Are you measuring the “right” outcomes of your financial aid policy? Data gathered by SSS By NAIS suggests that the only way to do so is by defining which families are a good fit for your school — and tailoring your policy to specific budget dollars.
Here are our key findings:
Cutting awards doesn’t save money. NAIS core sample data shows that the average independent day school increased its tuition by an average of about 4.3 percent per year (4.4 percent per year for boarding tuition). Not surprisingly, given the down economy, day schools also increased aid budgets by an average of 10.7 percent per year (6.3 percent per year for boarding schools). For business officers, heads, and trustees, the key question prompted by these trends is, “Could we save money by cutting back on aid?” Some schools do just that, and when they report back to us, they attest that, in the short term, savings are possible. However, in the long run, too many of these families struggle to return year after year, and any promised savings dissipate quickly.
Distribution matters as much as total budget. A 2002 NAIS study of independent school retention rates found that schools with strong retention rates did not spend significantly larger amounts of money on aid as a percentage of operating budget than schools with weak retention rates. Rather, the single biggest difference was how they allocated that aid. The schools with the best retention rates tended to give out relatively fewer awards but at more generous levels.
“Discretionary” is in the eye of the beholder. Since the economic crisis of 2008, we’ve seen a tremendous spike in aid requests coming from families that are considered relatively affluent by national standards. In fact, over 21 percent of the applications SSS processed this past year were from families with total incomes of more than $150,000 a year, whereas a decade ago only 6 percent of our families earned that much. Simply put, these families don’t believe they can afford what we think they can — and are pushing back.
You should start with national benchmarks, then dial in local settings. While our subscriber schools see enormous advantages in having a national data set against which to benchmark their analysis and start their calculations, true accuracy requires local knowledge. Simply put, it’s a big country, and anyone who has tried to buy a house in San Francisco, or sell one in Detroit, knows that macroeconomic trends can play out very differently at the local level.
All of these findings point out that aid policies should be based on mission and data, and not hunches. Whether your financial aid efforts are successful will remain unclear unless your school leadership team creates a financial aid policy that defines which families are a good fit for your school, and then ties that policy to specific budget dollars and desired outcomes. Are you a well-funded school trying to invest in socioeconomic diversity and make your school more accessible? Or are you struggling to reach full enrollment and need to make your school more affordable to families that aren’t quite “full pay”? Only when you answer those questions, and allocate your aid accordingly, can you assess your program’s effectiveness.
If you try to gauge success by benchmarking dollars saved this year as opposed to last, or the number of families appealing their awards, you are measuring the wrong outcomes.