Enrollment Management

[March Madness] Enrollment Management

Imagine, if you will, the high school senior that creates a tournament bracket similar to college basketball and seeds each of his potential college suitors in accordance with his interest.  Then, one by one he pits each school against one another using financial aid as the sole contributing factor to the decision on which college or university moves on to the next round.  (I saw something similar to this in our student affairs office last year when a college senior created a bracket during March representing his law school choices.)  As an enrollment management professional at a private, independent college and obviously not knowing explicitly who my institution is competing with, a process like this would make me cringe.

In the admission and financial aid office at Doane College, March 13th represents the date when we make our first official financial aid offers to prospective students.  We will mail over 400 financial aid awards representing over half of the total number of awards we will make this recruiting cycle.  And, when you consider that our first “wave” of financial aid awards accounts for roughly 60% of our anticipated class, it makes sense that this is a big deal.

March is maddening, particularly in this day and age in higher education and this would be true without college basketball!  I’ve discussed in previous posts the challenges of merit aid, price, cost, and tuition.  Financial aid is a beast and a blessing in enrollment management.  No two schools develop their financial aid policy and strategy the same.  As a result, all who want to make apples to apples comparisons with financial aid awards are easily frustrated.  A consequence of this process is an increasing demand for financial aid negotiations between potential students (or the parents) and the college.  At times it’s laughable because I often see those who have the greatest ability to pay for college lobbying for the greatest amount of aid.  But, then I ask myself, “Who could blame them?”  Just because people have wealth doesn’t mean they are any more interested in parting with it.  Nevertheless, I often hear more appeals for families with the financial resources than I do for those that do not.

Those in enrollment management understand that financial aid can be very complicated and therefore isn’t always the easiest to explain to families.  Even if you can articulate your institution’s philosophy and process, good luck helping a family understand why their Expected Family Contribution is $20,000 as defined by the FAFSA.  Who hasn’t heard the comment, “I don’t have $20,000 in the bank to pay for Junior’s college each year!”?  I suppose the saving grace is to share that the EFC is calculated the same for everyone and therefore each school is using the same information.  Unfortunately, that doesn’t provide families with much comfort.

So, how does an admission counselor navigate the March Madness bracket with a prospective student in the event they focus largely on the financial aid award?  As a private, independent college, how can we compete with the local community college on price?  If you draw that match-up do you simply throw in the towel?  How about if you draw the local state institution?  Maybe you have a chance if the student isn’t getting any aid from the state school.  But what if you draw another area competitor; similar college if you will?  Slam dunk, right?  Hmmm, not so fast.  In the end, we must to talk about value.  We cannot let it be only about cost even when we know that is a significant issue.

Let me share a brief story.  A father visits Doane College with his son.  During the visit they indicate that they have received an “offer” from another private, independent college in the state totaling more than our offer.  When asked for the details of the offer in order to determine if we could find a way to be more competitive, the father indicated that he doesn’t work that way.  He is a farmer and he likened his son’s college choice to a recent purchase of a tractor. He shared, “When I need a tractor, I go to two businesses and ask for the best price on a tractor.  Whoever gives me the best offer gets my business.”  I asked the father, “Sir, were both tractors John Deere?”  He indicated that both were Case to which I replied, “Sir, in your example, what if you were comparing Case to John Deere?  Would price be your only comparison point?”  I would bet that John Deere and Case reps would work hard to argue the differences in their tractors if given the chance.  That being said, if from the beginning this farmer knew that he wanted a Case, the fact that we are John Deere is irrelevant because it’s very possible that we don’t have what you want.  Comparing Doane College to another school based only on financial aid is shortsighted and assumes that everything else is equal.  A better financial offer from us may make your decision more difficult but it sounds like this farmer and his son had already decided what they wanted.

March Madness in higher education admissions seems to be all about financial aid and less the importance of fit and comfort in a college choice.  As colleges, we create financial aid awarding strategies in order to provide enough financial aid to make enrollment possible for a target amount of prospective students while also anticipating resulting revenue.  Ultimately, our awards will not be the best award for every student.  It doesn’t (and can’t!) work that way.  But, we want to be right for 350 first-year students for sure!

