If Your University or Business School Goes Virtual, Should You Take a Gap Year or Defer Your Admission?
We’re now ~3 months into this coronavirus crisis, and as I predicted back in March, the “cure” has been worse than the disease.
Entire cities in the U.S. are burning down, 40 million people have lost their jobs, and unemployment benefits for most workers end next month (July).
I have no idea where this will end, but I wouldn’t be surprised if any of the following happen:
- In addition to killing small businesses, the protests and riots lead to a massive second wave of the virus.
- The population of major cities, such as New York, drops by 50%+. I would not relocate to places like NY, SF, etc., for any amount of money.
- Civil War 2.0 breaks out, and the country eventually splits up and dies.
I could go on about the apocalyptic scenarios, but I want to focus on a smaller aspect of the general breakdown of society:
I believe that a huge percentage of universities and business schools in the U.S. will shut down within the next 2-3 years.
Yes, right now, many of them are saying, “We’ll open for business in the fall,” and others are going virtual or using a hybrid model.
As a result, you might be asking yourself, “Is this degree worth it? Should I pay $50,000 per year for Zoom classes?”
But you should be asking whether or not your university will exist in 2-3 years:
How the University System Set Itself Up for Collapse
Professor Scott Galloway from NYU Stern put it best in his interview with Anderson Cooper (maybe the most interesting content on CNN in years):
- Tuition rates have increased by more than 3x the rate of inflation over the past 40 years.
- The “product” has barely changed in those 40 years. How is a university campus today different from one in 1980?
- Since 2011, enrollment in higher education has dropped by 11%, but student loan balances have increased by 74% (!).
The bottom line is that costs have risen far more quickly than the value proposition, which we can define as:
Undergraduate Value Proposition = Credentials + Learning + Experience/Networking
And at the MBA level:
MBA Value Proposition = Career Change/Advancement Potential + Networking
If institutions move to online classes, or even a hybrid of online and in-person classes, the “Experience” and “Networking” parts in those formulas approach 0.
The “Learning” part suffers greatly as well: online classes work for certain, specific topics, such as how to set up Pivot Table X in Excel or fix Image Problem Y in Photoshop.
But they don’t work so well for foundational knowledge, or for anything that requires a physical component, such as labs.
Therefore, all universities and business schools can offer students under this new model is the Credential or the Career Change.
But is it worth paying exorbitant sums for those?
If you’re attending one of the best schools in the country, maybe, because employers still hire based on your school.
And if you’re at a much-cheaper-but-still-good public school, maybe, because the ROI is still there.
But if you’re at an expensive-but-not-great university – most private schools outside the top ~50 or ~100 in the country – then the answer is an easy “no.”
We already see people realizing this, with reports that 4-year colleges may lose up to 20% of their students.
But it’s worse than that because enrollments for international students will drop even more substantially.
Good luck without them!
Universities with multi-billion-dollar endowments get all the attention, but the median endowment is only $144 million.
And these endowments are not “discretionary funds”: universities can’t just use them to keep the lights on while attendance plummets.
Usage is usually restricted to big projects, and many endowments can spend only their returns – not the principal.
As a result, many lower-ranked universities will follow this pattern over the next few years:
- Move to an online or hybrid model.
- Find that students won’t pay nearly as much, or that enrollment falls substantially.
- Beg alumni for money repeatedly.
- Eventually, give up and shut down when they realize the numbers don’t work.
So, Is It the Perfect Time to Take a Gap Year?
A lot of students and parents seem to think the gap year is the perfect solution…
…but I don’t think it’s quite that simple.
The first problem is that it may not be possible to defer enrollment or, if you’re already in school, to take a “leave of absence” without sacrificing your spot.
For example, most business schools don’t allow students to do this because it disrupts their resource allocation and admissions targets.
Another problem is that if you’ve already lined up an internship for next year, or you’re in a strong position to do so, the firm you’re joining may not give you a full-time return offer once they find out that you’ll need another year to graduate.
And since the large banks now recruit a year in advance of internships, this is a major issue if you’re currently in university and aiming for IB roles afterward.
So, we need to divide this question into a few different cases:
Case #1: You haven’t started university yet, or you’re early in university (Year 1).
Case #2: You’re midway through university (Year 2-3).
Case #3: You’re at the MBA level.
In Case #1, I’d say it makes sense to defer enrollment or take a leave of absence.
You lose nothing because most internship recruiting won’t even start until the end of Year 2, the summer after Year 2, or Year 3.
And even if you’re not paying directly for your university, or it’s fairly cheap, you’re going to get a diminished experience if you attend in the current environment.
This is especially true if you’re attending an expensive-but-not-top-ranked private university since they’re likely to experience the highest number of shutdowns in the coming years.
It’s worth it to take a step back, see what happens over the next year, and proceed from there.
It may make more sense to transfer to a good public school that’s more likely to survive or to do something like Lambda School or a trade school or boot camp.
In Case #2, if you’re midway through university, it’s tougher to make a case for a delay or leave of absence.
First, if you’ve already lined up an internship for next year, or you’re in a good position to do so, you have to follow through, which means staying enrolled in school for next year.
Second, even if you’re not in a good position for IB recruiting, it’s probably still better to stay in school and aim for internships in related areas.
Then, go for a full-time offer in one of those fields and use lateral hiring to get into IB or whatever industry you want.
If you’re in Year 2, you’re not in a great position for internships, and you have doubts about your university’s survival, then it might make sense to transfer elsewhere.
But I’m not sure what you would gain by taking time off from school in this case.
Case #3: The MBA Level
There are a few key differences at the MBA level:
- There are few “cheap” MBA programs worth attending, especially if your goal is a finance or consulting job.
- Most programs do not let you defer enrollment. HBS changed its policy this year to allow it (the deadline was June 1), but other programs did not follow suit.
(The incoming class at HBS will have only 720 students, down over 20% from its normal levels.)
So, this case is simpler: if you’ve already won admission to a top-tier program where finance and consulting firms recruit, and you’re planning to go into one of those industries, enroll.
Yes, it will be a bad experience, and you’ll get much less networking value out of it, but you’re mostly paying for the career-changing potential.
On the other hand, if you’re in any of the following categories, I’m not sure how an MBA program makes financial sense in the current environment:
- You’re not recruiting for finance or consulting roles (why are you reading this site?).
- You’re attending a non-target MBA program.
- You’re personally responsible for the full price of your program, but you’re not 100% certain how you’ll use it.
You’re better off doing almost anything else, from staying in your current job to learning new skills via a boot camp or trade school to doing volunteer work (see: “Is Business School Worth It?”).
Summary: The Collapse of Higher Education, and How to Respond
In short, here’s what I expect to see over the next few years:
- The elite universities and MBA programs will survive because of money, branding, and artificial scarcity, and cheaper/public schools will survive because the ROI is still there. Expect many expensive-but-non-top-tier private schools to shut down.
- Banks will keep recruiting at the top schools out of tradition and alumni connections. Yes, it will take more than a pandemic, depression, and massive civil unrest to disrupt an entrenched recruiting system.
- If you haven’t started university yet, or you’re early in it, it could make a lot of sense to defer or delay your next year (if possible). If the alternative is to “attend” and pay a ridiculous amount for online classes, why bother?
- But if you’re already midway through university, this plan makes less sense – especially if you’re aiming for an IB internship that you can convert into a full-time offer.
- At the MBA level, deferral is usually not an option, so if you’ve won admission to a top-tier program, just go through with it, and use it to change careers.
- If you’re about to pay a huge amount for a non-top-tier MBA program or you are not attempting to make a career change, immediately reconsider your plans.
Questions? Ask away.
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