In financial aid policy, among the questions that cause the most angst are those related to home value and home equity. The reality is that the housing market has been in such a state of flux from town to town, block to block, and family to family in the past couple of years, it's difficult to establish a rule of thumb that applies to everyone. Families on the same block can have vastly different home values, vastly different abilities to tap into it, and vastly different reasons for wanting (or not) to do so. So, what are some of the key considerations for deciding how you should treat home equity as you review financial aid cases?

Do we expect a family to sell its house? For better or worse, access to home equity has long been used by families as a means to fund everything from retirement to a new house to a new sofa. If a family has home equity, recognizing, at a minimum, the potential to access some of it to help supplement income is important. This doesn't mean selling the house but it could mean that a family may be able to help pay some of its costs with its some of its equity rather than with (or in addition to) some of its income.

What if the family can't access its equity? SSS only uses the amount of home equity up to three times the family's income. If you don't want to use home equity in the assessment for a family, you can remove it from the calculations and recalculate the results. In the student's "Professional Judgment" section of your Comp*Assist Online account, simply select the setting "Remove Home Equity from Calculation" and change it to "Yes." Doing so will allow you to recalculate the SSS results without regard to the equity they report.

How can I trust the market value a family reports? A wise man once told me, "No one knows how much their house is worth until they sell it." Anybody can make a bad guess about their home's value or give you a tax-assessed value different, potentially, from market value. If you want an alternate estimate (or if the family simply doesn't provide one), there are some tools you can use to get other figures against which to compare what the familyreports. Try www.zillow.com and the home value estimator at the www.eloan.com website for some comparison points (but how can you trust them, too?).

What is the HIM that SSS provides? You can use the SSS-provided Housing Index Multiplier (HIM) as well to get another estimate of current home value. This projects current value based on year of purchase and purchase price. It applies an index of how much that home has appreciated since it was purchased based on national housing value trends. As such, it may be less reliable than something like the zillow or eloan tools, which base estimates on local and recently comparable sales, but it's more reliable than an arbitrary estimate based on nothing.

How much impact does the equity actually make on the family contribution? Depends on how much equity there is but, generally it does not weigh inordinately in the determination of ability to contribute. The SSS formula recognizes that assets, like home equity should be primarily protected for future use, such as retirement or emergencies, so significant protection allowances against home equity are given.

Here's a simple example of the relative impact home equity has on parent contribution:

• Two parents, both at age 44, earn $50,000 each and report zero income from their side business. They have two children and no net worth. Their parental contribution (PC) is about $9,040.
• You discover that they actually have $50,000 in home equity (and no other assets). Their PC goes up by $78. This is equivalent to 0.16 percent of the amount of equity. Further, this extra $78 represents only 0.86 percent of the new contribution. But if you discovered $50,000 in business write-offs to add back to income, their PC goes up by about $14,850.
• Of course, as home equity increases, it matters more, but the impact on the bottom line is still relatively cushioned by the protection allowances for assets. If our sample family has $100,000 of home equity (and no other assets), the initial PC would go up $1,085 (or 1.09 percent of the equity, but now about 10.7 percent of their new PC). This is where significant change in EFC begins to emerge for an individual family, but still represents a small fraction of the amount of equity to "convert."

In fact, this sample family needs about $44,500 in home equity before the "income-only" PC moves at all. Among PFS filers in the 2007-08 year, the median home equity reported was $45,000, meaning that half of all filers reported less home equity than the amount that seems to kick in as minimally impacting their contribution analysis.

While reviewing home equity for families is important, resist the urge to get it EXACTLY right every time. Home values are hard to pinpoint, even under the best economic conditions, and the changes in what you might find versus what the family reports may not yield much difference in the end for most families. The impact of a "found" $50,000 in equity can be much less than adjusting income or allowances by just an extra $1,000 for a typical family. When dealing with home equity issues, be sure to keep these considerations in mind for a balanced and sensible approach.

I’m sad that the holiday season is over because I really love the spirit of the gift exchange; not just of presents — but of time, stories, and nourishment (spiritual and, of course, gastronomical).  To me, it honors what we love about our loved ones, it symbolizes what it means to sacrifice something to make another happy, and it signals the appreciation we feel to be part of a family that helps make us who we are.

This is also the ‘big picture’ purpose of the financial aid season.  Financial aid investment is a gift that schools (and others) give in order to help families and the school achieve mutual dreams, building a family community that has multiple talents, making the whole greater than the sum of its parts.  Now that the financial aid season is fully upon us, how do we make sure that we have what we need to make that sacrifice and investment of time, tears, and money really pay off?

