Have you ever wondered how in the world do colleges come up with their price each year?
Is the process anymore complex than waiting to see how “the competition” prices itself?
What are the considerations?
What are the questions?
What’s the process?
I bet there are many people out there, from public policy makers, to parents and students, to faculty and staff members, who might be curious about this annual ritual.
I thought it might be helpful to describe the process I am involved in annually at Augustana College to provide an example. It’s my hope to be general enough that everyone can follow the process, but also to provide some important details where possible.
This is in no way a complete description of the many considerations that go into the decision-making process, but it’s a start. My goal is to keep is simple and provide the perspective of an enrollment leader.
Another goal is to reinforce the idea that establishing price (and by virtue of establishing price, determining net cost) is neither as haphazard as tossing darts at a dartboard or a scientific certainty. It’s complex and somewhat idiosyncratic.
The following post includes a time-line along with some description of what happens along the way. At the end I’ve also included some observations about topics discussed in recent years, which were not discussed ten or fifteen years ago.
I hope you will find this helpful.
|College price setting timeline|
|Step 1||May||Evaluation of efforts for previous recruitment cycle. Typically includes taking stock of the class. Did we make the class? Was it the right “shape” in regard to profile, gender, diversity, etc.? How much did we spend in financial assistance in an effort to attract the class? And, how much total revenue did the class generate? (Reflection)
|Step 2||June/July||In-depth statistical analysis of the previous recruitment year at macro and micro levels. The search for tends. Working with our financial aid leveraging partner we examine every single aspect of our financial program. We use a matrix that has one axis that assesses “how desirable a student is to us” and another axis that assesses a student’s available resources for paying for college. We examine yield (conversion from accepted with a financial aid offer to enrolled with a financial aid offer) in each cell of our aid matrix and look for patterns. Following examination and analysis, we start talking about goals for the following year. Lots of examination of the “discount rate,” etc. (Assessment)
|Step 3||July||Goal setting. Our process begins with discussion about enrollment goals. What size class do we desire? How many students from out of state? What is the academic profile we seek? What are demographic trends suggesting? What is the desirable socio-economic mix for the new class? How much aid can we afford to offer? How little financial aid can we afford to offer and make the class? Are there other strategic goals guiding our recruitment program? We also begin to think about merit and talent-based scholarship amounts for the following year, which are a critical aspect of our financial aid program. (Goal setting)
|Step 4||Late-July||We share our goals with our financial aid partner and begin to plug them into our financial aid leveraging model guided by performance from the previous year. We usually need to do some serious work here (i.e. increase the number of students to get the model to generate sufficient revenue, cut back the amount of merit or talent, etc). This is where the “rubber meets the road” in regard to balancing our aspirations with our resources. We typically discover that we can’t afford to do what we want to do. In this discussion we involve members of the admissions and financial aid staff and the chief financial officer (CFO), who provides guidance about “how much more revenue we need” to accomplish our financial goals for the coming year (think pay raises, new hires, programming, physical plant improvements, etc.). Hopefully, we get close enough to the targets during this process that we make the CFO and President happy and we think we can accomplish our goals. It is also during this stage that we being to model a couple of different % tuition increases based on CFO recommendations.
|Step 5||Late-July||Based on the general goals adopted, we establish merit- and talent-based awards for the following year. This is critical for us and represents a major driver of our price/cost calculation. Doing this over the summer enables us to update recruitment materials that discuss merit and talent and we can promote these awards to the thousands of summer visitors. Establishing these amounts early also allows us to update the amounts in the Net Price Calculator, which is important for transparency and accuracy with prospective students and families.
|Step 6||August||CFO and business operations staff members begin modeling 1, 3 and 5 year budgets with our new projection for net revenue based, which takes into consideration our projected increase in comp fee and the corresponding increase in financial assistance.
|Step 7||September||More work on the budget and budget model to determine if we will have sufficient revenue to meet our organizational and programmatic needs. 10th Day of Fall term, which is our census day, gives a chance finalize our financial aid projection to better inform the budget.
|Step 8||October||Fall meeting of the Board of Trustees. Review of previous years recruitment and retention efforts and assessment of net revenue position. Preliminary discussion of future budget.
|Step 9||November||Based on feedback from Board of Trustees regarding future budget, and identification of strategic needs and review of previous recruitment efforts, the president, the CFO, VP of enrollment, and the President’s Cabinet offer a recommendation for an increase in tuition, room and board for the following year. This recommendation balances the institution’s financial needs/wants, with family willingness to pay for an Augustana education. There is a healthy combination of “science” and “art” in establishing this recommendation.
|Step 10||December||Executive Committee of Board meet to discuss recommended comp fee increase and hopefully approves
|Step 11||January||Announce comp fee for following year. This year, in addition to a general press release, we sent an announcement to every employee on campus, all students expected to return and we sent a letter to parents of those students we expect to return. In a new twist we also created a brief video to accompany our release. The video does a nice job of explaining the increase in the briefest of possible terms.
|Step 12||ASAP after approval||Produce Financial Aid materials with updated costs to begin working with accepted students
|Step 13||February 1||Finalize guidelines for financial aid packaging. Establish packaging guidelines regarding the percentage of demonstrated financial need met with gift assistance, etc.
|Step 14||Mid-February||Begin offering financial assistance packages to families. (It always makes me happy to have at least one financial aid offer on the streets by February 15)
|Step 15||Beginning mid-February||Weekly leveraging phone call with our Financial Aid consultant. During these calls we monitor tends and anomalies we see within our packaging grids. We also consider year-to-year performance in a number of categories ranging from # of FASFA filers to # of financial aid awards offered to # of students committed for the fall. These calls allow for adjustments to plan.
|Step 16||March 15||Deadline for applying for financial assistance (pretty soft deadline since we know how important financial assistance is to a final college choice)
|Step 17||May 1||National Candidate’s Reply Date. This (or as near to the date as possible) date is when we start the whole cycle over once again.|
There you have it; that’s the process. Complicated? Not really. Important? Yes.
To conclude, I should note that the conversation in the past several years has been far was more focused on…
…a family’s willingness and ability to pay
…the changes in demographics in the Midwest that brings more first-generation and multicultural applicants to our pool
…our position within the broader marketplace (publics, community colleges and high-quality, more selective privates that we know many of our accepts will pay more to attend)
…far more conscientious about what the market will tolerate, rather than what we “need” to run our operation
Please let me know what questions you have about the process of establishing price and cost on a college campus.
W. Kent Barnds @bowtieadmission