Financial Aid Tip of the Month

Do not starve families out

2010-05-01T12:00:00.000-07:00

Just because you've given a family enough aid to convince them to enroll doesn't mean you have given them enough to survive. It is essential for a school to budget tuition aid adequate to enable families to pay without sabotaging their family's financial health.

A good, workable percentage for a financially healthy family to spend on tuition is around 5%. If tuition represents more than 5% of their budget, they must cut somewhere to fit you in. There's a typical protocol for how families cut, but they usually begin by cutting retirement or savings.

If your aid package is such that they're forced to cut on essentials, or if your aid package pushes them too close to the limit, then eventually something will happen that requires them to take tuition money and pay something else. At that point it's just a matter of time before they are forced to leave.

Feel free to contact us for a copy of "Tuition Aid and Financial Health." In this white paper you will learn line-by-line what happens to a family's budget when they enroll in your school.

Not over 50%

2010-04-01T09:17:00.000-07:00

Tuition Aid Tip of the Week

Do not give over 50% to anyone, including employees.

Why not give more?
If the services you provide have value, which they do, then they should be paid for. We have found that most families applying for tuition aid can adjust even meager budgets to handle a reduced tuition payment. There may be times when this is impossible, but for most families these times will have a clear beginning and a clear end. Restrict any exceptions to the 50% policy to this time frame if you can.

We have found that when tuition exceeds 7-10% of a family's net income it becomes difficult to pay. If your tuition is average for the US, about $4,000, then it is out of reach for nearly half of your community's families.

If you give a family a 50% scholarship, this reduces their tuition to about $2,000 per year for one child. This brings your tuition within reach of about 80% of your community's families. You could reach even more with creative ways to provide even more subsidy for families making under $50,000, such as part-time employment.

With regards to employees - unless your salaries are so low that you have to subsidize salaries with free tuition for your employees we would suggest that the maximum you give to employees is also 50%. Some schools will only provide tuition breaks to employees with a demonstrated financial need.

What about exceptions?
There will always be exceptions. We recommend that exceptions to this rule be made only in response to a written request presented to the committee by the family. The committee can make a decision based on the facts they have gathered, but that exceptions should be limited to one year, or one semester, at a time. The committee's decision should be documented and placed in the family file.

Creative ways to raise funds

2010-03-01T09:24:00.000-08:00

Consider creative ways to raise funds designated for scholarship or tuition assistance.

It's okay if tuition assistance moneys come out of your budget. Most schools do it that way.

However, if you are giving away 5% of your tuition income as tuition assistance, and then raising that same 5% through fund raisers to subsidize your budget, you may find fund raising much easier if the appeal is for scholarships rather than for general expenditures.

Also consider delivering written proposals to churches from which you get a number of students, asking for a monthly commitment to tuition assistance specifically for families from that church. (Clients of CFS have sample proposals in their CFA Manual "A One-Day Tuition Assistance Program.")

Two other ways schools have successfully raised funds for tuition aid:

Matching gifts. Find a donor who is willing to commit to a fund raising program in which donors give funds for either your General or Annual Fund, or for a specific project - like you always have. The difference is this: for every dollar given, your matching donor will give a dollar to your aid fund. Donors will often give more if they know their gift is doubled. They will often give more if they know the "match" is going toward tuition aid.

Enterprises. Some schools have successfully started book stores, thrift stores, or even services within the community. These enterprises can provide part-time employment opportunities for families needing a little extra cash, while all the profit goes to your tuition aid fund.

Require students to meet behavioral and academic standards to continue receiving tuition assistance.

2010-02-01T13:42:00.000-08:00

By tying the continuation of tuition assistance to behavioral and academic standards you quickly erase the complaint that tuition assistance funds only attract undesirable students.

This will give you leverage in dealing with tough situations in which the families are also on assistance. It will also give parents leverage in working with their child's academic performance.

Commit to continuing aid

2010-01-01T13:43:00.000-08:00

If you bring someone into your school using tuition aid and their financial situation doesn't change, you need to have a commitment to continue the aid.

