Transcript Document

The Art of Discounting
Bluefield College
Board of Trustees
February 18, 2011
Defining Tuition Discount
(a) Gross Tuition & Fee Revenue $xx,xxx,xxx
(b) - Institutionally
Funded Financial Aid
-xx,xxx,xxx
(C) = Net Tuition Revenue
$xx,xxx,xxx
(D) (b)/(a) = Tuition Discount %
NACUBO, 2006
xx.xx%
College Board Trends Data
for private nonprofit colleges
o Published tuition & fees averaged $27,293 in 2010-11.
o$1,164 (4.5%) higher than 2009-2010
oAverage total charges are $36,993, up 4.3%
oIn 2010-11, FT students receive an estimated average of
$16,000 in grant aid from all sources.
College Board, Trends in College Pricing, 2010
The NACUBO study documents the alarming growth in
discounting and
non-need-based aid and mentions that many colleges feel
locked in "arms race" with each other as they compete for students. In our
2008 white paper, "Time to Reexamine Institutional Cooperation on Financial Aid",
we examined the issue of non-need-based aid, suggested ways that increased
cooperation among colleges could be structured to benefit colleges and students,
and looked at the current antitrust rules that may hinder cooperation. Given the
findings of this study, now is the time for colleges to step up and raise the issue of
institutional cooperation and what legal changes might be necessary to facilitate it.
Matt Reed
Program Director
The Institute for College Access & Success
mreed @ticas.org
www.ticas.org
Balancing the Goals
#
Q
$
Assessing the ability to pay for college
Family Income
$35,000 or less
1 in 17 will earn a BA degree by age 24
(Approximately 6.0%)
$36,000 - $60,000 1 in 10 will earn a BA degree by age 24
(Approximately 12.7%)
$60,000 - $85,000 1 in 4 will earn a BA degree by age 24
(Approximately 26%)
$85,000 or more 1 in 2 will earn a BA degree by age 24
$94K - $121K
(Approximately 51.3%)
Source: Postsecondary Education Opportunity
Analysis, Based on 2002 Census Data
Factoid – USA Today – Feb. 2, 2005
Distribution of Full-Time Undergraduates at Four-Year Institutions by
Published Tuition and Fees, 2009-10
Source: The College Board, Trends in College Pricing 2009; Annual Survey of Colleges.
Distribution of Full-Time Undergraduates at Private Four-Year Institutions
by Published Tuition and Fees, 2009-10
Source: The College Board, Trends in College Pricing 2009; Annual Survey of Colleges.
Distribution of Undergraduate Enrollment by Sector,
Fall 1990, Fall 2000 and Fall 2007
Sources: The College Board, Trends in College Pricing 2009; NCES, unpublished data provided by IPEDS staff.
The rising price of college 1988-2008 (in 2008 CPI-U constant $)
160.00%
140.00%
Cumulative growth since 1988
120.00%
Public Four-Year
100.00%
Private Four-Year
Public Two-Year
80.00%
Prescription Drugs
Household Energy
60.00%
CPI-U
Median Family Income
40.00%
New Vehicle
20.00%
0.00%
-20.00%
1988
1991
1994
1997
2000
2003
2006
Sources: College Board, “Trends in College Pricing, 2008”; Bureau of Labor Statistics, 2009, www.bls.gov ; U.S. Census,
Current Population Study-ASEC, 2008.
$50,000
Median Revenues per FTE by Source:
1987,1998,2005
Median Revenues Per FTE Student (in 2005 dollars)
$45,000
$40,000
Unrestricted revenue
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
1987
1998
2005
Public Research
Tuition
1987
1998
2005
1987
Public Masters
State and Local Appropriations
1998
2005
Public Associates
1987
1998
2005
Private Research
1987
1998
2005
Private Masters
Private Gifts, Investment Returns, and Endowment Income
1987
1998
2005
Private Bachelors
Designated Revenues
Source: Delta Cost Project IPEDS Database, 19-year matched set.
12
Freshman Funnel
2000 to 2010
1000
900
800
700
600
Applicants
500
Accepts
Enrolled
400
300
200
100
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Tuition, Discount and Net Revenue
2000 - 2010
$20,000
$18,000
$16,000
$14,000
$12,000
Gross Revenue
$10,000
Net Revenue
Aid per Student
$8,000
$6,000
$4,000
$2,000
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Average FTE
700
600
500
400
300
200
100
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Unfunded Financial Aid
per Student
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Unfunded Aid as a % of Tuition
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Net Revenue per FTE
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
There is no pricing power without
excess demand.
2010 Actual
2012 A
2012 B
Demand - Apps
1600
1600
1600
Accepted
1334
1334
1334
Accept Rate
83.4%
83.4%
83.4%
Discount
50%
50%
47%
Yield
30%
30%
27%
Enrolled
400
400
360
Net Revenue per
Student
$15,000
$15,600
$16,536
Aggregate Net
Revenue
$6.0M
$6,24M
$5.95M
Assessment of Discount Rate
by Yield
HS-GPA by Quartile
SAT/ACT Scores by Quartile
# offered
#accepted
Average $
Yield
What do we know summary?
 The pie is getting smaller
 Only 30% of all college-bound students attend
colleges priced >= Bluefield College
 Only 20% of college-bound students at private
colleges attend a college with our price or less
 Colleges are more tuition-dependent
 Financial aid is increasing more than price
 New lesser-priced experiences are gaining
popularity and market share
What are our options?
 Reduce our price
 Increase tuition & fees and room & board at a higher
rate than planned
 Enroll more full-paying students
 Charge for premium services/experiences
 Increase enrollment
 Eliminate/reduce merit-based scholarship assistance
 Reduce expenses
 A combination
What are our options?
 The Muskingum model: Reduce price.
 Works for the short-term, but has long-term
consequences
 Forfeit forever revenue from anyone who pays more
than the average cost of attendance
 Reduces or eliminates the lure of merit- and talentbased aid
 Still must meet the financial need of needy students
What are our options?
 The public school model: Increase our price at
rates greater than planned
 Pass more cost on to students
 When we increase our price we become less
affordable to some and others become less affordable
for us
 Increased attention from legislators
 Seems counter-intuitive when we know the only
alternative for families is increased borrowing
What are our options?
 The Hamilton and F & M model: Eliminate meritscholarship in favor of need-based aid
 Eliminates competitive advantage
 Merit has become an expectation (students, parents
and high schools)
 No demonstration of how much we “want” a student
 Most of merit dollars already meet need and we get
the psychological “bounce”
 Could compromise our ability to attract students for
key programs
What are our options?
 The DePauw model: Decrease net cost by
discounting more and exceeding enrollment
targets to generate revenue
 Capacity becomes a problem
 Bond raters and others have concerns about
discounting and NTR per student
 Not sustainable without resources (human and
financial) in place
What are our options?
 The University of the South model: Decrease
tuition 10% in one year
 What happens with financial aid?
 Not sustainable unless
 Aid is affected
 Enrollment increases to compensate for loss
of revenue
*
Pricing/Net Revenue is complex
*
No “silver bullet” answers
*
Time for a paradigm shift
*
Stabilize Enrollment
*
Stabilize Demand
*
Then, Stabilize Net Tuition
Revenue
Questions?