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Is Non-Need Discounting Right for Your School?

March 27, 2023
Drew Cocco
Director of Client Success

When we think of financial aid in the traditional sense, we are often thinking specifically about need-based financial aid or, in other words, a reduction in tuition price intended to match a given family’s ability to afford an education at your school. The tuition assistance component of a school’s overall enrollment picture has steadily increased, especially in the wake of the 2008 financial crisis. In those past 15 years, the pool of families applying for financial aid has increased dramatically and as tuition rates continue to rise, the household income threshold for those qualifying has also risen. Combine these realities with declining birthrates and volatile job and housing markets and you have a recipe for a much more competitive landscape for schools trying to meet enrollment goals.

The tumultuous landscape of the past decade and a half created the conditions that sparked the evolution from traditional labels of “admissions” and “financial aid” to terms such as “enrollment management” and “indexed tuition," among others. Words matter, and at the heart of this newer terminology is the recognition that the work of the enrollment management professional is strategic in nature. Significantly, it also acknowledges that the need-based assistance once offered based solely on the criteria of affordability has given way to a more nuanced approach to considering how to discount the tuition that families are paying.

What that nuanced approach can often look like is a non-need discounting strategy that is aligned with your school’s mission and enrollment goals. It does not have to mean that you’re giving away dollars to families who don’t need help, as often is the argument against such programs. While it is true that some of these families may not demonstrate need in the traditional sense, what their children are bringing to your school and how their personal qualities or talents contribute to the school population that you are trying to craft as an enrollment professional are extremely valuable to your mission. If, for example, you are an arts-focused school it may make sense to set aside some discounting dollars for an art-based merit scholarship because attracting and retaining highly talented artists is mission-aligned for your school. If your school is focused on academic excellence as measured by such things as AP scores, college acceptance rates, National Merit Scholars and the like, your mission may be well-served by instituting an academic merit scholarship to attract and retain academically motivated students.

What’s more, a clearly defined discount strategy that is aligned with your school’s mission also gives you additional levers to pull when looking to yield applicants at the optimal tuition level. Oftentimes, the value of even a relatively small non-need based discount has an outsized impact on net tuition revenue. I once did a study at a school where I was the Director of Enrollment Management to determine the relative ROI of need-based tuition assistance and the non-need merit scholarship program I’d introduced. I found that for every dollar of tuition assistance, there was about a $0.62 net revenue but for every dollar of merit awards given, there was about a $7 net revenue to the school. The effectiveness of the discounting was far greater in yielding students as I sought to build my classes by judicious use of merit awards when coupled with the primary discounting approach of need-based aid. As a tuition-driven school, it was critically important to ensure that the class we brought in not only met the mission of the school, but also satisfied the fiscal operational needs of the institution and having additional tools in my kit beyond need-based aid, allowed me to meet both my enrollment targets as well as satisfy the operational revenue needs. This balance of revenue, enrollment, and discounting is a core aspect of strategic enrollment management today.

Incorporating tuition discounting into a larger strategic enrollment plan is a necessary reality for the vast majority of independent and private schools as they depend upon tuition dollars to fund operations. To be clear, need-based financial aid should always remain the primary focus of any discounting (or tuition-reduction) strategy. As a community of institutions and vendors, it is a central part of our mission to make the education offered by tuition-based schools as accessible as possible for families. However, there may also be a place for non-need discounting in service of your school’s mission and strategic enrollment goals.

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