Okay, so this doesn't need much explanation. Obviously the ethical thing to do is to continue your financial commitment to the family if their situation doesn't change.

Maybe you have seen cases where school boards have cut tuition aid because of pressure to cut the school's budget to account for tuition shortfalls. We have. Certainly areas not critical to the school's commitment to excellence are at the top of the hit list.

However, if the board is willing to cut aid to families already enrolled, the damage of that decision will extend way beyond the two or three families who will have to dis-enroll because of finances. Not only does it generate negative PR in the community, it also communicates that there is instability within the school's leadership.

I read the other day that companies that choose to continue a healthy commitment to their marketing budget during financial downturns come out much stronger than their competitors two years later.

Not the Administrator, not the Board

2009-12-01T13:48:00.000-08:00

Use a committee of 3-5 to make tuition assistance decisions, (not the administrator and not the board).

In a recent survey we learned that it is not at all unusual for an administrator to make tuition assistance decisions on his/her own - and in many cases in the presence of the families. Let me say this nicely - that is not the most prudent course of action. The administrator who does this opens himself/herself up to potential complaints when families feel that there have been inequities - especially if the inequity means that they pay more than their friend pays.

It is much cleaner and more professional to utilize a committee to make these decisions. Then the administrator can distance himself or herself from the financial portion of the family's decision. Not only does this appear to be more professional to the families, it also relieves the administrator of one more task that he/she does not have to do.

In most schools it isn't too difficult to find 3-5 families who can make wise decisions and can keep a confidence. A good job description will go a long ways in spelling out your expectations. (CFAs' client manual includes a comprehensive job description that includes a list of what should be kept on file, and who should have access to those files.) If you feel more comfortable with a board presence, assign one board member to the committee - typically the board Treasurer.

Scale back on multiple-child discounts

2009-11-01T13:52:00.000-08:00

Our school was like many others in the US. We provided hefty multiple-child discounts. Then one day a mother came to us and said "Here's a check for the difference - I don't need a discount, and it's not right for me to take it."

There seems to be some psychological advantage to giving discounts. That's why we shop at Sam's or COSTCO. We believe that if we purchase by the case we should get it cheaper. But allowing a third or fourth child to attend for free only hurts the school financially and makes you seem like a discount warehouse. On the other side of this coin: reducing multiple-child discounts will enable you to free up more funds for families with a demonstrated need.

A 5-8% maximum would be a more reasonable discount. Multiple-child families who still find it hard to afford a Christian education for their children can apply for tuition assistance, and receive it - based on their actual financial situation. This is a much more cost-effective way to deal with tuition and tuition discounts.

Budget tuition aid based on a percentage of tuition income rather than a dollar amount.

2009-10-01T13:37:00.000-07:00

Let's say your budget anticipates $500,000 in tuition income, and you plan on giving out $50,000 in tuition aid (10% of your anticipated tuition income). When the $50,000 is used, and the dollars are all gone, then the Administrator or the individual responsible for recruitment has to go back to the board for more money. If the budget is based on a percentage - in this case 10% of tuition income, then whether your enrollment grows or shrinks the recruiter will have much more freedom in using tuition assistance for recruiting new families.

What's a reasonable percentage?
The average school in the US gives away about 4% of their tuition income. Research has shown that this is definitely not enough. As a result the percentage of Christian school families making $35,000 - $100,000 is shrinking rapidly.

There are actually two targets for tuition assistance funds to keep in mind when trying to determine how much is enough.

1) Your current families. How much is enough to retain your current families? 6-10% is probably a better number to start with. You could begin planning with your current percentage, and increase that percentage every time you increase tuition, because every time tuition increases, a larger number of families will need help paying it.

2) If you desire to use tuition assistance as a recruitment tool, you will need to venture into the 10-15% range. This will vary depending upon how high your tuition is and how many lower-income families you want to reach. Keep in mind that the average family applying for tuition assistance will need 1/3 to 1/ 2 of their tuition paid.

Increase financial aid twice as fast as you increase tuition

2009-09-01T13:02:00.000-07:00

Rule of thumb:
When tuition exceeds 7%-10% of a family's net monthly income, it becomes difficult for them to pay.

