On many campuses the answer to the question: “How do we set tuition?” is that the budget office gives the admissions office a “total revenue needed” to cover the budget, or perhaps their portion of the budget. This is both a dangerous and often counterproductive practice (e.g., limits optimizing net tuition revenue).
Beginning with a “we need this amount” approach tends to under appreciate or wholly ignore market forces like demand, competition, and price sensitivity. The ability to meet enrollment goals and financial aid budgets needs to take these things into consideration. A cost benefit analysis would confirm whether enhancing the aid budget could enable the institution to meet its enrollment goals and maximize net tuition revenue even though the aid budget is breached.
If the number of new students and financial aid budget are seen as the institutional tools to “balance the budget,” then all of the budget-impacting decisions have been set, trade-offs and assumptions made, and value-based decisions cemented before the conversation about enrollment actually occurs. This leaves financial aid and new student enrollment as the “adjusters.” The institution should have financial aid and enrollments “on the table” with all the other budget impactful issues, requests, and decisions.
If the financial aid budget that is requested is greater than the financial aid budget that is approved, and there’s no adjustment to the enrollment expectations, the results will likely not be good. Conversely, if enrollment goals are increased but there’s no adjustment to the aid budget, the results could well be disappointing. Simply stated, in the planning process the aid and enrollment expectations need to be linked such that changes to one driver require adjustments to the other. If there’s no impact on enrollment when aid is reduced or vice versa, then you haven’t nailed your admit pool’s price sensitivity.
Finally, when projecting next year’s enrollment, the registrar’s office, in addition to admissions and financial aid, should be at the table. If a larger than typical senior class is graduating, the targets for new students will likely increase if retention and planned total enrollment are constant. But, don’t forget to adjust the aid budget.
To summarize, enrollment goals and financial aid budgets need to be linked; enrollment experts who understand the external forces and competitive environment need to be heard before budget decisions are made, and all trade-offs need to be “in play” not just the enrollment metrics to “balance the budget.”
Next week’s blog, written by Bob Sevier, is entitled “Determining Your Value Proposition.”