Sophie’s Choice: Access or Affordability? PowerPoint Presentation, PPT - DocSlides

Sophie’s Choice: Access or Affordability?

Patrick F. Bassett, President

NAIS

See industry trend lines on admissions, financial aid, family incomes

Examine “the new normal” practices of net tuition revenue budgeting and planning.

Determine whether your school competes on “brand,” “uniqueness,” or “price.”Observe some school pricing experiments.

At the conclusion of this session, you will:

Sophie’s Choice: Access or Affordability?

Prioritizing Financial Aid Is Becoming

Sophie’s Choice:

The historic independent school focus on financial aid as a tool for diversifying a school seems to be migrating over time away from the mission commitment to

diversity

in the name of

ACCESS…

…

to the enrollment management obligation of full enrollment via a focus on

upper middle class

AFFORDABILITY

.

Silver Lining:

We’ve managed seven recessions well, by spiking and flexing financial aid. (And SSS by NAIS is offering new means to make better financial aid decisions.)

Hit Brake on Tuition Increases?

Median

Increases

2008-09

2009-10

2010-11

2011-12

Day5.8%4.0%4.0%5.8%Boarding 5.4%4.0%4.1%5.4%

Median Increases2008-092009-102010-112011-12Day20.9%24.0%25.0%25.5%Boarding33.2%36.9%37.3%39.1%

Hit Accelerator on Financial Aid?

Percentage of Students Receiving Aid

1

st

Marker of Success: Market Demand (1)Number of applications per acceptances measures the market’s perception of the school’s “brand” (high ratio a proxy for reputational value), the higher the ratio, the greater the pricing/tuition) flexibility

Percentile(25)

1.2

Percentile(50)

1.4

Percentile(75)

1.9Percentile(90)

2.8

Day Schools 2010-2011 Boarding Schools 2010-2011

Percentile(25)

1.3

Percentile(50)

1.6

Percentile(75)2.3Percentile(90)3.3

Day Schools 2009-2010 Boarding Schools 2009-2010

Percentile(25)1.2 (1.3)Percentile(50)1.5 (1.6)Percentile(75)1.9 (2.2)Percentile(90)2.8 (3.3)

Percentile(25)1.3 (1.4)Percentile(50)1.6 (1.8)Percentile(75)2.1 (2.3)Percentile(90)3.1 (3.6)

(Years mentioned are data collection years)

1

st

Marker of Success: Market Demand (2)Number of applications per acceptances measures the market’s perception of the school’s “brand” (high ratio a proxy for reputational value), the higher the ratio, the greater the pricing/tuition) flexibility

Percentile(25)

1.2

Percentile(50)

1.4

Percentile(75)

1.9Percentile(90)

2.9

Day Schools 2011-2012 Boarding Schools 2011-2012

Percentile(25)

1.3

Percentile(50)

1.7

Percentile(75)2.3Percentile(90)3.4

Day Schools 2010-2011 Boarding Schools 2010-2011

Percentile(25)1.2Percentile(50)1.4Percentile(75)1.9Percentile(90)2.8Percentile(25)

1.3Percentile(50)1.6Percentile(75)2.3Percentile(90)3.3(Years mentioned are data collection years)

History of Tuition of 9

th

Grade Day

Sources: NAIS StatsOnline and US Census Income Reports

Attribution: Jeffery T. Wack, Ph.D., JTWack & Company LLC

67% Increase

($12,675 to $21,210)

Note no change in rate of tuition increases

History of 9

th

Grade Day Tuition as Share of 95

th

Percentile Family’s Income

Sources: NAIS StatsOnline and US Census Income Reports

Attribution: Jeffery T. Wack, Ph.D., JTWack & Company LLC

OR:

If your child enrolled in 1999 and graduated in 2009, you are a 95% family, and the family’s rate of income growth was same as national, tuition that was 8% of your income grew to 10.5%

Now, this model could actually work if the absolute number of 9

th

graders and families were growing, and thus so was the Top 5% Segment

…and this is what was happening….

until 2004.

U.S. Births 14 Years Prior

(i.e. 9

th

Graders in Year Shown)

(000s)

Sources: NAIS StatsOnline and US Census Income Reports

Attribution: Jeffery T. Wack, Ph.D., JTWack & Company LLC

Period of Pricing Power

PFB: The “X-Factor”: increasing market share.

What are your three scenarios?

Survey of Families >$150K

Source: Jeffrey T. Wack, consultant

Source: Jeffrey T. Wack, consultant

The Value Proposition for Parents

Perceived Outcomes

Perceived Price

=

Value

For prospective parents, as perceived price goes up, value goes down unless perceived outcomes increase proportionately.

Lower price can increase the value proposition and the full-pay proportion of families.

As merit aid goes up, for those who get it, perceived price goes down.

Does your school compete on brand, uniqueness, or price?Moderating tuitions lowers the perceived price: Some private colleges and independent schools leading the way.

Competing on

$ Price $

Competing on Price

We believe it is our responsibility to ensure a quality education is affordable to all working families and accessible to the most deserving students. It is with this guiding principle that our school is committed to making our tuition the most competitive in the market.

School 1

School 2

School 3

NAIS Avg

School 4

School 5

Our Price

Competing on Price

Are you prepared

to face increasing competition for a decreasing number of students?

“St. Louis Magnet Schools offer an EXCITING, TUITION FREE alternative for students of all ages and abilities.”

Competing on Price

Reducing Tuition: Free

Top 5% Incomes

($200K+): The X Factor

In the past we could charge what we wanted as Top 5% incomes rose even faster than independent school tuitions in most years.

Since 2008: inflation down, top 5% incomes down, but tuitions up.

Sept. 2010 Census Bureau reports median family incomes down and proportion of families over $100K income smaller.

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Competing on Brand

Competing on Brand

Competing on Uniqueness: Cushing

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The “New Normal": A Game Changing Model for Financially Sustainable Schools

Is

setting tuition

and

the financial

aid budget a fiduciary (level 1), strategic (level 2), or generative (level 3) task of the board of trustees?

The “New Normal": A Game Changing Model for Financially Sustainable Schools

When the traditional landscape changes, a new map required.

Old assumptions challenged, new thinking:

Budgeting

starts with price, not needs.

“Charge what it costs” vs. competing on brand vs. price vs. uniqueness

Debt is not cheap; it’s costly.

Enrollment the fixed variable; financial aid the flexible variable. Mission evolves, so strategic visioning ends, not begins, with mission.

Summary Questions To Take Home

Where on the Sophie’s choice continuum should our school be? Strategies to get there?

Should we adopt the “new normal” net tuition revenue (NTR) model? How much NTR would we need?

What school

size and financial aid flexibility to achieve the target NTR?

Does our data indicate low, moderate, or high brand value?

Should we be competing on brand, uniqueness, or price? Should we conduct a tuition elasticity study to find out?

Name Patrick F. Bassett

Title President

Organization NAISAddress 1620 L St., NW, Washington, DC

Zip Code 20036

Email/Phone

bassett@nais.org

202.973.9710

Presenter Contact Information

Thank you for attending

SSS By NAIS Leadership Forum

See Related Slides in Appendix

APPENDIX

See Related Slides in Appendix

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(5%)

(5%)

(20%)

(30%)

(40%)

(17%)

(19%)

(16%)

(11%) (38%)

Elite Colleges Sample

50 Schools (4000 apps) SSS Data

2010-11: Avg tuition $42,920 (Boarding) / $22,840 (Day)

Avg Need-based Grant: $13,720 (98 kids); Non-Need:$5,850 (7 kids)

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