Net Tuition Revenue:
Practical Techniques to Maximize
Enrollment and Financial Aid
Part I
TABS Conference - Washington, D.C.
December 3, 1999
Scott Looney
Director of
Admission & Financial Aid
Cranbrook Schools
Matt Berg
Director of
Administrative Services
Cranbrook Schools
Net Tuition Revenue and
Admission Accountability
Review independent school tuition and
enrollment trends.
 Examine the philosophy behind NTRA.
 Examine the price vs. demand dynamic.
 Explain the Implementation of NTRA.
 Demonstrate NTRA budgeting.

The Legacy of Deferred Maintenance
Around 1980 schools began to address the
issues of deferred maintenance and faculty
salaries.
 Tuitions were raised to cover the increased
costs associated with improving physical
plants and increasing teacher salaries.
 Income from sources other than tuition did
not increase.

Rise in Boarding Tuitions
20000
16000
12000
Indexed w/ CPI
Tuition
8000
4000
"Access and Affordability",
NAIS
0
1955
1960
1965
1970
1975
1980
1985
1990
1995
1998
Boarding Affordability Index
4.1
4
Percent of
families who
can afford
tuition
3.9
3.8
3.7
3.6
Boarding
3.5
"Access and Affordability",
NAIS
3.4
80-81 81-82 82-83 83-84 84-85 85-86 86-87 87-88 88-89
Rise in Day Tuitions
12000
10000
8000
Tuition
Indexed w/ CPI
6000
4000
2000
"Access and Affordability",
NAIS
0
1955
1960
1965
1970
1975
1980
1985
1990
1995
1998
Day Affordability Index
12.5
12
Percent of
families who
can afford
tuition
11.5
11
10.5
Day
10
"Access and Affordability",
NAIS
9.5
80-81 81-82 82-83 83-84 84-85 85-86 86-87 87-88 88-89
Demand vs. Cost




From the 1999 NAIS public opinion poll: “If cost were
not a factor, which would you chose for your child?”
Responses: 39% public, 30% independent, 28%
parochial school (total private =58%).
In a 1995 survey, “57% of parents with children in public
school said they would switch to private school if they
could afford to do so.” API
In 1971 62% of parents felt that the public school system
was preparing their children better than they were
prepared, in 1994 only 42% of parents felt that way.
Parent’s confidence in the public school system is
declining quickly, and demand for private education
seems to be increasing.
Ratios per Enrollee 1989 -1997
10
9
8
89-90
90-91
91-92
92-93
93-94
94-95
95-96
96-97
97-98
7
6
5
4
3
2
1
0
NAIS statistics
Inquiries
Apps
Accepts
Enrollment Growth
by School Type (1988-1998)
40
35
30
25
20
10 year
5 year
1 year
15
10
5
0
-5
NAIS statistics
Boarding
Boarding-Day Day-Boarding
Day
*from "Liberal Arts Colleges:
Thriving, Surviving or Endangered?":
David W. Breneman
The Brookings Institution
Enrollment Demand, Price and Revenue*
Demand
Price
High Tuition
Tuition
Tuition
Revenue
Low Tuition
(High Tuition
Revenue
LowTuition
Enrollment)
(Price X Enrollment)
Tuition Revenue
(Low Tuition, High FP Enrollment)
0
Low FP
Enrollment
Full Paying High FP
Students
Enrollment
Enrollment
*from "Liberal Arts Colleges:
Thriving, Surviving or Endangered?":
David W. Breneman
The Brookings Instituition
Enrollment Demand
and Net Tuition Revenue*
Tuition
D
Unfunded
student aid
Optimal Enrollment
Tuition
rate
Full Paying
Tuition Revenue
Net tuition
revenue
due to aid
D
Total on aid
Enrollment
0
Total
Full Payers
Total
enrolled
High
Demand
Tuition
*from "Liberal Arts Colleges:
Thriving, Surviving or Endangered?":
David W. Breneman
The Brookings Institution
Enrollment Demand
and Net Tuition Revenue*
Moderate
Demand
Low
Demand
Tuition
rate
H
M
L
0
Low
Full Payers
Moderate
Full Payers
High
Full Payers
Enrollment
High
Demand
Tuition
*from "Liberal Arts Colleges:
Thriving, Surviving or Endangered?":
David W. Breneman
The Brookings Institution
Enrollment Demand
and Net Tuition Revenue*
Moderate
Demand
Optimal
Enrollment
Low
Demand
Tuition
rate
Unfunded
Aid
FA Revenue
Full Pay
Revenue
H
M
L
0
Low
Full Payers
Moderate
Full Payers
High
Full Payers
Enrollment
High
Demand
Tuition
*from "Liberal Arts Colleges:
Thriving, Surviving or Endangered?":
David W. Breneman
The Brookings Institution
Enrollment Demand
and Net Tuition Revenue*
Moderate
Demand
Optimal
Enrollment
Low
Demand
Tuition
rate
Full
Pay
Revenue
Unfunded
Unfunded
Student Aid
Student
Aid
FA
FA
Revenue
Revenue
H
M
L
0
Low
Full Payers
Moderate
Full Payers
High
Full Payers
Enrollment
Tuition
All who
meet
criteria
All who
would
attend
Enrollment Demand
at stages in admission process*
Matriculating
*from "Liberal Arts Colleges:
Thriving, Surviving or Endangered?":
David W. Breneman
The Brookings Institution
Unfunded
student aid
Tuition
rate
A
B
C
D1
D2
0
D3
Desired
Enrollment
Enrollment
Admission Accountability
QUALITY and composition of Student
body: Academic, Diversity, Extracurricular.
 QUANTITY - Enrollment at optimal level
(capacity).
 REVENUE -Net Tuition Revenue.