To invigorate this spirit of exchange and investment in community-building, SSS By NAIS staff conducted six two-day financial aid training workshops, connecting over 400 financial aid professionals around the country with each other to learn new skills and exchange ideas on how to solve common challenges.  One of the discussions held in each of the six locations was “What Does It Take To Make a Good Financial Aid Decision?”  The responses of the attendees fell into three categories:

1. Good Information
    a. Clear sense of school culture/mission:  what is valued and what isn’t
    b. Clarity of purpose of the financial aid program and its tie to school mission
    c.  Forms and documentation from families that is timely, sufficient, accurate, clear, and trustworthy (PFS, 1040, W-2 statements, etc.)
    d. Clear communication channels between the school and families that promote trust and openness in the process
    e. Clear picture of family’s financial and household situation as it relates to ability to pay tuition
    f.  Reliable data about the school’s financial aid trends that illuminate whether the school is on the path it wants to be on
    g. Understanding demographic realities/projections and how they relate to the school’s affordability for families
    h. A clear sense of the total demand for financial aid from the entire applicant pool and how to prioritize limited funding

2. Good Funding
    a. Aid budgets that allow meeting 100% of demonstrated need
    b. Aid budgets that encompass non-tuition costs
    c. Awareness of financing alternatives beyond what the school can provide
    d. Ability to assess how having too little funding affects school culture, enrollment, or both
    e. Ability to assess how having adequate funding improves school culture, enrollment, or both

3. Good Support
    a. Resources (tools, software, people, training, time) to help make the rough patches smoother
    b. Clear and comprehensive policies and procedures for administering aid dollars
    c. Educated and committed financial aid committee to share decision-making and/or workload
    d. Head and board leadership that sets and honors clarity in:
            i. Mission and purpose of financial aid program investment
           ii. Policy and priority guidelines
          iii. Lines of authority and decision-making
          iv. Financial aid budget-setting processes
          v. Assessing whether the goals of the financial aid investment are being met
                    1. If so, plan for sustaining or growing
                    2. If not, plan for rectifying where it falls short
    e. Discipline to remain fair and equitable in the face of sensitive, difficult situations
    f. Faculty and staff that understands the value of financial aid and respects confidentiality protocols
    g. A network of colleagues who can be objective in helping you find solutions to difficult challenges

The list could go on.  But it highlights that the best financial aid decisions come when you’re equipped with good information for determining how to allocate scarce funding, with good funding that enables you to operate along an intended path, and with the good support of people and processes needed to guide your work to the best possible outcome. 

Use the outline above as a sort of checklist for where you think you do — or do not — have good information, good funding, and/or good support.  If you’re lacking in any areas, have a conversation about what you need in order to address how that deficiency impacts your ability to meet the goals of the financial aid program and, by extension, the mission of the school.

When these things are aligned in proper balance, the investment in building community and making dreams happen that we value so much in our schools and our lives will be more readily achieved.

Recently, on the Financial Aid listserve,  there was a conversation about identifying “middle class.”  It was a surprisingly brief exchange.  I think, in part, that is because defining “middle class” is a difficult exercise, and because it is steeped in subjectivity and difference of opinion.  Even the Census Bureau doesn’t define it. 

So, how should you define it?  For starters, grab some data:

1. NAIS Demographics Center.  NAIS members and SSS subscribers can access data (for free) from the Demographic Center to see a snapshot of median income of households in a city, state, ZIP code, etc.  Using the Detailed Report, for example, you can find median household incomes easily and see them compared to the national median ($54,180 for 2009).

2. US Census Bureau Income Data.  Perhaps the most objective way to define it is by putting all the households into equal quintiles.  The range of the incomes of the households in the middle third of that distribution is what we call “the statistical middle class.”  These are the people truly in the middle of the income spectrum.  The US Census Bureau does this in a definitive and useful way in its Historical Income Tables.  These data show that the middle-income range for American families in 2008 was $49,326 to $75,000.

3. Ask your families. If you believe that your community is different from the statistical norm, ask the families in your school into what ranges their incomes fall.  Use a parent satisfaction survey every few years to gather income and other demographic information about the respondents.  Identify the middle income range that you want to gauge, and include that as an income choice in a section on family characteristics.  Knowing how many families identify themselves in that range, you’ll have another measure to consider.

The perception of “middle class” is localized, and often personal, making a universal definition elusive.  Independent schools tend to put the middle class somewhere within $120,000-$220,000 range (sometimes the low end is lower, sometimes the high end is higher).  However, any statistical view (of even the highest-cost cities) reveals that families in this range are not middle income.  Yet, it might be true that families in that range sit in the middle of the distribution within a particular school and when surrounded by wealthier families, they do not feel as upper-income as they really are (what we call “the emotional middle class”).  A key question then emerges:  how relative to the population-at-large (statistical), or how relative to the families within your school community (emotional) do you make the issue?

Once you identify your middle income/middle class range, don’t stop there.  Go further to probe your affordability posture more broadly.  Here are some key questions to get you thinking on that path:

– What are the 5- and 10-year trends on your tuition growth and what drives them?
– How much income does a family need to earn in order to pay one tuition at your school?
– How many families in your vicinity earn that much money?
– Is that income in the range of what you consider “middle income”?
– Do those families value the education that you provide to students?

