Stanford's (Now Truthful) Aid Policy for M.B.A. Admits

A year after revelation that university's business school lied for years about how it used aid to build its class, a new approach is announced.

November 12, 2018
Stanford's business school

A year ago, Stanford University's business school acknowledged that it had been lying for years about how it awarded aid to those admitted to its M.B.A. program.

The university had asserted for years that it awarded all aid based on financial need. But a student figured out that all business school students could get access to a database showing how aid was actually awarded -- some based on financial need, but also based on other factors. Students with a background in finance, for example, received grants that were larger than demonstrated need. Women also appeared to be a target for larger aid packages. The university promised a review of its aid policies -- and to be honest going forward.

Last week, the university announced the results of that review. Going forward, Stanford will award all aid based on need, with the exception of a few fellowships established with gifts restricting their use.

Many elite universities award financial aid to undergraduates based on financial need only (although Stanford awards athletic scholarships). But some of those institutions have different perspectives on M.B.A. admissions. Competition is tight for top students, some of whom worry about borrowing to pay for an M.B.A. (Stanford estimates the cost of attendance for a first-year M.B.A. student at more than $115,000). In this environment, differential aid packages (based on factors other than need) are common.

Stanford explained its decision to return to need-based aid this way: "Many students advocated for a solely need-based formula on the grounds of access and fairness. We heard arguments to include an element of discretion, if it would assist in attracting competitive and diverse students. We also heard that once admitted students felt attendance was possible, their decision typically depended on the overall appeal of the Stanford [Graduate School of Business] education and community rather than the specific mix of fellowship and loans. This view was consistent with a review of recent enrollment decisions, which showed that students who declined to enroll often had not submitted a financial aid application, while a very large majority of students who applied for aid subsequently enrolled. We gained additional evidence from the experience with last year’s transitional system, which awarded fellowships based solely on financial need, and led to a highly competitive and diverse M.B.A. Class of 2020."

At the same time, the university released an analysis of trends in M.B.A. aid policies that noted the pressures to award some funds based on perceived merit.

"The historical system was motivated by a desire to attract a competitive and diverse class. Most peer schools, which share this objective, have used and continue to use discretionary awards, either in whole or in part. In this sense, the historical system aligned with the perceived market environment," the analysis said. "We took this observation seriously, because we seek to attract talented students who often have many options. After an analysis of alternative award mechanisms, we concluded that in the current environment, with a sufficiently generous fellowship budget, we could continue to satisfy the guiding principle of attracting a competitive and diverse class with a solely need-based formula. At the same time, we recognized the need to re-evaluate this conclusion as we learn more from year to year."

Stanford also announced that it would be making changes to the way it calculates financial need -- dealing with a long-standing complaint of M.B.A. applicants (many of whom have income from well-paying jobs in the years prior to applying).

The business school "has assessed need based on a student’s current assets. Students pointed out that the calculation creates an incentive to 'spend down' assets, rather than saving prudently. To mitigate this incentive, our new system for assessing need will factor in prior income as well as assets," Stanford announced.

Stanford's announcements come amid reports of declines in M.B.A. applications nationally.


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