Financial Aid is not real money...
Financial Aid is potential revenue lost.
 Unless a school is turning away qualified full
paying students, in order to make a space for a
student receiving financial aid, there is no
revenue lost by admitting students who receive
aid.
 In fact, financial aid students are a valuable
source of revenue!

Is the glass half empty or half full?
Net Tuition Revenue = the tuition remaining after
the marginal cost of educating that student
(receiving aid) is subtracted from tuition paid.
 Tuition = $20,000 but family only pays school
$10,000 and the additional marginal cost to
educate that child is $2,000. Net tuition revenue
is $8,000.
 So, this student could be viewed as a $10,000
loss (traditional F/A accounting) or a $8,000
gain (net tuition revenue accounting).

Students on Aid are a source of income,
not a cost to the school.
Look at the tuition revenue (beyond
marginal costs) generated by students on
financial aid.
 In most schools, the revenue generated from
families on financial aid is significant.

Cranbrook Upper School
Financial Aid Revenue as % of Total
FA
Financial Full
revenue
Aid
Paying
Total
as % of
Revenue Revenue Revenue
Total
Boarding $ 729,701 $2,857,800 $ 3,587,501 20.3%
Day
$ 430,975 $6,293,000 $ 6,723,975
Total
$1,160,676 $9,150,800 $10,311,476 11.3%
6.4%
Traditional vs. NTR accounting
Boarding vs. Day Costs
Boarding Tuition
$21,500
less:
food
(1,200)
activities
(250)
net
$20,050
Day Tuition
$14,500
Difference
$ 5,550
Faculty Cost
Cost of teaching an additional section:
Number of students per section
Contribution required per student to
break even on additional section.
$6,000
10
$600
Budgeting Scenarios
Spending more aid is fiscally responsible...
“Capping the amount of unfunded student aid is not an
option (for schools under capacity). And yet, that is
precisely the type of move that college officials are
tempted to try, ignoring the logic of the downward
sloping demand curve. Capping unfunded student aid
at some arbitrary percentage of the expense budget,
unrelated to the demand curve, could result in lower
enrollments and a loss in net tuition revenue.”
David W. Breneman
Liberal Arts Colleges: Thriving,
Surviving or Endangered?
How do you move towards
Net Tuition Revenue accountability?



