The Strategic Use of Institutional Financial Aid

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The Strategic Use of Institutional Financial Aid

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Title: The Strategic Use of Institutional Financial Aid


1
The Strategic Use of Institutional Financial Aid
  • Mr. Ron Day
  • Director of Financial Aid
  • Birmingham-Southern College
  • rday_at_bsc.edu
  • Ms. Deborah (Tolly) Tollefson
  • Director of Financial Aid
  • Univ. of NC Greensboro
  • tollefson_at_uncg.edu

2
Session Description
  • This session will first focus on various
    methodologies that can be used to both predict
    and control the institutional aid budget from
    both a public and private school perspective. And
    second on ideas of how to use those funds
    effectively.

3
Suggested Reading
  • Trends in Student Aid and College Pricing,
    1997-98 to 2001-02, Watson S. Swail, Educational
    Policy Inst, 2003.
  • Funding and Distribution of Inst. Grants in
    1999-2000 Results from the 2001 Survey of
    Undergrad Fin. Aid Policies, Practices, and
    Procedures, Kenneth E. Redd, Journal of Student
    Financial Aid, Vol. 31, 2001.

4
Suggested Reading, cont.
  • Merit Aid and Inequality Evidence from
    Baccalaureate and Beyond, Derek V. Price, Journal
    of Student Financial Aid, Vol. 31, 2001
  • Race, Gender, and Institutional Financial Aid
    Awards, Donald E. Heller, Journal of Student
    Financial Aid, Vol. 31, 2001.

5
Suggested Reading, cont.
  • Trends In Student Aid, College Board, 2003.
  • Changing Direction Integrating Higher Education
    Financial Aid and Financing Policies Informing
    Public Policy Financial Aid Student
    Persistence, Donald Heller, Western Interstate
    Commission for Higher Education, 2003.

6
  • 2004-2005 College Costs
  • Keep Rising Prices in Perspective
  • There's no escaping the fact that college costs
    are rising. According to recently released
    reports from the College Board, most students and
    their families can expect to pay, on average,
    from 167 to 1,132 more than last year for this
    year's tuition and fees, depending on the type of
    college.

7
Good News!
  • There is more financial aid available than ever
    before -- over 122 billion. And, despite all of
    these college cost increases, a college education
    remains an affordable choice for most families.

8
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Financial Realities Affecting Education Consumers
  • Astronomical rise in consumer debt has come at a
    time when income growth has been slowing.
  • Median income of families with head of household
    has grown just 10 in past decade.
  • Rising debt is particularly troubling for college
    students/parents.

10
Cont.
  • Federal Student loans have increased 265 in the
    past 10 years.
  • Alternative loan volume has swelled to 466 in
    the same period.
  • Avg. loan debt (2000) for 4-yr pub. - 15,074
    and 4-yr priv. - 16,516.

11
  • In summary, these are the new financial realities
    facing current and prospective college students
    and their families
  • Rapidly rising college costs, which show no sign
    of slowing
  • Fears of continued economic malaise
  • Increased debt from student loans, credit cards,
    and other forms of consumer financing.

12
  • In past years, many families believed the promise
    of higher salaries and other benefits of higher
    education justified the expense of postsecondary
    education. But will future students be willing
    or able to take on more debt in order to attend
    college?

13
  • We are already facing this question. How many
    have had students and/or parents say, We dont
    want a student loan. We just want the free money
    and as much as possible.

14
  • How do you approach this request? With a
    clientele that, for various reasons, do not want
    loans and/or work yet you know that headcount
    is vitally important what ways do you prepare
    and effectively utilize the funds your
    institution labels as
  • INSTITUTIONAL AID

15
You are vital in Planning for Recruitment and
Retention!
  • Become vital in both recruiting and retention.
  • Become a member of the Retention Committee and
    the admission team.
  • Gather and retain historical data
  • a. Retention Rates
  • b. Tuition Discount Percentages.
  • c. Net tuition historical data
  • d. Awarding policies, i.e., how does the
    Admission Office award merit.

16
Retention Rates
  • Traditional data determines those students who
    enrolled one academic year and did not return the
    next typically from fresh to soph, from soph to
    jr, and from jr to sr. This figure should
    reflect a five (5) year average.

