Aristotle once said, "To give away money is an easy matter and in any man's power. But to decide to whom to give it, and how large, and when, and for what purpose and how, is neither in every man's power nor an easy matter. Hence it is that such excellence is rare, praiseworthy, and noble." Independent and other private schools have struggled with this challenge for decades. Schools have looked to third-party financial aid service providers for help managing this struggle. Nevertheless, some feel that working with a third-party provider to support such difficult decision-making is not always necessary based on the questions and concerns listed below.
Why is the methodology so complicated?
Aristotle hit the financial aid conundrum squarely on the head: The most difficult part of the determination is the amount of contribution after income, assets, and allowances have been reported. That's the heart of using an objective methodology: once you get down to, say $25,000 in effective income, how much of it could someone pay? This is where schools must be careful not to apply too much "artful" subjectivity in the name of equity and fairness.
What a service like School and Student Services By NAIS (SSS) provides is a sound, research-based rationale for using their recommendations in an objective and consistent manner. School administrators do not have to guess at which assessment rates to implement nor do they typically have the time to conduct the most appropriate, current, and relevant economic research to make even the best educated guesswork. In the SSS program, NAIS staff identify actual taxation rates (federal, state, and other) and use data from current consumer expenditure surveys as well as real estate market analyses, from trusted sources including The College Board, the Bureau of Labor Statistics, a chamber of commerce researchers association, IRS, and other agencies. This is not research that the overwhelming majority of schools want to do, nor have much time or expertise to conduct — most are too busy with other responsibilities of the admissions or business office. This way, the school's time is best spent on the areas of need analysis where they are most expert: applying school-based policies and mission to individual review.
What if the school or a parent disagrees with the third-party recommendation on family contribution?
Every year, schools offer comments regarding where they think the methodology falls short, and we discuss the recommendations in the task force to always make sure we're current and relevant. The SSS formula is a living document, so to speak, always being changed and updated in tactical and strategic ways. For example, the SSS program changed its methodology significantly in 2000-01 to reduce contributions for "middle income" families and to recast how we view home equity, based on customer feedback. And in 2008, the formula was recalibrated to more closely reflect household living expenses for the average family. Also, the process always allows schools flexibility to revise the family contribution if it is aware of information that was not provided by the family at the time of the application. The estimated family contributions are nothing more than a recommendation that most schools use as a sound starting point for fine-tuning, given case-by-case family information and school-based policy.
Much of this fine-tuning does not require excessive time to review. More extensive review is usually necessary in the relative minority of cases where the family's situation is very complex (e.g., business owners, divorced parents, etc.), in which cases more extensive review is the administrator's professional responsibility. In fact, administrative software is available that helps schools add, change, or delete records in a matter of seconds, which allows staff to focus more on applying policy and not doing math. What schools buy from third-party providers is the front-end methodology, framework, and data collection/reporting tools; synthesis time on the back end is always required to make a final decision and different schools will spend different amounts of time on this piece. Some take the recommendation without further deliberation; others manipulate the results in specific ways that take more time.
Why is the application so complex?
The applications are complex because the issues are. Every household is unique, but no one can design one application for each family. Using a form that simultaneously captures data from the simplest financial picture AND the most complicated financial picture requires a degree of complexity that is unavoidable. Using advisory groups and other means, schools continually advise third-parties on the types of questions that should be asked so that they get the best information they can use. Further, schools value a consistent method for collecting it — building equity in the process by ensuring that all families are treated in the same manner. This consistency is also helpful for families applying to more than one school and/or for more than one child since the SSS Parents' Financial Statement allows one-time application for multiple children and multiple schools. This creates ease and convenience for the family and ensures that all schools receive the same information at the same time.
Nonetheless, there are ways to make the forms simpler and the process is an ever-changing one. For example, providing flexible online options and using a redesigned form will make improvements. These steps and others are currently underway at NAIS. However, the fact remains that financial aid budgets at all schools are finite at best. Building a tool that ensures administrators and other financial stewards at the school that they're getting the most reliable and useful information requires consideration of a family's full financial picture. Anything less than that compromises the integrity of a process that is designed to gear the dollars to those who most demonstrate need. In this way, it is always better to ask for too much information than to ask for too little. One would make the same argument regarding designing one's own simplified admissions test vs. reliance upon a scientifically designed and validated and normed test designed by a professional organization: What level of professionalism and reliability does a school project with the former "home-grown" strategy?