Prepare:
1) revenue, enrollment and financial aid histories;
2) a financial analysis of the potential impact;
3) a budgeting system.
Work to get all constituencies (Admission, Business
Manager, Head, Board) to understand concept. Assure
them that this will make admission more financially
accountable.
Supply Head and Board with information necessary to
accept tuition revenue and let go of traditional financial
aid accounting.
Challenges of
Net Tuition Revenue Accounting





Accurate accounting of both tuition revenue and
financial aid.
Realistic two or three year enrollment and
financial aid projections.
Establishing the school’s true capacity, without
increasing the fixed costs.
Establishing the marginal cost of educating one
additional student at your school.
Getting the Admission/Financial Aid Director,
Head, Business Manager and the Board to fully
understand the concept and ramifications of
NTRA.
Budgeting





Spread awards across grades, don’t commit too
much aid to younger students.
Don’t spend too much of future years’ budgets.
Have F/A goals or limits as to how many full, half,
small, etc.... awards to be given.
Create a system to track tuition revenue and F/A
numbers accurately.
(Go to spreadsheet).
True of independent schools as well...?
“Across the country colleges are raising their sticker prices
(tuition, room and board) yet they’re losing money. In
relative terms, it costs students less to attend college than
it did a decade ago because of increased financial aid.
The long-term problem is that we have invented a form
of education that’s too expensive. Collectively (liberal
arts colleges) must decide how to deliver quality
education we now deliver, for less money.”
Robert Zemsky
Founding Director
Institute for Research on Higher Education
University of Pennsylvania
Challenges of Net Tuition Revenue Accounting






Accurate accounting of both tuition revenue and
financial aid.
Realistic two or three year enrollment and financial aid
projections.
Understand the difference between PROJECTIONS and
GOALS
Determinng the school’s true capacity, without
increasing the fixed costs.
Determining the marginal cost of educating one
additional student at your school.
Getting the Admission/Financial Aid Director, Head,
Business Manager and the Board to fully understand the
concept and ramifications of NTRA.
Suggested Reading







Liberal Arts Colleges: Thriving, Surviving, or Endangered? (Chapters
2 - 4), David W. Breneman, Brookings Institution, 1994.
Access and Affordability. Peter Aiken, NAIS, 1994
“A New Equation for Tuition and Aid Policies”, Arthur M. Hauptman,
Priorities Newsletter, Number 8, Spring 1997, Association of
Governing Boards of Universities and Colleges
“Liberal Arts Colleges…Economic Challenges”, University of
Pennsylvania Homepage, (http://slab.mtholyo…960412/experts.html)
“Student Aid: Price Discount or Educational Investment?”, William G.
Bowen and David W. Breneman, Brookings Review, vol 11 (Winter
1993), pp. 28-31.
College Tuition Spiral: An Examination of Why Charges are
Increasing. Arthur M. Hauptman and Jamie P. Meisotis, MacMillian
Publishing 1990.
“Enrollments Surge Following Big Cuts in Tuitions Rates at Private
Colleges”, Ben Gose, The Chronicle of Higher Education, August 9,
1996.
Net Tuition Revenue:
Practical Techniques to Maximize
Enrollment and Financial Aid
Part II
TABS Conference - Washington, D.C.
December 3, 1999
Scott Looney
Director of
Admission & Financial Aid
Cranbrook Schools
Matt Berg
Director of
Administrative Services
Cranbrook Schools
Financial Aid is not real money...
Financial Aid is potential revenue lost.
 Unless a school is turning away qualified full
paying students, in order to make a space for a
student receiving financial aid, there is no
revenue lost by admitting students who receive
aid.
 In fact, financial aid students are a valuable
source of revenue!

Is the glass half empty or half full?
Net Tuition Revenue = the tuition remaining after
the marginal cost of educating that student
(receiving aid) is subtracted from tuition paid.
 Tuition = $20,000 but family only pays school
$10,000 and the additional marginal cost to
educate that child is $2,000. Net tuition revenue
is $8,000.
 So, this student could be viewed as a $10,000
loss (traditional F/A accounting) or a $8,000
gain (net tuition revenue accounting).

