Alberto Fumo is the type of student business schools crave. His high marks and international experience landed the budding financier admission offers at Yale University's School of Management and Cornell University's Johnson School. But the Italian native chose London Business School rather than face a new trifecta of trouble with a U.S. MBA: an imminent drop in work visas, a hiring slowdown for MBAs, and less school financial aid.
After a decade-long buildup of overseas applicants seeking the prestige--and salary--of a U.S. business degree, B-schools are concerned about the growing wariness of others like Fumo. In the 1990s, international students became the fastest-growing pool of prospective MBA students, helping push total applications to record highs in 2001. Now, in short order, the weak economy, coupled with a looming drop in the availability of H-1B work visas, is taking its toll. International enrollment at BusinessWeek's Top 30 schools slipped from 32% in 2000 to 30% in 2002 and is estimated to go lower yet in 2004. The ultimate concern for U.S. B-schools is the new unwelcome mat driving away the world's best candidates. "What is that going to do 10 years from now to the talent pool?" wonders Vijay Govindarajan, strategy professor at Dartmouth's Amos Tuck school.
The pipeline may get a lot thinner soon. In October, 2003, a law increasing the number of H-1B visas is set to expire, chopping available H-1Bs from 195,000 a year to 65,000. The business lobby is poised to fight to maintain the number, but with the economy soft, it's likely to be an uphill battle. While MBAs would still make up a small portion of the allotment, if all visas are issued before students get to commencement, jobless foreign grads will have no choice but to head home.
That's if they get here in the first place. Admissions officers urge foreigners to apply early to cope with delays in State Dept. background checks. "There are some places in the world where we have special concerns," says a State Dept. spokesman. Europeans have reported little trouble; applicants from the Middle East and China can expect tie-ups.
Massive debt, which can exceed $100,000 at top private schools, is also a problem. Repayment is a high hurdle if you hail from a country where $5,000 is a good yearly wage. They're not supposed to say so when they apply for the student F-1 visa, but many foreign students--especially those from developing nations--plan to stay in the U.S. after graduation to help pay down their debt. But suddenly, staying stateside is far from guaranteed. Companies with tight budgets and hiring slowdowns are beginning to cut down on hiring non-U.S. candidates. It can cost upwards of $10,000 in administrative expenses and legal fees to sponsor one foreign applicant through the visa process. And since September 11, there's no guarantee the recruit will be approved by the Immigration & Naturalization Service.
Already, at the University of California at Los Angeles' Anderson School, only 15% of companies recruiting on campus say they'll consider a foreigner. Many consumer-products outfits--like Johnson & Johnson (JNJ) and Procter & Gamble Co. (PG)--that recruit generalists are sticking to U.S. hires. "Those types of positions would be very difficult to bring in" on a visa, says David Wittenberg, director of investment evaluation at Weyerhaeuser Co. (WY)
To make matters worse, B-schools have become less generous with loans. At the University of Virginia's Darden School, loans given without a co-signer will be capped at $34,000 a year, covering only tuition. As its default rates rise, University of Pennsylvania's Wharton School, long considered among the most generous to foreign students, also capped loans and upped interest charges this fall.
The changed climate has made foreign students even more anxious in a tight job market. One student at Darden found that most consulting companies wouldn't consider him for positions in U.S. offices. He recently sent out about 25 r?sum?s for summer internship positions and is still hopeful he'll get one. "I wouldn't be able to pay off my debt if I had to go back to [my home country]," he laments.
B-school deans across the country are crossing their fingers for an economic turnaround. Otherwise, they'll watch a decade's worth of work recruiting foreign students evaporate. "If this happens, we are the losers," says Govindarajan. It would be a setback felt around the world. By Brian Hindo in New York