Every time you increase tuition, you increase the number of families within your school who cannot afford your tuition.

To ensure that there is an adequate amount of aid available you should plan to increase tuition aid twice what you increase tuition. In other words, if you increase tuition 5% you should increase tuition aid 10%. If you increase tuition 7% you should increase tuition aid 14%.

In surveying schools for nearly 20 years we have seen a disturbing trend. Schools have increased tuition with little or no increases in tuition aid. As a result, the percentage of enrolled families making $35,000 - $100,000 has been decreasing at a rapid rate.

For many schools the percentage of families making under $35,000 hasn't changed appreciably. This is because the meager tuition aid they do give out meets this group's needs. The group shrinking is families making between $35,000 and $100,000. They are being replaced by families making over $100,000.

Using the 7%-10% rule of thumb, if your tuition is $4,000, and a family taking home, say, $90,000, has 2 children enrolled, they will be having difficulty paying tuition. ($90K yields about $6K/month take-home. 7% of that, $420/month = the stress point.)

Help Families Find Additional Income

2009-08-19T07:44:00.000-07:00

It is not unusual for a school to not have enough tuition aid money to help all families to the extent that they need help.

Many schools have addressed this problem by reserving part time employment opportunities within the school for applicant families. At least, give them a hiring priority. There are numerous jobs that could be reserved for these families, such as: housekeeping, teacher's aid, maintenance, kitchen, bus driver, special school projects, or special maintenance projects.

Schools can also minister to these families by developing a system for keeping tabs on part time employment opportunities within the community. There are many ways to do this. One suggestion is to ask either your church families or your school families to complete a form that tells you about opportunities they are aware of, along with a contact person and phone number.

You will need to be diligent to keep these up to date, asking for these referrals on a regular basis. These can be posted on your website for any family needing a little extra income to view.

Require Counseling

2009-08-12T07:56:00.000-07:00

If you go to the doctor and he says your numbers are not good, he will tell you: "You can not carry on the way you are and expect to last for very long." We may need to tell families receiving financial aid the same thing.

Our standard recommendation for maximum tuition aid is 50% of the the tuition amount. If a family receiving aid cannot afford even their half of the standard tuition, often schools will make an exception for them. This exception is typically because of a circumstance that, hopefully, has a time limit.

If you make an exception to your standard award that enables them to enroll, we recommend that you require that they see a financial counselor.

Better yet, provide training for an employee in your school, or a family, or even a board member, so that they can become certified as a Crown Financial Coach.

To find a free coach in your area, the family must request a contact name from Crown. You cannot do this for them. They can do this at: www.crown.org/financialwisdom/church/budgetcoach.asp or by calling 800-722-1976.

An alternative: you may be able to find a free non-profit financial counselor in your area by going to dexonline.com and searching for "credit & debt counseling."

Some schools have even required every family receiving tuition aid to attend a series of money management. Do this and you may find non-aid families asking to attend as well.

Accurate Assessment

2009-05-26T11:56:00.000-07:00

Whenever you award tuition aid, it is critical to accurately assess a family's ability to pay. An accurate assessment will accomplish two very important functions:

1) You will help the family in a manner that will enable them to pay tuition and survive financially.

To give a family an inadequate award will certainly entice them to enroll most of the time. Way before they ever apply for aid they have decided they want to enroll their child in your school. Most families don't have a very good handle on their ability to pay tuition, so if it looks like your aid package will help them, they'll enroll. If the amount is inadequate, there will eventually be a time when they have to choose between tuition and another high priority demand. If they choose against tuition, they will leave and your tuition aid will not have provided their child with a Christian education, but rather a Christian interlude to a secular education.

2) You will help the maximum number of families.

If 2 families get a awards that are 50% too much, there will be a third family who will get nothing because you won't have the funds available.

CFS's Confidential Financial Analysis accurately and quickly evaluates a families ability to pay. You can even choose to have us verify the family's information for reliability.

(copyright)Confidential Financial Services, 2009
PO Box 6903
Colorado Springs, CO 80934
888-685-5783
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