The student aid conundrum: right now, it may feel like damned if you do, damned if you don't. But clear analysis of your financial aid mission and adoption of an action plan can deliver solid benefit to students and school. (Strategy).A dip in the economy is hard on everyone, but for higher education higher education
Study beyond the level of secondary education. Institutions of higher education include not only colleges and universities but also professional schools in such fields as law, theology, medicine, business, music, and art. , hard times are aggravated ag·gra·vate
tr.v. ag·gra·vat·ed, ag·gra·vat·ing, ag·gra·vates
1. To make worse or more troublesome.
2. To rouse to exasperation or anger; provoke. See Synonyms at annoy. by a kind of triple whammy wham·my
n. pl. wham·mies Slang
1. A supernatural spell for subduing an adversary; a hex: put the whammy on someone.
2. of financial need: When the economy dips, more parents and students are out of work, and more investments shrivel. The result: Colleges and universities are asked to meet more financial need. State legislatures A state legislature may refer to a legislative branch or body of a political subdivision in a federal system.
The following legislatures exist in the following political subdivisions:
The whammy doesn't necessarily stop at triple. For schools that have endowments, asset value drops, and with it, the amount available for payout pay·out
1. The act or an instance of paying out.
2. A percentage of corporate earnings that is paid as dividends to shareholders. . Worse, trustees often ratchet back endowment spending even tighter than spending formulas would dictate, figuring that no matter what you originally intended, a rainy rain·y
adj. rain·i·er, rain·i·est
Characterized by, full of, or bringing rain.
Adj. day is no time to use the money you've saved. And a weak job market can push many would-be workers back to school; for some schools, especially community colleges, rising enrollments can eat up even more scarce financial resources.
More need and less money to fill it. Whenever the economy dips, that's the prospect faced by most colleges and universities. And as students and families feel the pain, they turn unfailingly to the one spot in the institution that ought to be able to help them: the Financial Aid office. What's the best way for the Financial Aid office to respond? University Business spoke to some top experts in financial aid, enrollment management, and the economics of higher education. Here's what they had to say.
Challenges Across the Board
The crucial point to remember, says Williams College Williams College, at Williamstown, Mass.; coeducational; chartered 1785, opened as a free school 1791, became a college 1793, named for Ephraim Williams. The Williams campus, noted for its fine old buildings, includes West College (1790), the Van Rensselaer Manor economist Gordon Winston, a noted scholar of the economics of higher education, is that different sorts of institutions face vastly different challenges. "The publics, the wealthy privates, and the not-so-wealthy privates are three totally different worlds," Winston says. "One of the troubles, of course, is that we use the term `financial aid' to mean radically different things. It can mean price discounts to get customers or improve student quality on the one hand, or it can mean income redistribution Income redistribution refers to a political policy intended to even the amount of income individuals are permitted to earn. This differs slightly from wealth redistribution or property redistribution, a policy which takes assets from the current owners and gives them to other policies on the other hand, and they're very different things. Those three different populations are in very different circumstances, and the toughest are the circumstances faced by private, not-awfully-wealthy private institutions that have been shading See Phong shading, Gouraud shading, flat shading and programmable shading. price to improve quality or to maintain quality in the face of others shading price through merit aid. Schools like this are increasingly running up against declining endowment returns and are really getting a squeeze. If the question is what are they supposed to do, I'm damned if I know."
What makes it even harder for schools to cope with economic hard times, Winston says, is that so many institutions refuse to acknowledge what kind of financial aid they actually engage in. "There's an awful lot of unclarity," he says. "A lot of social respectability re·spect·a·bil·i·ty
The quality, state, or characteristic of being respectable.
Noun 1. respectability - honorableness by virtue of being respectable and having a good reputation
reputability and panache goes with having only need-based financial aid. That's what the good guys do. So everybody has a strong desire to treat their own financial aid as if that's what they are doing. But, in fact, they're doing student enrollment management. They're cutting prices and modulating deals for superior students, and trying to steal good students from other schools. That makes it very hard to talk about a financial aid policy. You refuse to admit how much your old policy has been abandoned, because it's embarrassing. You don't really want to be one of those tacky people who cuts price to lure students. But, on the other hand, when someone else is cutting their price and luring your students, you don't want to let them get by with it."
"The real difficulty," explains Macalester College
Macalester College is a privately supported, coeducational liberal arts college in Saint Paul, Minnesota. President Michael McPherson Michael McPherson (born July 21, 1982 in Ostego, Michigan, U.S.) is an American pair skater. With former partner Kristen Roth, he is the 2001 World Junior bronze medalist. They won the silver medal at the 2000-2001 Junior Grand Prix Final and competed for one season on the senior , who has written and consulted extensively on financial aid, "is that the financially prudent ways for schools to respond to that kind of difficulty often wind up hitting hardest on the folks with the highest need. Think about public universities and colleges. Understandably, when they see a sudden drop in the contributions from state government, their inclination inclination, in astronomy, the angle of intersection between two planes, one of which is an orbital plane. The inclination of the plane of the moon's orbit is 5°9' with respect to the plane of the ecliptic (the plane of the earth's orbit around the sun). is to push for a substantial tuition increase so they can keep their programs going. A lot of people, particularly at flagship publics, can afford those kinds of tuition increases pretty easily--you have some pretty affluent people going to low-cost institutions. The people who can't handle it are the high-need students.