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Enrollment Management

Merit aid and the impact on tuition price

Eric Hoover wrote an article on January 17th, “Want to Define Merit?  Good luck.”  He accounted for a discussion among higher education enrollment officials at a conference focused on merit aid, specifically how colleges assess and reward merit aid to shape the socioeconomic and racial diversity of students at selective colleges.  I enjoyed the article but it got me thinking.  Shape socioeconomic and racial diversity?  I wish!

The term “merit aid” has grown in relevance exponentially over the last ten years for private, independent colleges.  But, merit aid is an enrollment tool used for very different reasons depending on the college.   Hoover’s article is focused on the discussion of officials from more selective colleges.  He discussed need-blind admissions, the influence of social class on students’ test scores, and the important debate surrounding the way in which colleges leverage aid to solidify diversity in enrollment.

Now, allow me the opportunity to share the world that many enrollment managers and college administrators live in related to this merit aid.  Our institutions are not considered highly selective.  We would love to shape our classes with more diversity and better test scores which typically translate into higher retention rates and ultimately stronger ratings in US News & World Report.  We thoroughly enjoy those conversations and get excited whenever the opportunity arises to participate in that discussion.  Unfortunately, our real-world, day-to-day challenges often push the discussion of shaping a class to the periphery.  Focus on that and we don’t have the enrollment to shape!  Fair to say, our issues with merit aid are different.

When colleges began offering merit, they opened Pandora’s Box.  On one hand, it was genius because it made private college attractive to many students who may have seen it as out of reach due to cost; college only for the wealthy.  On the other hand, it started a financial war which continues today.  Schools are pitted against each other fighting for the same student often not based on value of the education, but instead based on the value of a scholarship.  And, make no mistake; as the pressure to offer more merit has increased, schools have had to recoup their financial investment (net tuition revenue) in the form of tuition increases.

Because colleges offer merit with slightly different criteria, comparisons can be challenging.  There are different qualifications for different scholarship amounts.  Some scholarships are competitive whereas others are given based solely on arbitrary criteria.  Moreover, the arbitrary criteria are different at each school as is the amount attributed to the criteria.  Easy example is Doane College and Hastings College.  Very similar schools but different academic qualifications for different scholarship amounts.

As tuition-driven colleges increase merit to attract more students, it puts other similar colleges in a position to increase merit as well to be competitive in very price/cost-sensitive markets.  One college can significantly increase merit aid forcing other similar schools to do the same to stay competitive or lose enrollment.  In the private college environment, I believe this tactic erodes the value of the product we sell.  And not only that, but as I mentioned before, tuition will increase in order to recoup some of the net revenue lost by increasing aid.  I don’t expect students/parents to appreciate this or feel any remorse for colleges.  Nevertheless, merit aid war games are significantly effecting decisions made with respect to tuition and other costs at colleges today.

I’m not suggesting that merit aid is bad.  I don’t think I can make that argument.  But, it complicates an already challenging college decision.  If instead of merit, a college chose to provide financial aid based solely on need, it’s not likely that the college would meet enrollment targets, nor would it likely meet net tuition revenue targets for operational budgets.  But, some would argue that’s the “right thing to do.”  I don’t see an easy answer here but I do anticipate a change coming in higher education.  The path of more aid and increased tuition is a very rocky road at best.

I’m not minimizing the importance of the merit conversation related to Mr. Hoover’s article.  However, I think it’s important to understand that there is another merit issue unrelated to and (to me) equally important for many colleges today.  We can’t begin to shape our enrollment if we don’t have enrollment to shape.

What do you believe the role of merit aid should be in college enrollment?   

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Enrollment Management

College Tuition – the Price and the Cost

This is the time of the year in higher education recruitment when rubber hits the road.  Students begin to make the often tough college choice.  An important factor in that choice for most is the cost of education.  And, the cost of education depends greatly on the *price.

The price of tuition at private, independent colleges has received a great deal of criticism as of late.  There are those that feel that tuition prices have escalated far too high as a result of college greed or unwillingness to take into consideration the impact of that cost on families.

First, price does matter.  Let’s say you are considering two pair of shoes.  A brand name shoe has a price tag of $70 while a no-name brand has a price tag of $35.  Quick, which shoe in your opinion represents higher quality?  What if the $70 shoe is 50% off?  Now, both shoes will cost you the same amount out of your pocket.  Does that change your opinion of the quality of the higher priced shoe?

