What Heads and Trustees Need to Know About Affordability

What Heads and Trustees Need to Know About Affordability

by Mark J. Mitchell, vice president, National Association of Independent Schools (NAIS)

In the aftermath of the 2008 recession, financial aid budgets and applications are growing at rates that some schools fear may be unsustainable. Consider a few facts:

• The median total financial aid allocated per school rose from $506,025 in 2002-03 to $1,181,745 in 2012-13.
• The median number of financial aid applicants per school went from 80 in 2002-03 to 137 in 2012-13.
• In 2012-13, median day tuition was $20,970. To pay that from income sources only, a family would need to earn $137,150. According to 2010 U.S. Census data, only 10.5 percent of U.S. households earn that much income.

Source: NAIS StatsOnline data for all NAIS member schools. Data presented are not representative of a core sample.

With tuition growth and income stagnation driving more demand for and spending of financial aid dollars, school heads and trustees are increasingly grappling with tough questions that demand more purposeful direction than ever before, such as:

• How should tuition pricing strategy be informed by financial aid demand and external demographic shifts?
• Does the overall affordability picture of our school suggest we need a more flexible approach to our financial aid budget limitations?
• Is merit aid a viable or effective option to meet enrollment and revenue targets?
• What is our capacity for fundraising for financial aid to make it a self-sustaining investment?

Proactively tackling questions like these requires leadership from those close to the enrollment and demand realities. So, what can admission directors do to structure conversations that mobilize heads and boards to prioritize these issues? Here are four steps to consider:

1. Lead the board in a discussion that engages it in answering a set of key strategic questions about affordability, including:

• How affordable is your school? How much income does a family need to earn to be able to pay the tuition for one child at your school? What percentage of the population can afford your school? Is that shifting over time in a way that shrinks the pool of willing and able families?
• What is your philosophy on financial aid? Was it designed to provide access, but is now trending toward enrollment management as a priority? If so, what are the trade-offs the school is willing or not willing to accept?
• Are your financial aid goals reflected in how you have used your aid dollars? Does the allocation of financial aid dollars align with the stated purpose of the program? Are there adjustments in funding or policy approaches that need to be addressed?
• If tuition goes up X% in each of the next five years, how much does financial aid need to increase to maintain or grow enrollment? How do you plan to manage that projection?

2. Summarize the data to get your head and trustees talking about the most important, strategic issues needing critical focus. Employ data that provide snapshots profiling your aid applicant and recipient pools. Expose important patterns. Examine trends that the patterns are exhibiting over time. And enlighten the board on one or two key revelations that the trends suggest. Using data to tell a story or set up an issue that demands the board’s attention is critical.

3. Convene an affordability task force on the board, including key staff members such as the admission director, financial aid director, and business manager, to focus on prioritizing the issues to tackle and identifying the resources needed to do so. Short of having a board-level financial aid committee, the task force is empowered to bring to the full board a data-driven recommended course of action based on deliberate consideration of the most critical needs.

4. Resist the tendency to jump to a solution too quickly (“Let’s offer a merit scholarship, because everyone else around here does”), because acting too fast might not solve the right problem. Albert Einstein once said, “It’s not that I’m so smart. It’s just that I stay with problems longer.” Honing in on the right problem to solve is worth a little extra time and research, in order to yield a better solution. Being clear and on the same page about “the problem” you’re aiming to solve with financial aid dollars will help set the stage for more productive conversations about resources and strategies that are needed.

Adapted from the NAIS Strategic Questions about Affordability postcard series.

From Memberanda, Summer 2013

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