Often, the issue isn’t really about “middle class” but about broader concerns of affordability (i.e., trends in sticker price compared to income change) and family perceptions of value, wherever they are on the income scale.  How families perceive the school’s value is not only about class and income.  It’s really about what they believe the school is about and whether they want to literally ‘buy in.’ Understand what those families value and what they perceive, or know about their options in schooling, not just what makes them “middle class” by definition.

During the financial aid season, we often hear from families and some school administrators about the complexity of financial aid applications.  “Why is the form so complicated?  It’s more intrusive than completing tax forms.  Is all that really necessary?”

Indeed, this is a common feeling whenever people are asked to provide personal financial information in certain filing processes, such as for mortgages, tax returns, and financial aid.  We can blame it on credit cards.  As credit card applications have been pretty much reduced to “How much do you earn?” (and look where that's gotten us), the expectation for shorter applications for everything is growing.  As we consider simplifying the application, what are some of the key issues at play?  Why is simplification not so simple?

First and foremost, the application has to be designed to help institutions gather the right information to make the best eligibility decision.  Financial aid budgets are too large and the implications of poor stewardship in financial aid management are too great to sacrifice needed information to do the job right in favor of a simplified process. 

It is fair to ask organizations to simplify applications that include unnecessary questions or questions designed for a purpose other than determining need.  In examining the Parents’ Financial Statement (PFS), we ask schools (for whose benefit the form is designed, remember) and consult with our advisory task force of practitioners and school leaders, to identify such useless information.  In my 10-plus years of assessing this issue at NAIS, there has not been clear consensus on what questions need to be eliminated to simplify the form.  Most believe that the existing questions are the right ones to ask.

In fact, we usually get requests asking for more information on the PFS.  For example, each year we consider a few requests to add “race or ethnicity” on the PFS because it would be a convenient way for schools to track it.  While I agree that this could yield useful information, it has nothing to do with determining need and the application itself shouldn’t lead families or schools to think that it does.  Of course, the information that is gathered can be, and should be, used for other research-based purposes, but ultimately it is not designed to be a research tool.

I think it’s common to equate “long” with “complicated.”  Just because a form has a lot of questions doesn’t mean it’s difficult to complete, just possibly more time consuming than if it had fewer questions.  Why is it so long?  Over the years, the PFS has evolved into a longer document based on schools’ collective requests to collect information that they wanted, even if it were not used in the SSS methodology (such as insurance policies and where other children were going to school).

Creating a simpler form would require eliminating questions that schools themselves have asked SSS to collect. If the questions are the right ones and if only the right ones are asked, then it really doesn’t matter if it’s one question or one hundred, if those giving out the dollars are satisfied that we’ve gotten it right. This challenge shouldn’t solely center as much around simplifying the form by reducing the number of questions.  That approach could lead to a less effective application. 

So how to make it simpler for families without sacrificing what schools need to gather?  We think this can be done with a focus on using web technology to take the questions we have and dynamically rearrange them based on family profiles or answers to other questions, creating an “EZ version” on the fly.

We've created the PFS Online with adaptive components, such as asking an applicant if he or she owns a home.  If the applicant says no, then  questions related to home value, equity, etc. will not appear. The same is true regarding divorced/separated parents, and farm or business owners, making the form as long or as short as is necessary for each family.  Some other ideas in the works for expanding this “family-based” approach include linking to other financial sources (like IRS or tax software imports), and pre-populating entries to make renewal applications easier. 
   
In financial aid assessment, a shorter form isn’t necessarily a better one. But a better method of getting more people to provide necessary information easily and quickly is a worthy goal that we continually strive to meet.  The primary consideration, though, must always be that the form best serve schools’ needs for decision making, not parents’ need for convenience.  Finding the right balance between the two remains an ongoing process (challenge?).

What do you think we can do to simplify the application process for families?  What have you done at your school to make it easier for families to apply for financial aid?

Just inside the main entrance to Sheridan School in Washington, DC, there is a waiting area near the reception desk.  On the wall of the area is a display that includes the photos of each student and teacher at the school.  Along with the photos are four words that summarize core values the school espouses:  caring, challenging, collaborative, connected.  I love this because I think these four words are exactly what all schools should exemplify every day.  Without caring, there can be no cultivation for growth (think about plants...if you don't care for them, they'll shrivel-much to my surprise, even cacti are not indestructible).  Without challenge, there can be no achievement of excellence (think mountain climbing...you're at your best when you've done something you thought you couldn't do!).  Without collaboration, there can be no realization of improvement (you cannot get better at anything without help from others).  And without connections, there can be no awareness of how our own actions affect others, and vice versa, for better or worse (no one, no school exists in a vacuum...connecting to each other is vital to learning how to be better, how to help others be better).

As we embark upon the beginning of this year's financial aid application season, these 4 C's will continually manifest themselves in our collective daily realities.  The degree to which our individual financial aid strategies, procedures, and communications reflect caring, challenge, collaboration, and connectedness, will dictate how successful we will be as a community in balancing the affordability concerns of parents with the fiscal prudence required by schools' budgets.