Although I acknowledge that this is a bit of an oversimplification, price is often perceived as representative of a specific product’s quality in the market.  While I recognize that there are other impacts on price such as demand, price can be very important in the context of competition in a specific demographic and geographic market.  Consider the private, independent colleges in the state of Nebraska.  List each college and their respective tuition. Tuition amounts are typically within $2,000-$3,000, and sometimes within less than $1,000.  The fact that these colleges have tuition prices so close is not by chance.  But this still doesn’t answer the question as to why tuition prices continue to escalate.

Price does matter but the increasing price is not necessarily attributed to a college’s incessant desire to fill their coffers with your money.  What is easily misunderstood is a college’s ability to maintain appropriate net revenue to operate (with modest program investments) without increasing the price.  In order for a college to operate annually with net revenue from tuition, it must not only consider the price of tuition but also the amount of discounting required in order to meet overall enrollment targets.  Essentially, to what extent must a college put tuition on-sale in order to meet or exceed enrollment targets?

Consider the shoe example above.  Let’s try to keep this relatively simple.  Both shoes will cost the consumer the same out-of-pocket cost.  In turn, each company receives the same net revenue.  Private, independent colleges can be considered similar to the name brand shoe while a public university is the no-brand shoe.  While tuition is high, often the cost is discounted with significant merit aid and grants.  This discount is equivalent to a sale.  Each year enrollment managers assess the amount of aid required to yield the previous class.  Consumers are expecting more and more aid each year.  To be clear, this discussion is not addressing state and federal aid such as Pell Grants and loans.  I’m simply speaking to the funds provided independently by the institution which are not loans.  The amount of average institutional aid (merit or grant aid) for each student divided by the tuition translates into a college’s average tuition discount.

PRICE

Tuition = $20,000

———–

 Average Merit/Scholarship/Grants (provided by institution) = $7,000

Tuition Discount = 35%

———-

COST

$13,000

Many colleges are discounting tuition at historically high rates in order to meet enrollment goals.  If tuition does not increase and the rate of discount increases, a college will lose net revenue and be forced to operate with fewer resources than the previous year.  Think about this in the context of a family budget.  Fewer resources lead to decisions that ultimately can affect quality of life.  At a college, this can affect the quality of the educational program.  In order to account for a significant sale (discount) on tuition, the price must increase to protect net revenue and maintain operations with the same consume value expectations.

It’s important to understand that when a college provides a discount on tuition with institutional aid, rarely is that aid actually funded by actual paper money.  That’s not to say it never is, but most colleges simply don’t raise enough money annually to off-set the financial aid that they fund.  Do some quick math.

(Enrollment)  x  (Tuition Price) x (Sale/Discount) = Financial Aid Funding Required Annually

1,200$20,000  .35  = $8,400,000 (that is 8 million!)

There are not too many colleges that fundraise $8 million annually to support financial aid.  Nor are endowment returns (even on substantial endowments like Doane College’s) enough to support the scholarships/grants provided to students.  And, this example uses a tuition discount of 35% rather than upwards of 40% which is becoming more typical for some schools.

So, if the example above holds true, why not decrease tuition by $10,000 and stop discounting?  First, let me bring you back to the shoe comparison.  There is a strong theory that if a college cut tuition by 50%, it would impact their perception of quality.  There are schools that have done this but not without a great deal of research, consternation, and some risk.  Pricing may seem elementary on the surface.  Unfortunately, it is a significant issue and one that colleges wrestle with each year.  The price of tuition is one number while the cost of tuition to a family can be something quite different.

*For the purpose of this post, price is reflective of tuition only.

P.S.  Doane College approached tuition pricing a bit differently in 2013.

This academic year Doane College approached setting tuition slightly different than in the past.  First, internally administration discussed tuition considering the ongoing debate of increasing prices.  Doane considered holding tuition also known as “freezing tuition” for a year.  Doane considered lowering tuition, albeit for only a short conversation.  Ultimately, Doane decided on a 4% tuition increase but rather than make this decision in February – the customary time – the college’s board approved the tuition in October.  This move was an acknowledgement of the importance of financial planning and providing families with definitive costs for which to plan early in the year rather than in late February.  In addition, Doane College also modified academic scholarships and increased allocations of merit aid to historic high levels for new students enrolling in fall 2014.

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