"It's sort of a law of life in a society like ours that the people who end up taking the hit are the low-income, high-need people," says McPherson. "That is true in the public sector and to some extent in the privates as well: If you're trying to get extra revenue to compensate for endowment losses, one way to do it is to give less aid to high-need students and use more on middle- or upper-middle-income students, where it may have more leverage. If $10,000 will enable two middle-income students to come to your school but only one low-income person, you can stretch your dollars that way. It makes sense from the point of view of the institution, but it may mean that it may interfere with its mission, and if you add it up over all the schools, it certainly reduces opportunity for high-need students."
Institutional funds are important, but in the long run, the source of financial aid that can be the most volatile--and can make the most difference--is state aid, argues Edward St. John, professor of Educational Leadership and Policy Studies, and Director of the Indiana Education Policy Center at Indiana University Indiana University, main campus at Bloomington; state supported; coeducational; chartered 1820 as a seminary, opened 1824. It became a college in 1828 and a university in 1838. The medical center (run jointly with Purdue Univ. . "The research shows funding for state grant programs is an important predictor of access. It has a huge impact. If you think about it, federal aid is even-handed across the country. States have a greater impact on equalizing opportunity because the purchasing power Purchasing Power
1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase.
2. of federal grants has eroded e·rode
v. e·rod·ed, e·rod·ing, e·rodes
1. To wear (something) away by or as if by abrasion: Waves eroded the shore.
2. To eat into; corrode. . Private colleges have adapted pretty well to this policy environment. They have no problem raising tuition to give for aid, as long as they continue to have philanthropic phil·an·throp·ic also phil·an·throp·i·cal
1. Of, relating to, or marked by philanthropy; humanitarian.
2. Organized to provide humanitarian or charitable assistance: support. Public universities have limits, however. If they raise tuition to give more grants, they're really replacing tax dollars with tuition and using the tuition revenue to aid other students-they really are taxing one group of students to subsidize sub·si·dize
tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es
1. To assist or support with a subsidy.
2. To secure the assistance of by granting a subsidy. another group. There is a social justice dilemma when they follow this path toward privatization privatization: see nationalization.
Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned by raising tuition charges for student aid, especially for merit aid."
Not to say that all states do a good job of helping out when the economy gets tight. Indeed, in most states, aid reliably drops every time tuition--and need--in creases. In some states, as tuition goes up, aid goes up. Minnesota has generally done well. So has Illinois. Other states are trying to adjust for financial conditions, but mediated me·di·ate
v. me·di·at·ed, me·di·at·ing, me·di·ates
1. To resolve or settle (differences) by working with all the conflicting parties: through the politics of state.
When the states don't come through with aid, though, and schools try to compensate, there's always a question as to what the actual effects will be. That's especially true when the strategy in question is discounting price to keep up enrollments. Kathy Kurz of the consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee
business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a Scannell-Kurz explains, "We have some clients for whom we developed econometric models Econometric models are used by economists to find standard relationships among aspects of the macroeconomy and use those relationships to predict the effects of certain events (like government policies) on inflation, unemployment, growth, etc. to look at the price sensitivity of their students. In some cases, we found that whether they go in and make up the money [lost by falling state aid] or not, their net revenue is going to be reduced either way. If they make up some of the state money and keep the students, they've spent that extra money. If they don't, then the students don't enroll and they lose it that way.
"A lot of what's happening," says Kurz, "is institutions trying to respond to individual circumstances in the hope that the family circumstances will get better. That may be a pretty good bet, but what about things like reductions in state funding, whether in the form of a scholarship and grant program or in the form of subsidies to public institutions? In those cases, there may be a new base being created. There may not be a return to what we had before."
Action Plan for IHEs
The problems higher education faces in providing financial aid can seem cosmic cos·mic also cos·mi·cal
1. Of or relating to the universe, especially as distinct from Earth.
2. Infinitely or inconceivably extended; vast: . But there are some things institutions can do to protect themselves, and help students, say the experts:
Work from data. "Making decisions in the absence of any kind of analysis is a mistake that we often see" says Kurz. "Many institutions shoot from the hip, whether it's arbitrarily capping the discount rate or arbitrarily picking a tuition increase and not really analyzing what it's going to mean in terms of retention or yield rates. I think more institutions are trying to become data driven, but we still see institutions that haven't approached these questions analytically at all"
Monitor the way appeals are handled. When the economy gets tight, more students and parents appeal the packages they have been offered. The National Association of Student Financial Aid Administrators" Dallas Martin estimates that appeals have increased by between 10 and 20 percent this year. There's a temptation to grant many appeals, hut is that a good strategy? "Institutions have moved more and more toward a `let's make a deal' or `price is right' attitude," says Kurz, "and, of course, you get more appeals in times of economic downturn. Ironically, many times those are the students whose propensity to enroll is the highest, because they've gone to the trouble of appealing. While there often needs to be some response, what level is the right level of response is often not discussed analytically at the institution."