How might these values become apparent in the financial aid process?

Caring:  This is what the financial aid process is centrally about: caring deeply about helping families attain the best education for their children, even if they cannot afford the price.  In this particular year, like the last one or two, it also means caring about the difficult situations that the limping economy has forced many families into, limiting choices and making sacrifices, new and old, to focus scarce resources on what's truly most important.  It also means that the community of aid professionals must care for each other as a key support network to brace for and manage stress through another difficult aid season.

Challenge:   Challenge families to understand the degree to which your own school's resources are scarcer, while the demand for them grows.  This means that families must meet the challenge to cooperate in the application process with full disclosure and deadline-meeting discipline to demonstrate their neediness appropriately and accurately.  It means challenging families to accept that financial aid is not intended to make paying tuition easy, so much as to make it easier.  It means that each school must continue to rise to the challenge of committing as much as it can to its policies and procedures to ensure professionalism in decision-making.  Lastly, it may also mean challenging the community-at-large through fund-raising and other efforts to help support the financial aid budget in extended ways.

Collaboration:  The financial aid process itself is a network of people and systems that require ongoing collaborations, as various players and partners offer resources, support, guidance, and information to make the right budget and awarding decisions.  Parents, school administrators, school board members, financial aid committees, and  SSS By NAIS staff all play a variety of roles that begin with financial aid budgeting and tuition setting, move through admission/enrollment processes, continue along financial aid need analysis and assessment, carry on to awarding of aid and its acceptance/denial by parents, and end (in most cases) in the contract signing stage.  Strengthening the collaborative nature of this process is critical, so that each is aware of  others' roles and responsibilities in the process and how they must work in a spirit of partnership to effect the best possible outcome.

Connectedness:  It's not just that the variety of players must collaborate to provide what all others need.  It also means that each player must understand the impact that his or her decisions, motivations, limitations, and strengths will have on the others.  If an application is filed late, results are not delivered in a timely way, a financial aid decision gets delayed, and a family will not have the time and information needed to make the best decision it can about its ability to enroll.  Ripple effects are real and meaningful in financial aid work, for better or worse.

In my 10 years of working with SSS By NAIS for schools and families on the financial aid process, I have not seen the spirit of the 4 C's of Excellence embodied in greater ways than during our annual series of SSS Financial Aid Workshops.  These professional development events held for school administrators use a combination of case study reviews that challenge attendees to learn new approaches, encourage small group discussions that foster collaboration in decision making, and create opportunities for sharing solutions to common problems and tough issues that reflect connectedness,  yielding mutual growth.  All of this reflects the central core of such excellence:  caring.  These workshops illuminate brightly that the leaders in this work of access and affordability care deeply about quality stewardship of school resources, to exercise and provide the care that families need to help achieve their need for a high-quality education for their children.  Ultimately, this means that these workshops show us that the extreme care needed to deliver the promise of each school's individual mission lies within everyone committed to this work.

As the new financial aid season begins in this time of extended economic hardship for families and schools, and as NAIS unveils a new set of services and products to strengthen how the SSS By NAIS process supports you, I guarantee that we are committed more than ever to fostering and building the care, challenge, collaboration, and connectedness we all need to be successful in difficult-and in easy-times.

Last weekend, I learned  that if you're not Tiger Woods or Jack Nicklaus and you want to play golf at St. Andrew's, the famous Scottish destination where golf is said to have been invented, you have to show proof that your handicap is 24 or better.  Among other things, this basically means they want data that suggests you're not coming there to tear up the course or take a fortnight to get through it.  This is not only a way to weed out more serious players from those who really just want to say they've been to Golf Mecca.  It's an interesting insight into one of the many ways that organizations use data to determine who's in and who's out, whom they're trying to serve and whom they're not, since they can't meet the full demand for access for all those who are willing to pay for the privilege.

Sound familiar?  Of course, independent schools are no different in establishing tests, interviews, and other methods to create some measure of a student's "readiness" to benefit from the education they have to offer.  It's equally important to measure and constantly monitor data and information about the conditions and trends that might affect how the school is able to achieve the kind of demand it wants in order to stay fully enrolled.  According to Donna Orem, vice president for strategic initiatives at NAIS, doing even a little research "is like going on a journey:  if you don't take the time to sketch out the map, you might end up somewhere you don't want to be."

She encourages us that this research can also help schools notice strange imbalances in population, as a result of demographic shifts and, if balance is what you seek, to plan accordingly.  For example, if income demographics have changed, and you notice families are growing most at the $200K+ level, and they are more likely to choose a high-quality public school option instead, what will that say about your strategies to fill seats among lower- or middle-income families?  Similarly, getting a snapshot of changes in gender/racial/ethnic balance, proportions of families with school-age children by income, and the number of families choosing private or public schools, can help you plot mid- and long-term actions for rethinking your school's posture in extending access and affordability that are data-informed, not just anecdotal or based solely on the experience of today.

