Money Matters

Typically, when institutions conduct exit surveys for students who withdraw prior to completing a degree program, featured prominently are financial aid, cost, or affordability. They usually garner one of the top slots for reasons listed for withdrawal prior to graduation. But research shows there are a number of other drivers that influence re-enrollment trends.

We have written before about the importance of considering your institution's market position relative to competitors when planning future price increases. When sticker price position is higher than "prestige" position (based on publicly available measures like test scores, U.S. News rank, and selectivity) institutions often see declining demand.

Given the multiple goals and multiple players involved in developing and managing endowed scholarship funds, there are lots of opportunities for communication gaps, poor service, and less than optimal use of the funds. In an ideal world, endowed funds and annual gifts given for scholarship support would be used to take the place of unfunded aid in the offers made to students, freeing unfunded (and therefore unrestricted) resources for other purposes. However, many institutions are not able to achieve this efficient outcome for a number of reasons.

When competing for top students, many colleges are finding that offering merit awards or generous need-based packages is no longer enough to win the day. Academically successful students typically have multiple offers from which to choose. So, all things being equal when it comes to financial aid, how does a college compete for the best and the brightest? Here are four ideas for sweetening the offer to the student that everybody wants—because it's not just about money anymore.

It is no secret. Most state budgets are in terrible shape. Estimates from the Center on Budget and Policy Priorities are that budget gaps for all states, combining fiscal years 2010 and 2011, will total approximately $375 billion. These budget woes have already begun to affect states' spending on higher education. Leading up to the 2009-2010 academic year, many states were considering or implementing plans to cut financial aid to college students. Some were in the news more than others.

Talking about affordability can be a scary conversation for a recruiter. That is part of the reason more and more institutions have moved to transparent merit policies and other "entitlements" with clear eligibility criteria. But even if recruiters have these tools at their disposal, they still need to be able to talk with confidence about need-based aid and that is where it can get complicated.

IN A RECENT MOODY'S SURVEY, almost 30 percent of private colleges projected declines in net tuition revenues for the current fiscal year. This is likely not because enrollments declined, but because more financial aid was spent in achieving enrollment goals. Officials at institutions whose discount rates increased this fall are wondering if this is the new cost of doing business or whether they spent more than necessary.

The drivers behind increased discount rates are many, including:

IN ITS SIMPLEST FORM, ENSURING the linkage between financial aid and enrollment projections is about two things: solid data analysis and communication. How many new and returning students will there be, and how much institutional grant aid will they require? Who needs to be informed of the projections, and when? Of course, the devil is always in the details. So let us break it down into the basic components.

IN THE CURRENT ECONOMIC environment, it comes as no surprise that some higher ed institutions are beginning to wonder whether a radical strategy like reducing sticker price would be the best way to maintain market share. This spring, deposits were lagging at many private IHEs, even at campuses where admit numbers were up. More families were appealing financial aid awards, and more institutions were responding to those appeals. Officials are concerned students may “melt away” before fall.