As college costs continue to rise quickly, developing a successful financial aid strategy is more important than ever. But which strategies help create the most successful financial aid plans?
My colleagues and I at Noel-Levitz have consulted with many, many campuses about financial aid, and while every campus has its own individual challenges and goals, the following eight steps can start you on the path toward constructing, implementing, and evaluating your strategy.
1) Develop an analytical framework
The first step to developing this framework is to understand the purpose, or goal, of your aid strategy. At many campuses this goal is simple:
- Enroll a desired number of students.
- Enroll students with desired characteristics.
- Control the institutions discount rate and financial aid expenditures.
- Achieve a targeted revenue goal.
A framework should take into consideration a student’s ability to pay (EFC-Expected Family Contribution) as well as willingness to pay best demonstrated by the enrollment rate of those students receiving no aid to attend your institution (full pay).
2) Determine the appropriate market segmentation
Understanding the behavior of various groups of students can help you assess where you may wish to redirect additional institutional financial aid resources. If you wish to enroll greater numbers of students from a specific state or geographic region, it is important to understand how those students currently react to your aid strategy. If you wish to support your recruitment efforts with a targeted aid strategy in order to increase the enrollment of a specific major, it’s important to know how many of these students are currently being attracted to the university.
3) Develop a scholarship program
One thing I learned very early in my career is that financial aid, specifically scholarships, are delivered at every stage of the funnel. In other words, students are seeking scholarships, but do our scholarships seek students? Keep your program simple and, whenever possible, award your scholarships early in the cycle to more effectively “fish.”
4) Measure student response to your net price offer
Evaluate specific groups here: need-based students who may receive a full complement of aid from your past or prior practices, and those students who are not considered need based (“no need”) along with those students considered low need. In the end, these students are likely to only receive your merit scholarship award (trigger). If your scholarship awards are not satisfactory, or student response (yield rate) is low, you could be missing out on enrollments.
5) Understand the impact of non-financial variables
College choice is not just about dollars and cents. We know that students and parents will pay more for that which they value more highly. You need to assess and account for the impact of things such as your academic program offerings, location, and other factors that add value to the enrollment experience at your campus.
6) Begin developing your financial aid model
If possible, use a real-time model which allows you to measure the impact of multiple assumptions and any changes that may occur as a result of changes to these assumptions. This will help you put a price on the wish list of your desired class.
Step one: Establish academic boundaries and group students who share similar academic characteristics. Some of the criteria that can be used to determine academic boundaries include high school GPA, class rank, test scores, combination/index, institutional rating, and other specialized ratings such as portfolio scores for art schools.
Step two: Choose some financial measurement. The most common choices are EFC or financial need.
Step three: Input a set of assumptions about the future. Basic assumptions and inputs should include:
- Direct charges for the upcoming year
- Expected admitted pool for the upcoming year
- Desired enrolled pool for the upcoming year
- Anticipated state and/or federal aid changes for the upcoming year
- Scholarship levels by academic level (or other factor)
- Aid packages
7) Evaluate your chosen strategies
As important as it is to have a financial aid strategy, it’s also important to evaluate the strategy you have in place. This can be done through regular tracking whereby you measure your admit pool composition, student responses to aid offers (tracked in real time), and aid offered to admitted students vs. aid committed to deposited students, to name three particularly effective metrics.
8) Address the goals of new students and returning students
As we say in the higher education world, we are recruiting graduates, and it’s always more cost efficient to keep the students that we have than it is to find new ones to replace them. A multi-year enrollment tool can help you demonstrate this as well as the aid and revenue implications. You should also evaluate your current financial aid policies to eliminate any barriers that may exist. For example, if a prospective student receives a scholarship because he or she earned a 3.5 GPA in high school, does it make sense to require that same student to earn a 3.5 (or greater) at your institution in order to renew that same scholarship?
I hope you find these strategies helpful. If you have any questions about how you can implement these ideas or optimize your current financial aid awarding, please send me an e-mail and I will be happy to share recommendations. I also will be discussing these steps in more detail during my “Financial Aid for Rookies” presentation at the National Conference on Student Recruitment, Marketing, and Retention, this July in New Orleans. I hope to see you there.
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