Managing the financial aid gap

Strategies to help students attend that go beyond increasing institutional grants or reducing price
By: | Issue: May, 2014
April 24, 2014

Fewer and fewer institutions are meeting students’ financial need. Per The College Board’s “Trends in College Pricing 2013,” the average net tuition and fee price for students attending four-year public institutions increased by an estimated $1,180 (in 2013 dollars) between 2009-10 and 2013-14.

At private four-year institutions, average net tuition and fee price increased between 2012-13 and 2013-14 for the first time since 2007-08. In addition, families are spending less of their own funds on education: Sallie Mae’s annual survey, “How America Pays for College,” shows that parent contributions now cover 27 percent of expenses versus 36 percent in 2010.

The average family spent $21,179 on college in 2012-13 versus $24,097 in 2009-10, and 67 percent of families said they eliminated schools based on cost. Clearly, some students are responding to rising costs by choosing cheaper options, while others are turning to increased borrowing. According to The Institute for College Access & Success report “Student Debt and the Class of 2012,” average student debt from both federal and private loans increased an average of six percent each year from 2008 to 2012.

“The gap”

Only 61 of the nearly 1,130 schools that provided fall 2012 financial aid data in U.S. News & World Report Annual Survey claim to meet students’ full financial need—some with and some without a student loan expectation. While many of these institutions have long been “need-aware” in their admission policies, others have made national headlines in the recent past for making the switch from “need-blind” to “need-aware,” citing the need to sustainably fund their commitments to meet students’ need by admitting only students that they can support as a preferable alternative to “gapping.” So how are institutions that are not part of this need-aware group helping students “manage the gap” and position themselves as affordable options? As the enrollment environment becomes increasingly challenging and competitive—and institutions are ever more resource-constrained—there are a number of strategies colleges and universities are implementing to help students attend that go beyond increasing institutional grants or reducing price.

Loan repayment assistance

Loan repayment assistance programs have long been used by law schools, and in 2008, the Loan Repayment Assistance Program (LRAP) Association began offering an option for undergraduates. In short, LRAP guarantees that if a student’s post-graduation income is low, they will provide help in making their loan payments.

Jeff Berggren, vice president of enrollment management and marketing at Huntington University, describes his institution’s decision to offer its students the LRAP: “We began to see loan aversion impact our enrollment at the same time we were introduced to the LRAP concept in the spring of 2009. At that time there was only one other undergraduate school offering LRAP so it was going to be a unique tool which had both advantages and challenges when it came to communicating the offering to new students and their parents.”

Berggren says LRAP fees seemed a better investment than using those funds to increase grants to students. “That really became the choice we worked through when it came to offering LRAP. Do we just increase our institutional dollars an equivalent amount to impact student enrollment or would those funds have a higher ROI when leveraged as a unique offering that could be used in unique ways?”

Huntington did not decrease institutional grant funding to underwrite LRAP but rather chose not to make an intentional increase in funding in order to offer LRAP instead. Since implementation, individual feedback from students, and also in some measurable indicators like the increased percentage of students who borrow, has indicated that the LRAP option reduced concerns about borrowing.

“Not all of that is driven by LRAP of course, but we believe it is a factor,” says Berggren. “One clear area where LRAP has made a difference is those tough situations where parents are not credit-worthy and the student is left without an immediate cosigner for alternative loans. The program has given security to family members who have then stepped in as cosigners on private student loans once they understood the LRAP coverage.”

Financial literacy counseling

Improving efforts to provide financial literacy counseling to help families understand financing options can help students limit their borrowing to what they actually need versus what they are allowed to take out in loans. Sample monthly repayment schedules and the total amount to be repaid after interest and other charges can be eye-opening.

Many institutions also offer flexible payment plans that often have low fees and no interest charges. Educating families on the potential savings to be gained from these options to spread the balance due into more manageable monthly payments may help them see that footing the bill might be more possible than they thought. Methods for educating families include email, direct mail, web pages and meetings with staff.

Assessing unmet need

Our clients have increasingly been asking for analysis to evaluate the cost of limiting or varying levels of unmet need based on student characteristics such as quality, program area of interest, state residency and so on. (Unmet need can be defined as need minus all grants, or need minus all aid.) First, table analysis to examine yield by unmet need levels, and also retention by unmet need level for students achieving academically and those who are not, is used to find the appropriate threshold. Then, simulated awarding strategies are tested using econometric modeling to estimate the impact on enrollment results, discount rate and net tuition revenue.

Increasing work opportunities

S&K retention research also often identifies working on campus as a statistically significant, positive driver in persistence behavior. On the other hand, increasing gift funding for returning students does not have as strong a retention influence. My colleague, Kathy Kurz, wrote on this topic in our “Monday Musings” blog ( She also argues that work study benefits should go to beyond providing students with earnings—such as offering students job experience for their resumes and providing an effective supplement to the institution’s regular workforce.

Time-to-degree Offering a graduation-on-time program, or four-year guarantee, is not new, but Temple University’s Fly in 4 adds a twist. The first part of the program, available to all students, offers many of the elements common to such programs: Students must elect to participate and then attain certain checkpoints, such as meeting with an academic advisor each semester and advancing in academic standing each year.

If students meet these conditions, and are not able to graduate on time, Temple University will provide the courses they need to complete their degrees at no charge. Hai-Lung Dai, provost and senior vice president for academic affairs at Temple, says the institution is committed to reducing student debt. “There is a strong correlation between amount of debt and the number of years students take to graduate,” says Dai. “A major reason students were taking longer to graduate was their financial need to work, often 20 to 25 hours per week, reducing the number of credits they registered for each semester.” Dais says the second part of Fly in 4 offers students with high financial need grants to eliminate the need to work so many hours. “We recognize the value of work in education, but limited work hours will help students’ studies and retention,” he says. “Students receiving the grant must pledge not to work more than 10 hours per week. We are hoping retention will increase to balance out the investment in grant funds, while at the same time help students accomplish their goals.”

Outside scholarships

While students cannot receive financial aid exceeding the annual cost of attendance—and the sum of scholarships designated for tuition can’t add up to more than the tuition cost— institutions have some flexibility in their outside scholarship management policies. Some reduce institutional need-based grants dollar-for-dollar and some reduce by a portion after outside awards exceed a certain threshold.

Others allow students to stack outside funds on top of existing institutional awards. This may also require reducing loan and work-study awards to bring the aid total down to the cost of attendance. This last option represents the most generous policy, and after reviewing the net tuition revenue implications, a move in this direction might even mitigate summer “melt.” Ultimately, whatever strategies institutions may try, careful tracking of students offered these options is needed to evaluate the impact on enrollment and retention. Thorough data collection and analysis will allow decision makers to determine how sustainable these strategies might be. Ideally, investments in improving access to students would prove to be at a minimum revenue-neutral and at best a strong return.

—Jennifer Wick is an enrollment management consultant at Scannell & Kurz. She can be reached via the firm’s website,