Here's a simple look at what this might mean.  Let's look at the Richmond, Virginia and Los Angeles, California metropolitan areas, using data from the NAIS Demographics Center.  Even a cursory view of just a few of the variables provided in the Detailed Reports show very different realities that the next five years could bring for schools in these cities.

Making plans for growth, adjusting for competition, targeting families at certain income levels, and appealing to the non-White population require decidedly different approaches  based on where you are and what's happening around you.  Just a quick read yields a few critical considerations for schools:

1.       In Richmond, population growth among school-age children is expected to be relatively good, with a projected preference for private school enrollment greater than for public schools.  Not so in Los Angeles, where a decline in the age group could signal an increased competitive environment for students, especially given the slightly larger projected  increase in public school enrollment.

2.       In both locales, among all households with children, those with the youngest children and earning $125,000 to $150,000 in income are the fastest growing.  If you're running a pre-school program, this bodes well in the short-term.  If you're running a high school, it'll take time to see that ripple effect and you have to work to keep those families interested in the value of long-term investment in private school. 

3.       Also, it's interesting to note that for Richmond, projected growth in median and average incomes are about four percentage points lower than the projections for L.A.  Families there might be less able to keep pace with tuition increases that are greater than inflation than families in L.A. may be.  You'll have to look at your tuition increases for the past few years.  If they continue at that rate, think about whether they will outpace the predicted change in family incomes.

I like to use data as one input when asking questions about the environment around me.  Think about the questions you'd like to know the answers to regarding your enrollment and affordability positioning and use easily accessible demographic data to begin a conversation about them.  Here's a set of questions to get you started:

About school-age population trending (among the most important factors in affecting independent school enrollment):  How is the school-age population predicted to change in the next few years?  How does that compare to the past decade?  What does that suggest about where we might experience successes and challenges in filling seats at particularly grades or divisions?  How is the choice of private versus public enrollment changing?  What do we do to reinforce or ensure that families increasingly choose our school over someone else's?

About gender, race and ethnicity trending: How are the gender and race/ethnicity balances shifting, if at all? How does that compare to the past decade? How is growth or stability in the school-age population being affected by the change in ethnic and racial diversity?  Does our programmatic, staff, and/or student diversity need to change to reflect this shifting balance to improve or hold enrollment?

About income distribution trending:  How are income patterns changing? Does the trend in income growth match, exceed, or lag behind our projected tuition change?  How does that differ for different income ranges?  What does it suggest about families' ability to meet our changing price tag?  Do we expect that enough full-paying families will be part of our pool of prospects?  Does our approach to or funding for financial aid programs need to change to improve our affordability?

If you subscribed to SSS this year by July 31, you'll get a metropolitan area report based on your school's location that will provide data to help address questions like these and many more (NAIS members can also access the Demographics Center at www.nais.org/go/demographics). Study the data carefully, relate what you see to financial aid and enrollment strategies currently in place to see what adjustments might be necessary moving forward.  Use these snapshots to step out of what might be traditional comfort zones. Consider new methods to reach new populations or extend new strategies  to increase affordability.  Examine how providing financial aid does or does not mesh with your recruitment needs as average income and preferences for how to spend it change over time.

I'd like to hear about the steps you've taken to study these kinds of data, what you've learned from it, and how you may have adapted or adopted strategies for financial aid or enrollment as a result.  Share your thoughts and experiences by adding a comment below.

First one to respond should treat him/herself to a round of golf at St. Andrews.

In the July 17 Washington Post, there was an article that left me flabbergasted.  It was about how some families in the Washington, DC, area are adjusting to the new economic realities by cutting back on getting other people to do things for them that they could do themselves.  And they're not talking about do-it-yourself projects that seem so easy on HGTV, like replacing your fireplace mantle.  They're talking about things like mopping the floor and getting your kids to mow the lawn instead of paying for a landscaping service.  One guy even confessed that he now wears his shirts twice before he takes his them to the dry-cleaner.  He used to only wear them once??!! And then off to the cleaners??  How wasteful...

One particular forecast made in the article is that even people who don't need to cut back have been and that these habits may very well remain ensconced even if the Dow goes back over 12,000.  We'll see about that, but it seems to suggest that Americans of all socio-economic stripes have settled into a new way of living and spending, as if we've all hit some sort of "cosmic reset" button as a result of the economic crisis. 

Naturally, this got me thinking about the ways the economic turmoil of the past 18 months has affected the new reality of managing financial aid programs and the inherent challenges and opportunities.  Many signs point to the belief that this year and last were not anomalies (except in the steepness of their trajectories), but a reset on how things will be in the future. 

You should be (and are, I'm sure) thinking about this, too. If you're reading this, I presume that your school's still open and the onslaught of the latest financial aid season is past you.  Use the relative calm remaining this summer to reflect on your personal, your school's, and your parent community's mindsets about how life will be different:  what are the "cosmic resets" that you, your school, and your parent community must make and adjust to the new baseline on budgeting, spending, value, and priorities.  Think about how to set up a system to react and plan around this new baseline of attitudes about spending, choices, value, need vs. want, etc.   Think about and study things such as:

The new SSS methodology...many agreed with the principle while lamenting the timing.  How much of a difference did the new methodology make in your ability to fund students to keep full enrollment?  What did you see as the difference between contributions for 2009 compared to 2008?  If you weren't able to meet the "new need," how can you move a bit closer to that in the upcoming award cycle?