Why is the application so costly?
Actually it's not. Providing such service comes at a cost and this cost is necessarily passed to families and schools choosing to use them. Financial aid service providers (including higher education services) typically charge only about $35 or so for a family to file an application, not really a prohibitive fee. In the case of the SSS program, this fee has increased only twice in the past five years and a fee waiver program exists to help families without the means to pay the application fee. In 2008-09, NAIS accepted over fee waivers from families worth over $300,000. As a not-for-profit organization, NAIS aims to make its SSS process as cost-effective as possible for families so that more of their dollars can be used to support tuition; likewise, fees to schools are kept to a minimum so that more of their dollars can be used to fund financial aid budgets.
How can the national trends be helpful to my school?
Trend analysis is not particularly helpful for individual assessments (although it can be useful in some ways), but it is absolutely necessary for long-term, strategic decision-making in areas like budgeting and forecasting future needs, as well as for evaluating, benchmarking, and setting financial aid goals relative to others and the national picture. A school's financial aid program and the outcomes it is designed to achieve do not exist in a vacuum. Evaluating the competitive landscape, understanding the impact of economic and demographic shifts, and harnessing the value of looking at the past to help shape the future are vital reasons why such long-term and wide-ranging analysis of local, regional, and national trends is necessary. Important questions requiring broad research include: How has the financial aid applicant pool changed over time? How will this look in the future? How does our school's progress on expanding socioeconomic diversity compare with similar schools? Are we committing more or less to financial aid programs than similar schools? Not only does this research better position the school to measure fully its effectiveness in managing aid programs, but also it can help debunk myths and stereotypes about who attends independent schools and about who receives financial aid.
The NAIS monograph, Financial Aid Research and Benchmarking, provides additional reflection on the types of data schools need to collect and analyze on both a short- and long-term basis.
How else can a third-party provider help me?
Another extremely important element where third-parties are critical is that of training. Using an in-house system leaves the practical, operational, and ethical issues around financial aid management in relative isolation. Collegiality, learning from the examples of other schools, modeling best practices NAIS espouses and its partners support, would likely suffer if schools are left to their own devices completely. Financial aid challenges are becoming more difficult, not easier, and the support and training SSS provides help make finding solutions manageable. Doing the job right and making resources available to schools in the best possible ways that embody the NAIS Principles of Good Practice for Financial Aid are the primary concerns of the SSS program.
What's the rub? Where are the imperfections?
No system, whether provided in-house or managed by an outside service, is perfect. Turnaround time, costs, and complexity, are all areas that can always be improved. With the guidance of the NAIS School Financial Aid Services Task Force, the SSS program hears directly from schools to improve the program for the benefit of schools and families.
No financial aid services provider should claim to be the ultimate arbiter of individual award determination, unless that provider, not the school, is providing the money to families. The SSS program does not determine awards — it assists schools in evaluating a family's ability to pay. Variation in school policies, funding, and professional expertise will always require additional time and review from the financial aid professional at the school in making a final award. In this way, entering a partnership with a third-party provider allows each to take advantage of its staff and resources to do what it does best. Third parties provide the research and technologies to make valid, consistent, and objective recommendations. School administrators provide local-level knowledge of families, school policy, and mission to make final award decisions.
Clearly, using an in-house method for determining financial aid is an option to consider. Some schools currently use an internal system/method — usually when they find they don't have a critical mass of applicants to handle. Nevertheless, school leaders, with support and resources from organizations like NAIS, better serve their families by examining how financial aid advances the school's mission while maintaining fairness and equity with limited funds — not on creating application processes. Through research conducted by NAIS, this is what appears to be pressing schools most — where's the financial aid money coming from? How do I get the board not to slash the aid budget? How do we meet the rising demand for aid from current families? How do we properly align families' expectations? In the current times, school leaders are not nearly as concerned about finding alternate ways to crunch numbers or manage applications as they are with the financing challenges the process exposes.
Source: www.nais.org. © 2003, National Association of Independent Schools.