Does Your School’s Financial Aid Budget Float?
In the 90’s, while I worked at the executive director of enrollment management at Cornerstone University in Grand Rapids, MI, financial aid was a critical component of our strategy to grow the enrollment.
One of the most important changes we made was to create a financial aid budget and strategy that maximized net tuition revenue and enrollment. Our previous strategy included a financial budget that was fixed as a specific line item in our budget. Once the money was gone, we could not award additional financial aid dollars.
We made the change to leverage our financial aid dollars to increase enrollment. The concept was quite simple. The financial aid budget was not fixed. Rather, it floated based on a percentage of the budget that was tied to the enrollment. In other words, our financial aid budget was simply a percentage of our enrollment—as the projected enrollment grew, so did our budget (and it shrank when the enrollment projection was lower).
This strategic approach helped us achieve significant enrollment growth that resulted in increased revenue for the University.
This same model can work for private schools, especially as they are becoming more dependent upon the use of financial aid in their enrollment strategies.
This approach can be very effective during the summer months as some schools actually run out of financial aid and then don’t have any additional dollars to recruit and re-enroll families during these critical months.
Here’s how it can work. Let’s say you are projecting an enrollment of 500 total students and your tuition is $10,000. As a result, your revenue will be $5,000,000. Your financial aid budget might be 10% of our revenue for a budget of $500,000 (I am using 10% just as an example).
Using this example, your financial aid budget is 10% of revenue and floats based on your enrollment. If you think you can reach 520 students, then you would have another $20,000 in financial aid dollars to help you reach your goals. If it looks like you might be short by the same number, then your financial aid budget would be reduced by $20,000.
By using this approach, you never run out of financial aid dollars. It also helps you to keep on target as you can project your financial aid expenditure per family. Using this example, every student enrolled adds $1,000 to the financial aid budget. Keep in mind that if you award $4,000 to one student in financial aid, then three students will need to be full-pays.
It is important for you to carefully monitor your financial aid expenditures and to make sure that your average award for all families is based on the budgeted percentage.
By using this model, you will be able to leverage your financial aid dollars to maximize your school’s enrollment.