Effects of the economy...many feared that parents would make different choices about the value of a private school when the times and circumstances require penny-pinching in new ways.  In the words of one director of financial aid in a conversation with me a couple of weeks ago, "Financial aid saved my enrollment for next year!"  Was this true for you as well?  Did you have to talk about and use financial aid differently in order to maintain a strong enrollment posture?  Did this mean giving more need-based aid than originally budgeted?  Or did this mean thinking differently about discounts and merit aid to keep those who might otherwise be able to pay  but who had reset their ideas of value and sacrifice and put your school's tuition on the chopping block?

Job loss...many feared the spike in aid requests as the economy forced lay-offs and shutdowns.  Did you experience this more or less than you anticipated?  Did you have sufficient processes and policies in place to handle these situations with an effective "case-by-case" sensitivity balanced with a standard approach to ensure equitable and objective treatment of these tough situations?  Did you create one-time, conditional awards requiring status updates?  Did you revise SSS results using family projections of future income?

Budgeting needs and sufficiency...many feared that their financial aid budget wouldn't be sufficient to meet the new need of current full-paying families and the new need that the economy would bring for more requests for aid from prospective students as well.  Exacerbating this fear was the reality that market-battered endowments (and their returns) would present a more daunting challenge to boosting aid budgets than in recent years past.

For most schools, the reality is that the financial aid budget is rarely sufficient in the best of times.  So, to some extent, the aphorism "you can't miss what you never had" in this context means that stretching limited dollars among an expanding pool of requestors is something that schools have had a great deal of practice with for decades.  Did you experience a shortfall in financial aid adequacy more or less than what was typical?  If more inadequate, how did that affect yield and other enrollment patterns?  How much more aid would you have needed to hit typical or optimal yield?

So, you survived through all these fears, anxieties, and issues.  How did you do that?  How did you address these challenges?  Ask yourself these questions, recount the stories about what you experienced, study your financial aid facts and figures, and use the comment section below and other forums to share your experiences, challenges, and solutions with your colleagues to help us all know how you did it...and how you might do it moving forward, now that the "cosmic reset" button has been pressed.

When Priorities Access and Affordability Compete:

Who Is Financial Aid For? Whom Does Financial Aid Best Serve?

Over the past few years, a major noteworthy trend I see among schools is the shift from using financial aid for access, to using it for affordability.  As tuition rises beyond income growth,  it is clear that financial aid is increasingly for everybody (or "mostbody, " if I may coin a term).  Given this reality, more and more schools are pressed to give more of their limited aid dollars to current, formerly full-paying families that the school didn't think  it would have to fund. 

With the compounded pressure brought on by the current economic crisis, this shift of aid has meant that lower-need prospective families become funding priorities in the limited budget for new students, because they'd be "less expensive" to enroll and support long term (and thereby garnering higher net tuition revenue for the school than a high-need student would bring).  As a result, aid available for high-need new students constricts because aid for low-need current students expands to an unforeseen degree.  So, in a bizarre twist of reality, the families that need financial aid the most - those for whom one would intuitively think financial aid is intended - are increasingly less likely to receive it, especially in tough economic times for school budgets.

In presentations I've delivered over the past year or two and in a chapter I wrote for the NAIS book Affordability and Demand, I illustrate the forces at play through comparing tuition change rates and income change rates over a five-year timeframe.   Consider this:  between 2000 and 2005, median kindergarten tuition rose seven times faster than the average income of families in the lowest income-earning quintile.  This tuition squeeze is more than twice as painful as the more heralded, publicly lamented "middle income squeeze" that people tend to focus on. 

The middle income-earning quintile, during the same five-year period, has seen kindergarten tuition rise about 3 times faster than their average income.  Sure, the middle income squeeze is real, but no more real than the squeeze on any other income group.  Because tuition increases have outpaced income increases to a large degree, even higher-income families are now applying and qualifying for aid in greater numbers.  Financial aid budgeting is not accounting for this group of the "newly needy," shifting limited aid dollars to low need current families, and increasingly away from high-need families that most need access to the type of education independent schools provide.

As an alumnus of the A Better Chance program from Camden, NJ, who attended Moorestown Friends with significant financial aid (through its Camden Scholars program), I find it very troubling to hear how high-need students become less and less likely to get the aid they need, especially in lower school grades.  Does this mean that students like me today are less likely to be able to attend our schools than they were 25 years ago?  That's an unfortunate, increasing possibility.  A true snapshot to consider:  at one school in the Washington, DC, area, in a recent academic year, 41 percent of its financial-aid recipients had incomes in the highest US family income quintile, while only 10 percent of its financial-aid recipients had incomes in the lowest two US family income quintiles.   More affordable for higher income families, less accessible to low income families. 

