Tuition Discounting Practices
Breaking the Cycle
Matt Scotty, President
National Education Servicing
Stephen Storck, Senior Assoc. VP Finance
Kent State University
October 16, 2012
1
Vicious Cycle *
• A complex series of events, with no tendency
toward equilibrium, in which each iteration of the
cycle reinforces the previous one.
• The cycle continues in the direction of its
momentum until an external factor intervenes and
breaks the cycle.
* As defined by Wikipedia
2
Vicious Cycle
A complex series of events, with no tendency toward equilibrium….
School
Increases
Discount to
Attract More
Students
School Sets
Firm Price
Enrollment
Projection
Falls Short
3
Vicious Cycle
A complex series of events, with no tendency toward equilibrium….
School
Sets Firm
Price
Student
Appeals
Discount
Rate
Increases
School
Reviews
Appeal
School
offers
more aid
4
What Does the Future Hold?
• What will happen if the current cycle (trend) of
rising tuition and discounts continues?
5
Discounts – Historical &
Projected
…in which each iteration of the cycle reinforces the previous one.
$45,000
64.00%
$40,000
56.00%
$35,000
48.00%
$30,000
40.00%
$25,000
32.00%
$20,000
24.00%
$15,000
16.00%
$10,000
Stated Tuition
Net Tuition
Discount
20
24
-2
5
20
22
-2
3
20
20
-2
1
20
18
-1
9
20
16
-1
7
20
14
-1
5
20
12
-1
3
20
10
-1
1
20
08
-0
9
20
06
-0
7
20
04
-0
5
20
02
-0
3
0.00%
20
00
-0
1
$0
19
98
-9
9
8.00%
19
96
-9
7
$5,000
6
Well-recognized Issue
…the cycle continues in the direction of its momentum
Many Industry Studies have highlighted the
challenge:
- The 2012 IHE Business Officer Survey indicates:
- Over 81% of CFOs at private schools identified increasing net tuition
revenue as an important strategy over the next 2-3 years
- More than half of CFOs at private master’s institutions (54.7%) and
baccalaureate colleges (56.2%) cited their discount rates as
“unsustainable”
- Some have tried to address the issue, but very few have done so
successfully.
7
SOLUTION
… until an external factor intervenes and breaks the cycle.
One solution is a product we’ve designed
– Hybrid between a loan and tuition
payment plan
– Schools recapture revenue they had been
giving away as institutional aid.
8
What is…
• An extended tuition payment plan
• Financed by your institution
• Managed in full by National Education
9
How did this come about?
– Small CFO meeting a couple of years back
– Focus Groups
– Scores of direct conversations with private
schools across the country
10
What are the advantages….
SAGE Tuition Advantage increases net tuition
revenue by providing financing options instead of
unfunded institutional aid.
– Increase student retention and graduation
– Manage discount rates
– Recaptured Revenue can be used at school’s
discretion
11
Program Features
•
•
•
•
Up to 25% forgiveness
Potential 0% APR
Interest Free until repayment
Manageable loan sizes
12
Sage Tuition Advantage
Calculator
SageTuitionAdvantage.com
13
Summary
• Tuition Discounting is stuck in a vicious cycle
• Small changes on the fringe will not break
the cycle
• Schools must use some external factor to
break the cycle
• One such external factor is SAGE Tuition
Advantage.
14
Questions / Discussion
How will you break the cycle?
15
Additional Resources
•
•
•
•
•
•
•
•
•
Blumenstyk, Goldie. “One-Third of Colleges Are on Financially 'Unsustainable' Path, Bain Study Finds.”
Chronicle.com. 2012. July 23, 2012 < http://chronicle.com/article/One-Third-of-Colleges-Areon/133095/>.
Denneen, Jeff & Dretler, Tom. “The financially sustainable university.” Bain.com. 2012. July 6, 2012<
http://www.bain.com/publications/articles/financially-sustainable-university.aspx>.
Green, Kenneth C. “The 2012 Inside Higher Ed Survey of College & University Business Officers.”
Insidehighered.com. 2012. July 27, 2012 < http://www.insidehighered.com/news/survey>.
Hoover, Eric. “Two-Fifths of Parents Expect Children to Cover All or Most College Costs.” Chronicle.com.
2012. July 23, 2012< http://chronicle.com/blogs/headcount/two-fifths-of-parents-expect-children-tocover-all-or-most-college-costs/30907>.
Kiley, Kevin. “Short-Term Focus, Long-Term Problems: A Survey of Business Officers.”
Insidehighered.com. 2012. July 27, 2012<
http://www.insidehighered.com/news/survey/business_officer_2012>.
Kiley, Kevin. “Cost of Free Money.” Insidehighered.com. 2012. August 30, 2012 <
http://www.insidehighered.com/news/2012/08/30/long-island-university-overspending-financial-aidreflects-affordability-concern>.
Kiley, Kevin. “Bigger Picture, Smaller Numbers.” Insidehighered.com. 2012. September 14, 2012
http://www.insidehighered.com/news/2012/09/14/saint-benedict-sees-revenue-grow-while-shrinkingenrollment>.
Lederman, Doug. “Maintenance Over Management: A Survey of Business Officers.”
Insidehighered.com. 2011. July 6, 2011<
http://www.insidehighered.com/news/survey/business_officer_2011>.
NACUBO. “2011Tuition Discounting Study Report.” NACUBO.org. April 2012.
http://www.nacubo.org/Products/Online_Research_Products/2011_Tuition_Discounting_Study.html >.
16