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?

• Were there shifts in the socio-economic diversity of the school community? 

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

If you're not tracking or keeping stats such as this over time, observations and even pedestrian analysis such as this help underscore the value of doing so and the value of using tools like SSS and StatsOnline to keep on top of these critical trends and planning realities.