Throughout the country, organizations and agencies that exist to help low-income families access and thrive in independent schools (from Rainier Scholars in Seattle to The Independent School Alliance for Minority Affairs in Los Angeles to Early Steps in New York to The Black Student Fund in Washington, DC, and all points in between) are reporting increasing difficulty in securing the admissions and financial aid support for high-need families, as more and more schools explain that they've "run out" of financial aid dollars due to unforeseen increased spending on current families newly needing aid.  The ten $3,000 grants given to current families who didn't have the need last year means that two families needing $15,000 to gain access will be more likely to be wait-listed for aid, or perhaps even denied admission because of the lack of funding needed to make an offer that has a chance of being accepted.

This, then, is the pressure on constrained resources:  how do you best accommodate addressing need across the board, when the mission of economic diversity and access competes with the market pressures of fiscal conservatism?  How do you fund that in a time when endowment values plummet and the after-effects of the weak economy are unknown (at best) or devastating (at worst)?  Bringing these trends and dilemmas to school leaders' attention is vitally important.  The difficulty for those leaders, though, is that if a school has a forced choice, it will lean toward funding more low-need families, especially in budget-tight times, even as it agonizes over what that means philosophically, or culturally, in terms of broadened economic diversity or broadened opportunity to low-income kids.  As an industry, all schools need to plan their futures so that it doesn't become a forced choice.  Otherwise, we risk allowing the cycles to repeat themselves, particularly for schools that are never under-enrolled and aren't forced to address this dilemma.

This is the Million Dollar (or more) Question being asked all over the country as I travel coast-to-coast.  The easy answer is: "It goes up."  But there's more nuance in the corollary questions of "By how much?," "For whom?," and "What if the school can't afford it?"  Anyone who knows me knows I like to use data to paint pictures that can help answer these and other questions, so here goes...

Does recession have an impact on people asking for financial aid?  Yes.  The first set of data probed the total number of applications for financial aid filed with the SSS program.  Over the period 1985-86 to 2006-07, the average annual increase in applications filed (as reported to schools through NAIS's annual surveys) was 5.3 percent.  In the mid-80's, year-to-year increases tended to be greater than that.  Throughout the mid- to late-90's, application increases were typically far lower than that.  There were three years where application volume increase over the previous year spiked well outside of the norms: 1990-91 (PFS applications rose 13.7 percent from the year before), 1991-92 (up 10.9 percent), and 2001-02 (up 10.2 percent).  In the past 15+ years, these were, in fact, the only years where double-digit increases in applications occurred.  These coincide with the recessionary periods reflected in the chart of annual change in gross domestic product (GDP) illustrated in the NAIS book  Affordability and Demand  in a chapter written by Scott Looney, head of Hawken School (Ohio).  So, when the economy dipped, spikes in aid applications were felt in the following year.

Did schools offer more financial aid in those years?  Yes, based on a look at StatsOnline figures for the average spent in schools' financial aid budgets.  These data are a little harder to work with to make a definitive assessment since they are not based on studying a core sample of schools.  StatsOnline displays data reported by all schools in the survey year.  From year-to-year, some of the reason for the resulting patterns is the fact that different schools are coming in and out of the sample.  Nevertheless, the general pattern mirrors that shown in the changing applicant pool (which is also not based on a core sample of schools).  The early 90's commonly saw double-digit increases in the average total financial aid spending per school.  Growth in financial aid throughout the mid and late 90's flattened out to around 6 percent per year.  In 2002-03, however, there was a 13.2 percent jump in average total financial aid spending.

Did more students receive financial aid in those years?  A little, based on StatsOnline  data for change in the average number of financial aid recipients at schools.  In each year going back to 1985-86 (with one exception, 2004-05), the percentage increase in the number of students receiving financial aid trailed the  percentage increase in the financial aid dollars granted.  As such, the number of students receiving aid has not grown at the same rate as the money spent.  Average annual change in spending was more than 7 percent, while average change in number of recipients was under 2 percent.  This is not an earth-shattering finding.  But it suggests, to some degree, that perhaps schools were redirecting their spending to help more current families stay enrolled when facing financial difficulty.  Between keeping up with tuition increases and more applications for newly needy families in recessionary times, giving more aid to a smaller or stable pool of aid recipients was perhaps more effective for retention.  Even in those years where applications and dollars spent spiked, the average number of students receiving financial aid held relatively steady. This is exactly what appears to have happened in 2002-03, when the average aid budget jumped 13.2 percent but the number of average aid recipients did not change at all. When the average number of recipients spiked most, 2004-05 (at 9.6 percent), the average financial aid budget increased below the 20-year average (5.5 vs 7.6, respectively).

What does all this mean in terms of planning budgets in recessionary periods?  Some of the obvious:  expect more applications from families that will probably qualify for aid and, as a result, expect that an increase in aid funding will be necessary.  Seems like a boost in the rate of increase in aid budgets of about 1.5 to 2 times what's typical may be a good rule of thumb to anticipate.