Think about retention, "Some institutions will burden folks with a huge financial deficit early on, or they'll bait and switch A deceptive sales technique that involves advertising a low-priced item to attract customers to a store, then persuading them to buy more expensive goods by failing to have a sufficient supply of the advertised item on hand or by disparaging its quality. ," says enrollment management consultant Jack Maguire Jack Maguire was a Major League Baseball player (born February 5, 1925) in St. Louis, Missouri (USA), died September 28, 2001. In 1950, he played for the New York Giants; in 1951 he played for the Giants, the Pittsburgh Pirates, and the St. . "We had a client that would give good financial aid packages to entering students but would switch to more self-help in junior and senior year. We were able to show them that the issue of retention wasn't being addressed by this policy."
Pay attention to the pool. "An institution that's achieving its enrollment goals has apparently addressed affordability as a goat," says Tom Williams Tom Williams can refer to:
In metallurgy, any substance introduced in the smelting of ores to promote fluidity and to remove objectionable impurities in the form of slag. Limestone is commonly used for this purpose in smelting iron ores. in revenue or quality."
Preserve aid by cutting costs. "The premium," says Macalester's McPherson, who has been chairing a cost-cutting committee at his own campus, "is on having an intelligent process, with a lot of buy-in around the campus, which actually helps you to make some tough-minded changes, and that can be quite a positive thing. What's tough is that you end up hurting individuals who care about the institution and whom you care about, and that's no fun, but the larger cause may be served well by that kind of tough scrutiny. The other thing that's important and adds to the challenge, is: Just because you're cutting, you can't stop investing, so you actually need to cut more than the number of dollars needed to balance the budget. You need to cut enough to be able to free up enough resources to do interesting things. Otherwise, it's really bad for morale, and in the long run, it's going to harm the institution in terms of fulfilling its mission, and in terms of its competitive position."
Remember that loans are cheap today. In the end, many institutions will have only one real alternative in dealing with increased financial need: recommending more loans. That may not be a desirable alternative, but at least the market today is favorable fa·vor·a·ble
1. Advantageous; helpful: favorable winds.
2. Encouraging; propitious: a favorable diagnosis.
3. to borrowers. "I'd rather see people do without this and that, or try to tighten their belt a bit and not go into debt," says NASFAA's Martin. "But the value of your education and the return on the investment is going to be such that it's worthwhile to borrow. And if you're going to have to do that, it's a good time to borrow, because we're at an all-time low in terms of interest rates on students loans."
Look for a way out of the box. Says Paul Gilroy Paul Gilroy (born February 16, 1956) is a Professor at the London School of Economics.
Born in the East End of London to Guyanese and English parents (his mother was Beryl Gilroy). , president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Proeducation Solutions (www.proed.org), "If we look at net price as the sole means by which we decide whether college is affordable, we're locked into a finite number of solutions. [But] college affordability is a two way street: Can the family afford us, and can we afford the family? The traditional approach focuses just on price, and if you adjust the price up or down, either the family or the school does worse. There's seemingly no way out of the box, and that's where higher ed is stuck. In the long run, that strategy doesn't work. The way to go is to address affordability and lessen less·en
v. less·ened, less·en·ing, less·ens
1. To make less; reduce.
2. Archaic To make little of; belittle.
To become less; decrease. the impact on families and institutions." Gilroy's own solution is a loan program in which the school diverts funds it would have used for grants, to creating a subsidized sub·si·dize
tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es
1. To assist or support with a subsidy.
2. To secure the assistance of by granting a subsidy. alternative loan program. The program has had promising early results, but it is especially interesting because it shows that there are still unexplored alternatives in approaching the problem of affordability.
Remember who you are. "I would say that the combination of tuition and financial aid policy that a school follows is I very important to how it's perceived in the marketplace," says McPherson. "A school that's need-blind--that's a very important feature which is important to communicate to your constituencies. And to jerk those policies over short-term fluctuations threatens an important asset. I think it's important to strive to be consistent. If you're known for treating students well at all income levels and valuing a diversity of economic circumstances in your institution, to walk away from that to save some bucks for a year or two is likely to be a mistake because it will have lasting impacts on how people perceive who you are. You can delay plans for a new building or you can even delay some kinds of maintenance for a few years without doing any lasting harm. But if you start messing with your core policies, you're sending a very confused message to the marketplace, and you risk undermining the trust of your constituencies."