Financial aid plays a huge role in a family’s decision to enroll at an independent or private school. And with COVID-19 impacting the economic landscape on such a large scale, many schools may need to revisit their financial aid approach to remain marketable and affordable for the next class.
You’ve likely thought a lot about your school’s affordability in the past couple of months. However, in order to turn those concerns into a plan of action, you first need to know what financial aid offers and discounts you have available and what you’re willing to offer.
One problem many schools face is a lack of innovation or knowledge about exactly how to change their financial aid approach. And while many schools rely on the old financial aid calculations and systems, the amounts families are expected to pay are often based on an outdated model and are unreasonable for many modern families. This is especially true with the additional strain COVID-19 has placed on families already struggling.
So what can you do to help families and ensure you meet your enrollment goals?
Here are two financial aid ideas schools can implement today to better serve the modern family.
Idea #1: Account for student loan debt
I recommend taking student debt into account when calculating a family’s tuition cost. Doing so will have a big impact on younger parent applicants that have student loan debt. It will also help the families who have been struggling all along. It will also help protect against attrition.
For families with significant student debt, calculate the rough amount they’ll pay annually. Then remove that out of their tuition equation. This will make your tuition request far more aligned with a family’s ability to pay and increase their likelihood of viewing your independent or private school as a viable option.
Here are some steps you can take to do that:
1. Establish the range of loan debt you want to provide a discount for.
For example, you may decide that if a family has $75,000 or higher in student loan debt, you’ll offer a special discount.
2. Consider including a question about loan debt on your financial aid application.
If it fits with your application and makes sense for your school, you may want to ask families a general question about loan debt. It’s important to understand where your prospective families are coming from and collect data on which demographics have loan debt, and how much.
3. Use a financial aid calculator (I use the one on FinAid or instant aid.org).
Use a financial aid calculator to calculate the approximate annual payment towards student loan debt for each range. For someone with $75,000 in loan debt, that would be around $700 or $800 a month, which comes out to $9,600 annually.
4. Subtract the annual loan debt payment from the family’s total income.
Subtracting annual loan debt payments out of a family’s income takes it out of the equation to ease the burden on families with higher debt.
Fair discounting, or financial aid, should be the number one priority for families. Student loan payments aren’t often accounted for in financial aid offers. By alleviating the burden for families with large amounts of debt, you’ll ensure the actual payment amounts are far more manageable.
Idea #2: Cap Home Equity
I recommend capping home equity. The financial aid systems independent schools use often treat home equity like cash. The calculation is called an income supplement and was designed many years ago when home values didn’t appreciate at the rate they do today.
To figure out where to cap home equity, you may need to set aside a couple of hours and run some reports. Figure out what people in your area are spending, their general expenses, and home equity averages in the area. Then you can come up with an accurate and fair amount to cap home equity at that accounts for your school’s specific market.
Back in the day, families may have felt more strongly about independent schools and decided to struggle through a tight financial situation to make it work. I don’t get the sense that people today feel the same way. I think they’re more apt to say, “free is probably okay”. Consequently, in order to ensure families choose your private school, you have to be willing to meet families where they’re at.
Tips for Implementing Financial Aid Changes
Making changes to the way your school approaches financial aid can lead to increases in enrollment. However, the way you go about implementing those changes is equally important.
Here are a couple of tips to remember when making financial aid changes:
- Don’t just discount for discount sake
Aim to offer discounts for your families with a clear purpose. As you probably know, you shouldn’t pick a random amount to discount. Instead, you’ll want to think through your financial aid carefully and calculate discounts based on your school’s specific goals and needs as well as the families you serve.
- Document and formalize your process
If you decide to implement one or both of these ideas, you’ll want to do so in a way that’s consistent across the board. I recommend documenting new financial aid approaches and making them a formal part of your financial aid policy. Knowing who you offer aid to, and how much aid you offer will simplify your process. Having a clear system in place ensures your discounts are fair across the board. You should calculate the amount you will subtract from tuition for parents with every range or value of student loan debt or home equity. And you can do that now. For example, you could have a set tuition subtraction for parents with 10,000-20,000 in loans, 20,000-30,000 in loans, and so on.
- Implement slowly
It might be helpful to implement new ideas over a two year time period. The changes you make will impact your budget, so, initially, you’ll feel the pinch of it. But you’re more apt to have longer-term growth by meeting the modern family’s needs. And for many families, these changes will provide relief in a time when they need it most.
Short Term Cost for a Long Term Investment
Cost can be a make it or break it for families. It’s often the deciding factor when families aren’t sure if they will enroll at an independent or private school. One way to win modern families over and help them through difficult times is by meeting them where they’re at. Making changes in your financial aid for families with debt or home equity may feel like a cost initially, but these families are a long term investment. You have a chance to serve these families in a new way, especially during such a difficult season. And they’ll likely show you long-term loyalty as a result. Especially if you’re willing to give them a little extra help when they most need it.
More From Alisa on Financial Aid
Alisa Evans shared some great resources to help your school respond to families struggling financially as a result of COVID-19. Here are some of the resources:
- COVID appeal award sample letter
- COVID emergency need-based financial aid instructions
- COVID related appeal response
- COVID supplemental form
You can find more resources, ideas, and help on the Mission Enrollment website.
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