But be careful and purposeful about where those extra dollars are going to end up, though.  Striking the balance between supporting returning students and new students when both will be asking for more help will be critical.  Given funding limitations, the focus on increasing spending on returning families will put a crimp on the ability to invest in a socio-economically diverse pool of incoming students and/or increase pressure to enroll more full-paying new students, at a time when economic pressures change full-paying new families' ability or willingness to pay full price.

To predict or estimate how possible recessionary periods might affect your school's financial aid spending, you might take a detailed look at your financial aid data from 1992 and 2002: 

• What happened to applications for financial aid, compared to other years?
• Did applications from current families increase more than usual?
• Did spending on current families increase more than normal?
• What happened to your aid budget (as a total figure and as a percent of total budget)?
• Were the adjustments sufficient to maintain or increase enrollment?

Finding answers to questions like these might help you assess how to position yourself for meeting the needs of recessionary times to come.

During recessionary economic times like these, schools face the challenge of helping families cope with the prospect or actuality of income loss more than they typically experience. Having well-considered and clear policy approaches to working with families through these situations becomes more critical than usual.  Through listserve forums, e-mail conversations, and workshops/seminars, managing this challenge in the financial aid office is a hotter and hotter topic.  So I decided to share some observations about what schools  do that reflect best practices.

When a family enrolled in your school loses a significant income resource through job loss or other reasons (commissions or bonuses gone, investment income tanked, etc.), using 2008 income data as reported in financial aid applications quickly loses its meaning and applicability.  On the Parents' Financial Statement (PFS), families do have the opportunity to project their 2009 income, but often families don't complete that portion-perhaps due to oversight, no need to anticipate change at the time, or other reasons.  Furthermore, a 2009 projection can be difficult for a family to ascertain and difficult for a school to trust.  So what to do?  Here are two things to think about:

1. Good stewardship of the school's funds dictates (in my opinion) that you do not want to give money away without some documented reflection of reality, even if it may be a wild guess.  Taking a wild guess about projected income is better than pulling a grant figure out of the air based on nothing other than goodwill.  Get parents to give you an estimate of projected income, even if it's hard for them to do.  They must have SOME idea based on the situation.  If they've already lost the job, perhaps get some written statement of severance pay, for example, if there is any.  Even just plugging in that amount as assumed 2009 income for the year will be a documented course of action.  Parents will have to figure out what steps they're going to take to find employment and earn income, for far more reasons beyond the financial aid application, so getting them to actively think about that now will only benefit them later.  They've got to start somewhere.  In any case, you can't make the best decision using no information whatsoever. 

In the absence of the family providing an income projection, the school might consider implementing a policy that would apply for all cases.  For example, you might say that the default position for a parent losing a job is to recalculate financial need using projected 2009 income at 50 percent of his or her prior year's income , assuming  he or she might be out of work for six months.  And if that default position doesn't align with the projection a family is giving you, address the situation on a case-by-case basis.

2. Providing conditional/provisional awards is the best tactic for providing financial aid for families experiencing sudden job loss and this approach is not that difficult to implement; it just requires an additional step or two of followup.  Based on whatever income projection the family can provide you (or based on a policy-driven projection of income), determine a full-year award for the parents as you might otherwise, and agree to hold the full amount for them.  But, given their situation, you might apply only half of the full year award upfront to see what they would need to pay to make it to/through the first semester.  Over the course of the next few weeks or months, the parent might find a job (at better, same, or worse income than before).  Before "releasing" the second semester aid amount, just get verification or a statement from the family regarding its employment status/income at that time.  This update could occur at least a couple of weeks or more in advance of the second-semester billing.  If the situation's the same or the projection turns out to be fairly accurate, you release the other half of the grant.  If it's better, recalculate using the new information and reserve the right to lower the second-semester grant amount as appropriate if the realized income is greater that what you based the conditional grant on (i.e., that's the condition).  If the family's situation is worse than projected, you might be able to help even more (or you tell the family that you can only afford the initial amount promised).
 
Through presentations to schools and families, we often describe the financial aid process as being a partnership between the school and the family.  In order for you to do your part to help, the family needs to buckle down and do its part to figure out job/income prospects for the year.  Again, the parents will have to do that for other reasons anyway (like figuring out how to pay the mortgage, etc).  Maybe give them a little leeway on deadlines and once they give you their assessment, try your best to make a decision as quickly as possible.  Being able to manage these situations on a case-by-case basis with some standards of information-gathering is critical.  I'd just caution you against deciding anything without some foundational baseline of income information, even if it's not highly reliable.  The reliability of the information will just have to play itself out over time, which is why offering conditional awards per semester is a reasonable approach.  And remember not to kick yourself if the actual income comes in higher than what was projected...if that happens, it's probably not a reflection of the family "gaming" the system, as much as a reflection of the worst-case scenario that didn't come to pass.  Just adjust the remaining amount of aid as appropriate.