Tuesday, December 20, 2005

Contradictions in the Academy, Part I

One of the perennial contradictions I run into when helping to plan an annual budget is the conflict between financial aid and admissions. FA is typically given a fixed budget of institutional aid (for a private institution) whereas admissions is give an enrollment target. So FA wants above all not to overspend its budget, while admissions is trying to pack them in whatever the cost.

Good leadership (which we have at The College) goes a long way to alleviate that issue, but a better approach to experiment with is to include the revenue generated by an admit as part of the FA leveraging strategy. Without this big picture outlook, things run fine until near the end of an annual Fall admit process, when money is running low. FA will be pulling back on awards because odds are it has already overspent its budget by 20% or more anticipating that a significant percentage of new students won't show up or will drop after a semester, bringing the budget back into line.

So you can have a situation where good students apply and don't get the scholarship they would have gotten if they had applied earlier. This makes no sense from an academic point of view, and assuming that the scholarships are near the average discount rate (about 42% for The College), it also makes no sense from a financial perspective. The poster children for this are the Spring enrollees, who get significantly less aid from about every source. They have terrible retention stats too. It would seem to make sense to let these students revise (upward) their institutional aid packages the next Fall in the new budget at a normal rate. It would make even more sense to have each student considered on his or her merits with a more individualistic approach to talent and revenue.

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