Wednesday, December 10, 2008

Financial Aid Woes

The front page of InsideHigherEd this morning has an article about Syracuse University, and the impact of the financial climate on student appeals for financial aid.
Syracuse University recently sent an appeal to alumni warning that approximately 400 students will be unable to return for the spring semester unless the institution can raise an additional $2 million in scholarship support by the end of January 2009.
They are putting out the call to donors for additional aid to bridge the gap. I tried to find a figure for the university's discount rate, and stumbled on an old self study that puts the 1989-90 rate at 10.5%, and describes the financial aid leveraging process they're putting in place.
An innovative awarding and measuring tool, based on econometric methods, factored in student academic qualifications and family financial need. This model enabled the prediction of enrollment outcomes and guided the University to a considerably more competitive pricing position. In the course of its implementation, the undergraduate tuition discount has increased from 10.5% in 1989-90 to 37.8% in 1996-97. While this approach has accounted for a considerable shift in net available revenue, it is also credited with helping to stabilize the quantity and quality of undergraduate enrollment. The undergraduate tuition discount rate is expected to level at about 38% in 1998-99 and remain there for the immediate future.
That puts the rate at 37.8% ten years ago, after a dramatic-sounding reformulation of aid policies. The InsideHigherEd article quotes $16,737 as the average award, but I wasn't certain from the context if this was all institutional. Apparently it is, because the IPEDS report tool puts last year's average institutional award at $17,136. That would be a discount rate of a whopping 52%, far in excess of the 38% target. This assumes, however, that they are not including other fees and such when they calculated the discount previously.

What to make of the plea to alumni for additional aid? This looks like a short-term emergency response, and as such might be quite reasonable. I would also argue, however, that they should also be taking a hard look at their leveraging model. All of us who give institutional aid in order to shape incoming classes will have to do the same. The basic calculation, is: what do you gain by letting these students walk out the door? With an average net revenue (tuition-institutional aid) of $15,443, the price tag would be almost $6.2M if all 400 left. Assuming that the requested additional $2M in aid is the right number to keep these students, it seems fairly obvious that the university is better off creating the aid out of thin air if it can't get the donations, rather than letting students drop out for financial reasons. Adding 2M to a 155M aid budget would be a small price if that's the total impact of this recession.

The article also mentions loans and the inability of students to get them as an impediment to attending. I tested my idea about institution-based loans with our Business VP yesterday. It seems like an idea worth pursuing, and I'll follow up here when I get a chance.

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