Strategic Utilization of Financial Aid: The Power of Informed DecisionMaking MASFAA November 14, 200

1
Strategic Utilization of Financial AidThe
Power of Informed Decision-MakingMASFAANovembe
r 14, 2002 

• Jim Slattery
• Senior Educational Manager
• Higher Education SolutionsThe College Board

2
The Evolution of Financial Aid

• From a mechanism used to promote equity, access
  and choice
• To becoming a significant factor in determining
  an institutions competitive position and
  financial well-being.
• Financial aid policies must address both social
  values and fiscal realities.

3
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

4
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 institutions 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.

5
Key Questions

• 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?

6
Without analysis,paralysis.
7
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

8

• Influences on Enrollment Decisions
• Academics Reputation
• Location
• STUDENT CHARACTERISTICS
• PRICE
• Net price is the single, easiest factor
• for the institution to control

9
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

10
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

11
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.

12

• Without data, youre just another person with an
  opinion.

13
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.

14
Data Analysis ProgressionNo Data ? Strategic
Use of Data

• Historical data captured retained but files not
  merged
• Data files merged but strategic questions not
  asked
• Aggregate data analysis
• Segmented data analysis (group data)
• Regression analysis (individual data)
• Econometric modeling simulations
• Source Scannell Kurz, Inc.

15
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?

16
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.

17
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

18
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.

19
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?

20
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

21
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?

22
Competing Priorities

• VALUES
• If more funds are directed at middle- and
  high-income 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.

23
Strategic Use of Financial Aid

• If there arent 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.

24
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.

25
What is your mission?What are your target groups?

• Underrepresented populations
• Academically gifted
• In-state/out-of-state
• Special majors (engineering, nursing)
• On campus vs. off campus
• Special talents (musicians, athletes)
• _____________________________

26
Policy Alternatives

• Need-based approach
• Non-need-based aid
• merit scholarships
• Differential packaging
• merit within need
• preferential loans
• Gapping
• Admit/deny
• Need-aware admissions

27
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.

28
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

29
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

30
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.

31
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.

32
Contact Information

• Jim Slattery
• The College Board
• 781-890-9153
• jslattery_at_collegeboard.org