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by Dr. Arnaud Prevot, LinkedIn, 7/24/2015

Setting a tuition rate is quite complex. You have to look at your competition, the consumer price index, potential effects on enrollment...etc. For many schools, the administrative decisions around financial matters are set by a board of trustees, and there is little a school principal can do. Whatever the case may be, there are a number of factors involved in setting a balanced tuition level.

Don't only compete with price

As much as you would want to forget it, there can always be a competitor willing to undercut you in price. This is why any pricing strategy must always be accompanied by a differentiation of some sort. This means that while you may have a slightly higher tuition rate than other schools you may offer a program that others do not. It could be a new academic program, an experiential opportunity, or even a faith based approach which others don't have. You should do whatever is needed to reduce the emphasis on cost.

Three models of tuition/salaries balance

There are effectively only three types of models around which one can base their tuition strategy. Note the following is not based on any type of subsidized tuition scheme which might skew the model results.

Having competitive salaries, small classes (low ratios), and rapidly rising tuition.
Having non-competitive salaries, small classes (low ratios), and moderately rising tuition.
Having competitive salaries, larger classes (high ratios), and stable tuition.
It should be notes that any other combination cannot be sustainable, as either salaries will remain so stagnant that teachers will leave or tuition and class sizes will be too high that parents will withdraw their children from the school.

According to Peter Aitken [1] , it should be a mission of schools to reduce tuition (or raise the tuition moderately) whenever possible as a means of attracting more families.This will mean raising the teacher-student ratio may be necessary. This can cause issues, especially with schools who use their low teacher-student ratios as a positive selling point. The idea is to strike a proper balance.

Another Variable : Faculty Load

Remembering that the average public school student-teacher ratio is 17-to-1, and independent school ratio is 9.4-to-1, changing the faculty work load can bring efficiency in the school and tuition pressure relief for the parents. The work load for teachers could be balanced by an increase in salary which can keep the school competitive.

Don't forget the environment

According to the historical numbers, families in the top 12% of income levels can afford average private day school full tuition, and this means that it is quite important to understand the local population's financial needs. In an average situation, up to 88% of the population would need some sort of financial aid. This should be included in your tuition considerations.

Fees

There is no clear-cut formula for setting K-12 tuition levels, but one should not forget that for most families, tuition is not the only education-related expense that they will have to pay, others include administrative fees, sports and technology fees, any others related to field trips, insurance...etc. Fees are commonly forgotten when school administrators and boards attempt to predict how parents will react to financial changes.

How this affects public/charter schools

This information is just as important for public and charter schools as it is for private schools. It is important to note the financial situation of any competing schools. Should private school tuition begin rising quickly in a geographic area, then it may be of strategic consideration to promote in that area as the sharp rise in tuition may turn off some parents to private school education.

Once again, I have just scratched the surface, and there is much more to say, so please leave any comments below, and thank you.

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Dr. Arnaud Prevot is a language/technology teacher, a technology specialist, and an independent consultant on private school marketing. Find him at drprevot.weebly.com and follow him @ArnaudPrevot or http://twitter.com/arnaudprevot

References

[1] Access and Affordability: Strategic Planning Perspectives for Independent Schools (NAIS publication, 1994)

[2] https://www.nais.org/Articles/Pages/Tuition-Pricing-and-Affordability.aspx