Sept. 25, 2008 -- As Wall Street continues to buckle and choke on the mortgage crisis, many MBA students are rethinking the path to finance jobs with six-figure starting salaries and bonuses that can push annual earnings past $200,000.
Overnight, many students have been forced to abandon their hopes for "dream jobs" as investment bankers, switching gears and looking at new options.
The nation's top business schools say that although students are not in full panic mode, they are increasingly nervous about what lies ahead.
"A lot of students are still hanging," said Karin Ash, director of career management at The Johnson School at Cornell University. "Recruiters just don't have word yet from above. Right now they have offers, but the next six months will be telling."
"Surprisingly, it's not as gloomy as you might think," she told ABCNews.com. "Students haven't been hit with the same stunning news as someone who had been working for a company for years."
Today, about one-third to one-half of all students with a Master of Business Administration head for the financial world and as many as 10 percent look to investment banking. But many have seen their plans dashed in the last two weeks as the 158-year-old investment banking giant Lehman Brothers filed for bankruptcy and top brokerage Merrill Lynch agreed to be taken over by Bank of America.
Two other industry icons -- Goldman Sachs and Morgan Stanley -- have announced that they would start acting more like commercial banks, as the federal government prepared for an unprecedented bailout of Wall Street.
Students who took offers from Lehman Brothers are still in limbo, wondering whether Barclays, which is trying to take key Lehman assets, will honor the deals. Other companies have been similarly oblique.
200,000 Financial Jobs Gone
According to the Bureau of Labor Statistics, the financial services industry has already shed more than 200,000 jobs in the last year. After Bear Stearns collapsed in the spring, business schools braced for potentially more layoffs and jobless alumni looking for help.
But many have already put programs in place to show students other opportunities -- perhaps not as dazzling but less risky.
"It's still early in the year," Ash said. "They will use a lot of their type A energy to do what they can to tackle the challenges."
In 2007, about 21 percent of all Cornell's MBA students chose the investment banking industry.
"It's the challenge of the job," she said. "It's one of the hardest jobs coming out of business school and the most exciting, in terms of deal-making and making news. With all the recent actions happening on Wall Street, being a part of it draws them. In addition, it compensates."
Annual entry level salaries for investment bankers begin at $95,000 and can more than double after just one year by the time bonuses arrive.
Many of Cornell's alumni have called to offer their help coaching students in searching for other options. This week, they offered a session on boutique investment banking and energy training for students.
But Michael Chang, 28, and a second-year MBA student, said his classmates at Cornell are "nervous," as "hiring plans are on hold."
Luckily, Chang has sealed a job with CitiGroup in New York. "The headlines are a bit overblown," he told ABCNews.com. "Given all that's happened -- the bankruptcies and what's going -- the market has held up fairly well under the circumstances. I am an optimist. I think we are going to be OK."
Alexis Jhamb, 26, is relieved that she is concentrating on energy and consulting at Northwestern University's Kellogg School after a summer internship at Chevron Gas Trading Group in Houston.
"I am confident in my decision," she said. "The energy question is on everyone's mind, including the politicians."
Students Turn to Consulting
Many of her peers who interned at Lehman and Merrill are now looking at consulting.
"Switching to consulting when you have had a banking internship is a harder sell," Jhamb said. "There is a lot more homework, and it's an incredibly competitive market right now. Not only are you competing against your own classmates, but against more experienced hires."
Last week, Kellogg students convened for a session to develop new strategies.
"The message we've gotten from our deans is that things look better on the West Coast than the East Coast," she said. "Also, truly consider offers from internships and don't sit on offers too long. You might be holding a place for one of your peers."
Her advisers also suggested looking into the high-tech industry, as well as nonprofits and entrepreneurship. "A lot people are looking at second-tier firms or offices in Dallas, rather than Boston."
Kate McGee, 28, will earn her MBA from Columbia Business School in May, and has also received a job offer after her summer internship at JPMorgan Chase in its consumer retail group, but she knows even that carries some risk.
Before going to Columbia, McGee worked for Tommy Hilfiger, where her clothing line was discontinued. "I would be lying if I told you that a part of me wasn't nervous," she said. "I come from the retail industry where companies have experienced many rounds of layoffs."