Case study #1:Boarding/Day School, 300 Students



Situation:1) 20-25 students under capacity for several years; 2)
long financial aid waiting lists of talented students; 3) late
boarding student applicant pool; 4) high tuition dependency…
very tight budget.
Strategy: 1) Attempt to fill as many spaces as possible with
traditional financial aid accounting until August 15th; 2) on Aug.
15th determine how many remaining spaces will likely not be
filled before the opening of school; 3) meet the demonstrated
need of those students who will advantage LFA in revenue and
ability, without over committing for future years.
Results: 1) Average entering SSAT scores raised, AP scores
increased dramatically, average GPA of attending students
increased; 2) increased boarding enrollment by over 20 % in
three years 3) produced a small tuition surplus each year of
NTRA.
Case Study #2: Cranbrook Schools



Situation: 1) Strong lower, middle and upper school day enrollment; 2)
declining boarding student enrollment, at a 20 year low (low morale in
boarding program with decreasing retention); 3) strong school financial
position and tuition revenue; 4) Upper School 17 students from capacity.
Strategy: 1) Persuade Business Manager and Head to agree to tuition
revenue equal to previous year…so, any revenue from those additional 17
spaces is bonus money; 2) Second year increase US capacity by five
students without increasing revenue goal (results in five new full
scholarships.); 3) use additional revenue to fund boarding students; 4)
unlimited number of boarding scholarships $5,000 and under (Day tuition
+ marginal cost of adding boarding student = $15,500).
Results: 1) All divisions enrolled to capacity; 2) boarding enrollment goes
from 195 to 255 in two years (30%) increase; 3) average entering SSAT
scaled score up 3 points (about 15 percentage points) and average entering
GPA up from 3.4 to 3.7; 4) boarding student retention goes from 84% to
92%; 5) tuition surplus generated each year, $80,000 first year, $350,000
the second; 6) financial aid is no longer reported to the Board, only tuition
revenue figures are reported…FA is irrelevant.
Case study #3: Boarding/Day School



Situation:1) Rapidly increased enrollment from 150s to 230 using
NTRA 2) Large number of new students receiving financial aid grants
over $10,000; 3) Average net tuition was only slightly above half the
total tuition cost; 4) Parents were paying only 43% of the total income
figure budgeted by the school.
Strategy: 1) Reduce the number of “big” financial aid awards; 2)
Increase the number of smaller financial aid awards; 3) Increase tuition
revenue being paid by families, with goal of achieving an 80% figure
by 1998; 4) If possible, also increase enrollment and improve student
composition.
Results:
Year
92-93
93-94
94-95
95-96
96-97
97-98
Enrollment
232
228
NTR per
student
Tuition
$8,797
$9,991
% on FA
232
246
286
292
$11,402 $12,498 $13,516 $14,923
$16,200 $17,300 $17,800 $18,500 $18,900 $19,500
55%
54%
53%
52%
51%
51%
TABS Academy
(9-12, Boarding/day school of 300 students
Mission Statement:
At TA, we stress self-reliance, respect
and diversity in a learning community. We believe in educating
the whole child, with a strong emphasis on character
development and spiritual growth. We offer talented young
people the opportunity to develop their creative abilities in a
wholesome community under the guidance of an exemplary
faculty.
Enrollment Situation
Ideal enrollment would be 300 students, but the highest
enrollment achieved in the last 8 years is 280, by August 15th
with current enrollment is sitting at 277, with no strong
candidates in the pipeline. However, 29 students are on the
Financial Aid waiting list.
TABS Academy Enrollment
Grade
Actual
Enroll
52
68
85
72
Difference
9
10th
11th
th
12
Ideal
Enrollment
65
80
80
75
Totals
300
277
-23
th
- 13
-12
+5
-3
TABS Academy Financial Aid Waitlist
Trying to maximize enrollments, student
quality, net revenue and diversity…who
you chose?
 Remember to balance your classes and not
to mortgage future financial aid budgets too
greatly.
 TABS Academy entering students average a
3.2 GPA and 50% on testing.

Calculating Spreadsheets
Baseline
Calculating Spreadsheets
Maximize GPA
Calculating Spreadsheets
Maximize Revenue
For Copies of this Presentation





Leave your business card with us
(indicate paper, electronic or both)
or:
E-mail: [email protected]
Phone:
248-645-3409
Fax:
248-645-3025
Mail:
D. Scott Looney
Director of Admission & Financial Aid
Cranbrook Schools -Office of Admission
1221 N. Woodward Ave.
Bloomfield Hills, MI 48304