The Complex Simplicity of Financial Aid:
Building a Framework for Best Practices
Mark J. Mitchell
Vice President, School Information Services
December 10, 2006
Financial Aid: A Tough Task
Turn this…
Into this…
Balancing the art and science of financial aid
Copyright National Association of Independent Schools, 2006
Financial Aid: A Simple Formula!
Cost of Attendance
- Family Contribution
Financial Need
Copyright National Association of Independent Schools, 2006
Financial Aid: A Simple Formula?

What constitutes cost of attendance?
– Is tuition alone enough?
– Do you help families with other costs?

How is family contribution derived?
– How to make sense of family financial information?
– How and why to adjust SSS calculations?

How much financial need can the school provide in
financial aid?
– Why do you have unmet need?
– What other sources or options exist?
– When and how do you communicate with families?

Do you have a written policy manual that articulates and clarifies the
school’s approach to these issues?
Copyright National Association of Independent Schools, 2006
“Cost of Attendance”

Know the typical costs beyond tuition
– Books, transportation, meals
– Sports, clubs, school-sponsored trips
– Special events (e.g., prom)

Include estimates, averages of such costs in communications
– Periodic surveys (parents, teachers, suppliers, etc.)
– Be clear about whether financial aid exists to support these costs

Best practice: Fund financial aid to include these costs at the beginning
of the process
– Avoid treating allocations as a discretionary, case-by-case “set aside”
– Know how much the aid budget would need
– Earmarks, parent associations, special fundraisers, discretionary/
“slush” funds
Copyright National Association of Independent Schools, 2006
“Family Contribution”
 NAIS Principles of Good Practice: “…each family bears the
primary responsibility for financing a student’s education
costs.”
– Before aid is granted, families must prove they don’t
have the resources to pay fully
– What is “family”? What is “contribution”?
 Best practices:
– Use an objective and consistent method for determining
equitable contributions,
– Document and communicate policies and procedures
Copyright National Association of Independent Schools, 2006
Defining “Family”
 Parents and child(ren), right?
 What about…?
–
–
–
–
Stepparents
Divorced or separated parents
Grandparents
Non-biological supporters
 Foster parents
 Same-gender parents
 Unmarried “cohabitants”
Copyright National Association of Independent Schools, 2006
Defining “Contribution”

NAIS’s School and Student Service for Financial Aid (SSS) considers:
– Ability to pay
– Income and assets
– Expenses and debt
– Household size, unusual circumstances

SSS allows flexibility to adjust for:
– Cost of living adjustments
– Individual living costs (i.e., household budgets)
– PRO: can apply school-based policy and approaches
– CON: consistency between schools can break down

Handling appeals
– Is “Unwillingness to pay” at issue?
– Bargaining with parents: good or bad?
Copyright National Association of Independent Schools, 2006
Who Applies for Aid?
35
15
10
10.8
10.3
10.2
10.1
9.7
20
17.9
17.6
17.2
17.1
16.5
25
22.5
21.3
20.3
19.8
19
21.7
20.2
18.7
18.4
17.5
30
11.8
12.4
12.5
12.6
12.8
15.4
18.1
21
22.2
24.4
00-01
01-02
02-03
03-04
04-05
5
0
0-20K
20-40K
40-60K
60-80K
80-100K
100K+
Source: School and Student Service for Financial Aid (SSS) processing system data
Families HH earning over $100K in general pop: 20%
Copyright National Association of Independent Schools, 2006
Who Receives Aid?
 Know your school’s affordability range
 Don’t have to be ‘poor’ to receive aid
 Know the impact of cost-of-living adjustments
– Higher COLA factor = Lower contributions
– Lower contributions = Higher financial need
– Funding?
 Describe these realities to families
Copyright National Association of Independent Schools, 2006
“Financial Need”
 NAIS day schools’ aid budgeting: 9.3% of tuition revenue,
8.3% of operating expenses (medians)
 Most schools do not meet full financial need
– Tuition-only in calculation of need
– Limited dollars? Limited commitment? Limited vision?
– Enrollment management: meeting need to shape class
 Siblings, legacies, faculty children, etc.

Insufficient budgeting
– Forced Choice: More aid for fewer students OR
Less aid for more students
– Retention implications
Copyright National Association of Independent Schools, 2006
“Financial Need”
 Alternatives
– Tuition loan and payment plans
 Merit aid and scholarships
 Best practices:
– Meet full demonstrated need for all students to keep
subjective factors minimized in a need-based system
– Account for merit aid separately—and at no risk to needbased program
– Outsource easily automated tasks
– In-house decision-making and strategy building
Copyright National Association of Independent Schools, 2006
Best Practices Combine…
 Science of financial aid
– SSS methodology
– Determination of need
– Calculating family
contributions
– Budget projections
– Statistics and trends
Copyright National Association of Independent Schools, 2006
 Art of financial aid
–
–
–
–
–
–
Mission-driven
Professional judgment
Confidentiality
Flexibility
Communication
Adaptation
Additional Resources

Resources at www.nais.org
– NAIS Principles of Good Practice for Financial Aid Administration
– Professional development: fall workshops, spring seminar,
summer institute for newcomers
– Financial Aid Administration for Schools, 2nd Edition
– Marketing Independent Schools in the 21st Century
– Financing Sustainable Schools
– “Put It In Writing” guide to developing policy manuals
– Financial aid management monographs, Powerpoints
– K-12 tuition payment plan, loan providers
– Member listservs for feedback, idea sharing
Copyright National Association of Independent Schools, 2006
Funding Cost of Attendance

Tuition: 17,000

Tuition: 17,000

Avg PC: 9,000

Avg “other”: 4,000

Avg Need: 8,000

Cost of Att: 21,000

No. of students receiving aid:
130

Avg PC: 9,500

Avg Need: 11,500

No of students receiving aid:
145

Aggregate Need: 1,667,500

Aggregate Need: 1,040,000
Copyright National Association of Independent Schools, 2006
NAIS Affordability Ranges
(using SSS 2005-06 methodology)
NAIS Day
Tuition
No Net Worth
$100K Net Worth
No COLA
COLA*
No COLA
COLA*
$13,295
$103,317
$152,260
$98,980
$148,150
$14,570
$108,050
$158,735
$103,715
$154,625
$17,300
$117,867
$172,595
$113,840
$168,485
Assumptions: Family of four, two parents, two children (one enrolled),
parents age 45, both work (one earns $25K), no student assets, DC residency
for state/other taxes, *DC Cost Of Living Adjustment=1.445
Copyright National Association of Independent Schools, 2006