Real Life Economics Lessons for Students
Still, she is excited about what she is learning in these hard economic times. "It's awesome to be in the center of everything right now," she said.
Harvard Business School is also taking advantage of the Wall Street turmoil to give students "some teaching moments," according to Jana Kierstead, managing director of MBA career services.
"We tell them to think strategically about how they spend their time," she told ABCNews.com. "Things happen. Life happens and you have to be prepared."
Though there are no specialties at Harvard, about 44 percent will pursue careers in finance; 10 percent of those go into investment banking. They are encouraged to develop a five- to seven-year vision and "always have parallel paths," said Kierstead. "Whatever you are aspiring to, it does take a mental shift, absolutely, and that takes a bit of time."
'No Sense of Panic'
"In general, I'd say the students are calm," she said. "There is no sense of panic. They are mindful and watching what is happening and processing what it means for them and we are helping them do that."
Harvard has increased its staffing in an already robust coaching program, offering enhanced skill development and reaching out to retain existing companies and recruit hew ones. It is urging students to take a look at boutique and mid-market banks, some of which are "doing very well," she said.
"If they are in long-term corporate finance, they might look at finance leadership companies, which are attractive now," she said. "When one path closes, they begin to look at other Fortune 500 companies that might not otherwise be candidates."
Nick Coons, 29, who interned at Lehman this summer as part of Harvard's MBA program, was given a "firm offer" that is still in limbo.
He said the mood among his classmates is "fairly hopeful," and those who were originally only interested in finance are looking at consulting and general management. "Students are definitely starting to cast a wider net in terms of industry preference."
But David Parker, 25, of New Jersey, who hopes to launch a digital media business with a Harvard classmate, is worried that even though his plans are comparatively less risky, "we'll see if our funding dries up, too."
"I'm definitely not feeling lucky," Parker said. "Looking back over the last few years people were making a million dollars or more at my age. It is somewhat disheartening to see that and I wish I'd had an interest in hedge funds."
"Most people are confident that they'll get a job," he said. "They just won't get their dream job."
And for Guarav Malik, a finance student from India in the MBA program at Rutgers Business School in New Jersey, that means not any job in the United States.
Future Job Opportunities for MBA Students
"We do have companies coming in who are looking to hire financial analysts, but not a single company is looking for international students," he told ABCNews.com.
The 24-year-old interned this summer at CitiGroup, but given the tight market for jobs, it is unlikely to sponsor his H1B visa and Malik will return to India, where the market is more robust. "They still have to get back to me, but I am hoping," he said.
Even the undergraduate business colleges are preparing their students for the downturn. At Babson College in Wellesley, Mass., one-third major in finance.
"As a market overall, undergraduates are still in demand," said Megan Holker, director of Babson's center for career development. "We fare better than the MBAs because we are cheaper labor. This is a specialized school and they hit the ground running."
"They can switch gears, they are a little more nimble," said Holker. "My message to them is clearly things are rocky, so you've got to broaden your horizons, but your experience doesn't have to be on Wall Street."
Holker suggests financial leadership programs at conglomerates like United Technologies, General Electric Co. and Unilever. Like Harvard, Babson encourages its graduates to look at "hip, boutique" firms like Rothchild Group and Harris Williams. "There's money in these places, too," she said. "You don't get the bonus, but you're not working 100 hours a week."
Still, for most business school grads, Wall Street is "definitely a dream," she said. "It's the prestige of the brand and all that comes along with it. Harder than making the switch is to switch gears in their brains."
But most graduates of the nation's most prestigious business schools will survive, according to Doug Matthews, CEO and president of Right Management, a human-resources consulting and professional staffing company in Philadelphia.
"This is a little more dramatic because so much money is at risk and it's so quick and so global," Matthews told ABCNews.com. "But this has been going on forever, where kids come out of school completely able and can't find jobs in their areas of study."
"There's a generational aspect to this," he said. "They want choices anyway -- it's like air to them -- and don't want to be locked to one company. People will still get hired."
Matthews encourages students to turn to their strengths, be determined and don't give up.
"Try to find something more stable, give it a year and after the presidential elections and things stabilize, the recruitment will start again and they'll have prestige with those good degrees. Like the housing market, it will rebound at some point."
"Network, differentiate yourself, leverage your past experience," he said. "It's still a good market."