, my academic home, could lose $ 1 billion per year – a sixth of its annual budget. Often, when the original university suffers, the pain spreads.
Deans in the “hot seat”
Unless this turmoil is eliminated as if by magic, the American deans are on the hot seat. While positions of American business schools slip into the global management market for management, multidimensional competition between American schools (best teachers, large facilities, support staff and convincing programmatic characteristics) will cool considerably.
Some schools have strategic resources, for example, campuses outside the United States, they can take advantage of. New global arrangements can develop. It is the funny part of being dean. But the rest of what the deans will have to face will not be fun: little or no hiring of teachers and staff, difficult labor markets for their prized doctorate. students and less resource growth. Maybe the most difficult is the loss of really global.
Dean Edward Snyder. Yale Som Photo
Edward A. Snyder is the professor of economics and management of William S. Beinecke at the Yale School of Management. Snyder was dean of the Yale Som from 2011 to 2019, during which the school developed a global network of high -level business schools, presented its master’s degree in advanced management for graduates of the global network for advanced management, introduced its mastery in management studies with asset management, systematic and global risks and the company, and has expanded its MBA program. Before coming to Yale in 2011, Snyder was professor of economics Dean and George Shultz at the Booth School of Business at the University of Chicago and Dean of the Darden School of Business of the University of Virginia.
His research and teaching focuses on industrial organization, the antitrust economy, law and economics and financial institutions. He teaches the economic analysis of high -tech industries, a course that applies industrial organization concepts and assessment executives to high -tech global industries. It also contributes to stakeholders and capitalism, a seminar that develops a vision based on contracts on the way companies can manage stakeholders. Snyder began her professional career as an economist to the antitrust division of the US Ministry of Justice. He obtained a doctorate in economics and a master’s degree in public policy from the University of Chicago. He began his university career at the University of Michigan where he developed programs in Central Europe, China, India and Russia.