17
Tuition Discount
  • Three models
  • 1. Simple Tuition Discount consists solely of the
    waiver of all or a portion of the tuition due,
    usually in the form of a grant. Excludes external
    sources or funding from endowed accounts.
  • 2. Scholarship Allowance is the most inclusive
    concept and consists of all institutionally
    funded financial aid plus tuition payments funded
    by gifts and endowments (used by NACUBO and FASB).

18
Tuition Discount Cont.
  • 3. Student Tuition Discount is a broader concept
    than the Scholarship Allowance. It includes all
    tuition that students do not have to pay out of
    their pockets, or by loans or work. It includes
    scholarship allowance plus all external federal,
    state, and private grants and scholarships
    (commonly utilized by Moodys Investors Service
    when rating institutions).

19
Tuition Discount Concerns
  • According to a report written by Jerry S. Davis,
    VP for research at Lumina Foundation
  • Tuition discounting frequently fails to increase
    net revenue and may harm the intended quality of
    the institution.
  • Tuition discounting does not always lead to
    students with improved SAT/ACT scores and may
    hurt access for financially needy students.

20
Cont.
  • According to the College Boards Annual survey,
    Most colleges with the greatest increases in
    tuition discount rates failed to significantly
    increase the median SAT scores of their
    students.

21
Cont.
  • According to Davis, The report (from the Lumina
    Foundation) demonstrates that tuition-discounting
    practices have restricted access to grant aid for
    lower-income students to attend four-year
    institutions and reduce students opportunity to
    choose among public and private colleges.

22
Determining Discount Example
  • Using the NACUBO and FASB model
  • ((total dollars awarded from institutional
    funds)/(tuition figure of students))
  • ((2,000,000)/(18,000 400)) 28 Tuition
    Discount

23
Net Tuition
  • Simply done by determining tuition amount and
    institutional award totals.
  • (Tuition amt. of students) (total
    institutional dollars awarded)
  • (18,000 400) (2,000,000) 5,200,000 Net
    Tuition

24
Think outside of the Box!
  • New ways to spend your institutions money

25
What is your Focus?
  • More first-time freshmen
  • More Distance Learners
  • Stronger Academics
  • Happy Faculty
  • Out-of-state students (full pay)
  • Diversity
  • Tuba Players
  • Emotional Middle Class

26
Merit vs. Need
  • Must all institutional money be used for Merit
    aid?
  • Can Need based aid help improve the academic
    quality of the student population?
  • Sources of funds Tuition Discounting, Endowment
    Income and Annual Gifts, State and Federal

27
The Relationship
  • Recruitment Retention
  • Diversity Comfort
  • Commitment and loyalty
  • A Two-Way Street
  • Cradle to Grave
  • Future Donors
  • Partnerships

28
Need-Based Approach
  • Carolina Covenant at UNC Chapel Hill
  • A college-financing commitment between the school
    and low income students
  • Debt Free if you will work
  • Creates an inviting financial aid package

29
Eligibility Criteria
  • Academic
  • Admitted to, or enrolled at UNCCH
  • Pursuing 1st undergrad degree
  • Full time regular student (not Con.Ed.)
  • Financial
  • Parents AGI does not exceed 150 of federal
    poverty guidelines (based on family size

30
How Much Aid
  • Financial aid covering 100 of documented need
    (including a reasonable amount of FWS)
  • Laptop computer for entering Freshmen
  • Students can choose not to work, but will be
    offered loan to replace FWS,
  • Loans can also be used to replace Expected Family
    Contribution

31
First Year Statistics
  • Ave. SATs 1209
  • Ave. High School GPA 4.21
  • NC Residents 88 Other 12
  • Gender Female 69 Male 32
  • Minority63, White 32
  • Education of either Parent
  • High School or less 21,
  • Some Post Secondary 34,
  • Four year Degree 45

32
Cost to Institution
  • UNC Chapel Hill already had a commitment to meet
    need of all admitted students.
  • Additional cost for the first year 1.38 million.
    They have already raised over 3 million more
    most unsolicited.
  • Adding a Faculty Mentor to the program.

33
Merit Based Approach
  • Dont just give out the money, build a bridge
    with the student
  • Focus on Emotional Middle Class
  • Make application easy
  • Interviews/Campus Visits
  • Overnight stays in residence halls
  • Lunch with Faculty

34
Multi-Task
  • Faculty Mentors good for both faculty and
    students
  • Interview Days, include current students,
    faculty, staff, alumni, and donors.
  • Create Communities
  • Restricted Money Combine many small scholarships
    into one application.

35
Questions
  • Thank You
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