Transcript Financial Aid Strategy Tool

Strategic Utilization of Financial Aid:
The Power of Informed
Decision-Making
MASFAA
November 14, 2002
Jim Slattery
Senior Educational Manager
Higher Education Solutions
The College Board
The Evolution of Financial Aid
• From a mechanism used to promote equity,
access and choice…
• To becoming a significant factor in
determining an institution’s competitive
position and financial well-being.
Financial aid policies must address both:
social values and fiscal realities.
Trends Leading to Strategic Use
of Financial Aid
Similar to those which prompted enrollment
management models:
• Intense external competition
• Competing internal pressures
– Enrolling desired numbers, quality, mix
– Achieving revenue goals
– Staying within financial aid budget
• All-consuming focus on revenue
Discount Rate
The difference between the amount of tuition the institution
collects and the amount it returns (“discounts”) to students
in the form of institutionally funded grants.
• The “litmus test” of fiscal risk by which financial aid
policies are measured. Drivers of an institution’s
discount rate include:
 Trends in the economy which affect family contributions and
numbers on aid;
 Commitments to diversity and quality resulting in awards
unrelated to financial need;
 Responses to competition;
 Yields by levels of need and grant awards.
Key Questions
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Is our institutional aid being spent wisely?
Are we providing enough need-based aid?
What about scholarships?
What about awards to individual students?
Are they for the “right” amount?
• If we change our policies, what will it cost,
and what will be the impact on quality,
revenue and class characteristics?
Without analysis,
paralysis.
Goals of Enrollment Management
• Understand factors that influence
enrollment behaviors
• Positively influence enrollment decisions,
then retain and graduate those who enroll
• Optimize size & composition of student
body, consistent with mission
• Control expenditures
Influences on Enrollment Decisions
Academics
Reputation
Location
STUDENT CHARACTERISTICS
PRICE
Net price is the single, easiest factor
for the institution to control
Enrollment Decisions
• Net price is key to the enrollment
decision for many students
• Willingness to pay has emerged as
another important factor to consider in
addition to ability to pay
Willingness to Pay
• Willingness to pay varies from student to
student and is influenced by a variety of
factors:
… Perceived value of educational offering
… Commitment to institution – students
will pay more to attend their first choice
… Even if you are their first choice, they
must perceive the “price” as affordable
Willingness to Pay
• You can determine willingness to pay by
blending research with analytic tools, such
as econometric modeling.
• Evaluating the enrollment rates of students
with different combinations of academic
ability and need can also help you better
understand the relationship between
willingness and ability to pay.
Without data, you’re just
another person with an
opinion.
Role of Data
• The need for a data-supported approach to
awarding financial aid has never been
more important.
• Sophisticated models and tools are needed
to fully understand the trade-offs and
impacts of various strategies.
Data Analysis Progression:
No Data  Strategic Use of Data
1. Historical data captured & retained but files
not merged
2. Data files merged but strategic questions not
asked
3. Aggregate data analysis
4. Segmented data analysis (group data)
5. Regression analysis (individual data)
6. Econometric modeling & simulations
Source: Scannell & Kurz, Inc.
Objectives of Modeling
• Modeling starts with flexible thinking
• What questions are you trying to answer or
what goals are you trying to achieve?
• What facts do you have available?
• What assumptions are reasonable to make?
Objectives of Modeling
• A good model…
– Allows you to test the impact of various strategies
– Allows you to ask “what if?”
– Becomes the basis for a plan
– Assists in the assessment of the plan
• Modeling helps you understand the
differences between enrolling and
non-enrolling admits.
Data Components
For best results, analyze admissions, financial
aid and other relevant data for individual
students admitted for the past 2-3 cycles.
• Admission fields: application type and status,
quality measures, enrollment indicator
• Financial aid fields: need, gift assistance, other
awards
• Demographic fields: ethnicity, gender, state of
residence
Outcomes of Modeling
• Identifies student characteristics that are
important in predicting enrollment.
• Pinpoints opportunities to use aid resources
thoughtfully and effectively to achieve
enrollment and fiscal goals, and to support
institutional values.
• Makes clear the consequences that would
result from changes in awarding policies.
Enrollment Probability
General Rule: The probability of enrolling is a
function of individual student characteristics,
including financial need, and the total amount
of grant assistance offered.
You can respond to this information through
strategic financial aid/pricing policies (tuition
discounting) …but should you?
Role of Financial Aid
“Financial aid packaging has become a
sophisticated process driven by complex
models designed to optimize the use of
financial aid resources to achieve a
complex mix of institutional objectives.”
McPherson & Schapiro
Financial Aid Policy Issues
• Focus may shift from concern for meeting
students’ financial needs to concern for
meeting enrollment and net revenue “needs”
of the institution.
• What are the implications for our values and
institutional missions, our sense of fairness
and students’ perceptions of our practices?
Competing Priorities
VALUES
If more funds are directed at middle- and highincome students, low-income students may end up
with more unmet need or self-help.
REVENUE
To focus solely on equity could quickly deplete
resources and therefore be fiscally inefficient.
BALANCE
Focusing on the efficient use of funds may
increase the opportunities for the use of aid funds
in the pursuit of equity.
Strategic Use of Financial Aid
• If there aren’t enough students bringing
tuition dollars to campus, there will be
inadequate resources for delivering a
quality education and inadequate resources
for need-based financial aid.
Strategic Use of Financial Aid
• Strategic:
“Of great importance within an integrated
whole or to a planned effect.”
According to Webster
• Strategic use of aid provides a way to capture
the necessary revenue to preserve educational
quality while offering as many students as
possible a net price they find affordable.
What is your mission?
What are your target groups?
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Underrepresented populations
Academically gifted
In-state/out-of-state
Special majors (engineering, nursing)
On campus vs. off campus
Special talents (musicians, athletes)
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Policy Alternatives
• Need-based approach
• Non-need-based aid
• merit scholarships
• Differential packaging
• merit within need
• preferential loans
• Gapping
• Admit/deny
• Need-aware admissions
Strategic Use of Financial Aid
What are the trade-offs of various policies?
Each institution, according to its mission &
values, must determine who is helped & who
is hurt, while keeping an eye on the target:
Offering a rewarding educational
experience to current students while
sustaining the ability to continue to offer
such an education in the future.
Strategic Use of Financial Aid
Resulting aid policies should:
• Be congruent with mission & values
• Optimize enrollment of desired mix and
number of students
• Encourage retention & degree completion
• Blend principles of meeting need with
awareness of market realities
• Seek to balance ideal with practical
Ingredients for Successful
Decision-Making
Data and information resulting from modeling
+ Lessons learned from experienced practitioners
+ Intuition
+ Institutional context and values
= Well-founded and informed policy decisions
Defining “Success”
• Short-term view:
– Enrolling the right number, quality and mix of
students at the “right” price
• Long-term view:
– Measuring success by retention and graduation
rates. Unless admitted students persist to degree
completion, efforts toward access, equity and
fiscal controls are wasted.
Conclusions
• Business as usual will not continue to work for
most institutions.
• Without careful analysis of data, any change in
policy or practice is equally likely to succeed
or fail.
• The stakes are high enough that no institution
should “fly blind,” especially since risk can be
minimized through effective data analysis and
modeling.
Contact Information
Jim Slattery
The College Board
 781-890-9153
 [email protected]