As the economy struggles to recover and consumer confidence remains shaky, families all across the income spectrum are examining their own spending habits and asking questions such as “Is this worth it?,” and “How can I reduce this cost?” While families paying full tuition may agree that the value is there, more and more may be questioning what’s making it so high, and can it be lower? One oft -heard conclusion is: “If the school didn’t give out so much financial aid, my own tuition should be lower.”
A few weeks ago, a school head and I exchanged some thoughts about how he might approach the increasingly irksome attitudes that some full-pay parents are expressing about why their tuition dollars are partially subsidizing families unable to pay tuition on their own. Here are a few points we discussed that I thought might be useful for you to discuss with your leadership team and/or board, and find ways to share with parents.
The Value Proposition: How Financial Aid Investment Improves the Learning Environment
When a parent “buys into” your school community, he/she is helping to build all the things you think are important aspects of a rewarding and challenging educational experience. Tuition subsidizes everything: the cafeteria, the athletic fields, the best teachers, the computers, the library, etc. I always think it’s interesting that a parent wouldn’t question subsidizing a Spanish or Mandarin teacher’s salary if their child has only ever taken French (maybe they do?). They’re still buying into the recognition that providing multiple foreign languages is an important part of the learning experience, even if their child doesn’t “benefit” directly from each of the languages offered.
A culture inclusive of socio-economic diversity is as important to “buy into” (literally and figuratively) as is the science curriculum or college placement expectations. If socio-economic diversity is important to your educational vision and mission, building that environment comes at a price that everyone pays, including the families who do receive financial aid, who are making significant financial sacrifices to buy into the same thing. So, even if they don’t receive financial aid, all parents still should understand its important role in making the school what it is.
Articulate how that diversity contributes as much to student learning and character development as anything else parents pay for. Be prepared to illustrate how students receiving financial aid contribute to school leadership positions, win academic awards, qualify as National Merit/Achievement Scholars or Finalists, etc. One school leader in California tells me that the awards assembly makes her cry because just about all the winners are financial aid recipients that she has helped over the years.
The Financial Proposition…Three Angles of Vision
Everybody benefits from the largesse of others. A reality often noted is that almost no school charges the full cost of education in tuition. Tuition itself, for a typical school, covers 80-90% of the per student cost of education. Since you fill some of your budget needs with endowment and gift income, even full-pay families receive a subsidized tuition break, so, in essence, all families receive financial aid to attend. This argument doesn’t work for the full-payers who are also big enough donors to cover their own subsidy. One might expect that those givers wouldn’t give so much if they didn’t believe in what that gift allows the school to build, including socio-economic diversity.
Financial aid is not just funded by tuition dollars. Depending on the size of your financial aid budget, you should consider how annual giving (and other assets, like endowment draw, perhaps) actually supports the bulk of financial aid, even if indirectly. If you give $1 million in financial aid, but take in $50,000 in annual giving, it’s a weak point to go for. But if you give $1 million in aid, and raise $1 million in annual giving, it’s a credible point. At NAIS schools, the average amount of annual giving raised is about $900,000, while the average need-based aid spending is about $1.3 million. But examining that relationship between what makes revenue less than it needs to be and what typically fills that void can yield useful insight.
Financial aid spending saves full-payers money. Let’s say you have 735 full-pay families and gave $345,000 in financial aid to 109 families, who paid $500,000 in tuition. If the $500K net tuition revenue you received from the aided families were lost, and that loss did not result in reductions in program or staff (the 109 aided families spread across several grades, for example), the full-pay families would have to pay $680 more tuition to absorb the shortfall. This is most compelling if people believe that you couldn't fill those 109 spots with other qualified, full-paying (or mostly paying) students and/or couldn't get it through fundraising (and it’s best to be prepared to show why accomplishing that is unlikely).
Showing and describing a combination of value-driven and finance-driven perspectives and realities can help parents who push back on your financial-aid spending gain a broader understanding of how that truly impacts them and their children. Avoid defining your school as two separate communities (aided and full-pay). Do what you can to emphasize that yours is one community of teachers and learners from all backgrounds that bring value worth buying into.
