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Is Financial Aid the #1 Challenge for Schools in 2024?

May 14, 2024
Drew Cocco
Director of Client Success

I recently had the privilege of presenting to the Western Boarding Schools Association (WBSA) at their annual conference retreat in scenic Colorado Springs. The theme was “Elevate” - appropriate both for the setting at over 6,000ft above sea level as well as the topics covered, which included how to avoid burnout, how to navigate difficult conversations, and how to best leverage free AI tools for your work. My presentation was about what Financial Aid data schools should track and, more importantly, how to leverage the data strategically. It turned out to be a timely topic because early on, there was a poll asking schools to report their #1 enrollment challenge, and the overwhelming majority indicated that it was indeed Financial Aid.

Drew in Colorado Springs with WBSA

To understand why Financial Aid seems to continue to be one of the biggest challenges for many schools, one need not look further than the relationship between the growing tuition rates at independent schools, inflation, and wages. Certainly, other, deeper market factors will play a role, but those core metrics allow for a reliable assessment of the nation as a whole. According to Census Bureau data and reports from the Bureau of Labor Statistics, the average household income for a family household (this is much higher than the average HHI for a non-family household) in the United States is roughly $95,000. According to NAIS data, the median 7-day boarding tuition is roughly $70,000, or 74% of the median HHI for a family. It’s easy to see why so many families are applying for tuition assistance. Even if your school has significantly lower tuition, it’s clear why so many schools see “the middle” drop out as families who have the means to pay tuition will enroll in independent schools and financial aid programs rightly focus on accessibility for the neediest families, there is still only so much room for discounting, and it is frequently the middle income (whatever that looks like in your market) that is stretched the most.

Of course, it’s also important to recognize that consumers make decisions based not just on the numbers in their bank accounts but on how wealthy they feel. To understand that, I like to do a quick experiment. Before you read further, do you think wages outpaced inflation over the past five years or vice versa? Most people I poll indicate that they believe inflation outpaced wages. Recognizing that inflation data can vary slightly depending on the source, most sources generally show an average inflation rate of 4.3% over the last five years compared to an average wage increase of 4.6%. So, on balance, wages have actually slightly outpaced inflation, but it certainly doesn’t feel like it (just go to the grocery store). When that happens, people tend to tighten their spending and cut their discretionary expenses first. This means they will feel less willing/able to stretch their budgets for luxury extras, including private schools. It doesn’t mean they are less interested, but it does map to an increase in applications for financial aid and an increase in the average income for those applying.

What do you do when it seems like everyone is applying and demonstrating the need for Financial Aid? Because of the external market factors that make financial aid such a common challenge, schools increasingly need to think strategically about their financial aid policies, allocations, and programming. My advice is to start with the data. What data are you tracking, but more importantly, how are you using it? We’ll be kicking off a series of blog posts here at Clarity dedicated to data-driven financial aid strategy, so stay tuned for more data-centered content. If you’re already a Clarity user, our Client Success Team, with over 136 years of combined experience, is working internally to continue to enhance the ways that the platform can help you leverage key data in real-time, so lean on your CSM - we are always happy to help!








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