US business schools are struggling to recruit international candidates

Graduates from the Harvard Business School MBA program.

It’s getting harder for U.S. business schools to attract international candidates.

According to a survey by the General Management Admissions Council, 75 percent of two-year MBA programs saw fewer applicants from outside the United States for the 2017-2018 academic year.

College deans cite anxiety about the future as one factor keeping international students away. Students worry about the availability of H-1B visas as well as the political climate. “There’s this general sense of what’s going on in the U.S. from a cultural standpoint, I think that they are hearing things in the news, and they are a little bit worried, will they be as welcome as in previous years,” said Idalene Kesner, dean of Indiana University’s Kelley School of Business.

The ability to repay debt with U.S.-earned dollars is another factor for many international students. Tuition for Kelley MBA students from outside Indiana is $47,000 a year. Rohan Mishra, who plans to graduate from the program in 2019, is counting on working in the U.S. to make it easier to pay off his student debt.

“Obviously it will be difficult because [of] the kind of salaries that we get in India, with the cost of living much lower than what we will get in the U.S.,” said Mishra.

While substantial changes to visa programs have yet to occur, the government has approved considerably fewer H-1B visas in 2017 than the prior year, data released by U.S. Citizenship and Immigration Services show. President Donald Trump in April signed an executive order encouraging companies to “hire American,” and in August threw his support behind a bill that would shrink legal immigration.

This could be a telling year for business schools, as international candidates look for certainty on U.S. policies. “Not having clarity about what the outcomes will be and what will happen when they exit business school is leading them to look at other options,” said Sangeet Chowfla, CEO of GMAC.

Those options are more plentiful now. In 2000, U.S. business schools represented 32 of the top 40 rankings in the world. By last year, that number was nearly cut in half as programs in Canada, Europe and Asia picked up prestige.

“Students are saying, ‘I have options at this particular point in time. Do I need to only consider the U.S., or should I look at all these other places?'” Chowfla said.

An indicator of this migration: The majority of business programs in Europe and Canada reported more applications from international students compared with 32 percent of programs in the United States. The GMAC surveyed 351 institutions in 45 countries.

Still, U.S. business schools are meeting demand: They receive nearly five applications for each available slot and are seeing growth in interest from candidates within the U.S.

Administrators say diversity of cultures and conversations is crucial for preparing graduates to work at large, multinational companies. And unlike a law or medical degree, the prestige of a U.S. MBA is recognized automatically in other countries.

“It’s transportable,” Chowfla said.

The highest-ranked U.S. schools are not seeing the decline in international applications, GMAC survey responses show. For instance, NYU Stern told CNBC its international applications have risen for each of the last three years.

But many others, including the University of Iowa, are feeling the impact. The University’s Tippie College of Business announced in August that it is phasing out its traditional, two-year MBA program.

Instead it will focus on specialized business degrees that cater to undergrads going straight to business school to solve the visa problem for immigrants looking to stay in the country.

“Rather than going out and getting a job and coming back they can just continue their school and lengthen the time of their education here in the country and they can get an additional specialization area such as finance, marketing, business analytics, et cetera,” said Dean Sarah Gardial.

There are also cyclical factors at play. As the U.S. economy improves, more domestic students are applying for MBA degrees. But international students — whose tuition can sometimes represent double that of an in-state student — have an outsized impact particularly on state schools facing tightening resources.

“There’s no question that for the university and for our colleges there is a financial impact,” Gardial said. “Any time out of state students, and that means out of country students as well, any time that number goes down, that’s going to make it harder for us to make up the finances the tuition would bring from those students.”