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2/27/17
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UnderstandingandControllingYourDiscountRate
JohnW.DysartPresidentThe Dysart Group
RealChallengesforBusinessOfficers
DiscountingGreatlyInfluencesOperatingBudgetEnrollmentOfficersOftenRequestAdditionalResourcesEveryoneBelievesTheyHaveValidOpinionsPressurefromCabinetandPresidentConcernofBoardMembers
AnEssentialTruth
Everyonehasanopinionaboutyourtuitiondiscounting,everyonewantstodiscussit,butvirtuallynoonereallyunderstandsit.Abasicunderstandingofthedefinition,influencersandopportunitiesiscritical.Theeducationofvariousconstituentgroupsisessential.
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YourDiscountRate
DefinitionandPerspectiveUnderstandingYourDiscountingRealityUncontrollableDriversControllableInfluencersAnInstitutionalChallenge:EducationandBalance
Definition
Thediscountrateisdefinedasgrosstuitionandfeerevenuedividedbytotalinstitutionalscholarshipsandgrants
NACUBODefinition
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When calculating your discount rate, do you count tuition waivers and remission as part of your institutional financial aid. Conversely, do you count the tuition dollars from students receiving tuition waivers and remission as part of your tuition and fee revenue?
We currently put in both the expense and the revenue for waivers so it washes out. We like to keep track of the count within our modeling, so that's why we include it even though it doesn't impact the calculation of discount rate.
We count all undergraduate tuition revenue. We do not include remission of tuition benefits or waivers as financial aid scholarships.
We do not count tuition remission in either discount or revenue since it is an employee benefit. We don't have tuition waivers per se, but we do have Tuition Exchange, which we do count in discount.
Our remission and waivers are out of a different HR budget, so we do not include their aid or revenue in the calculation of our DR for scholarship/grant purposes. We feel that it inaccurately reflects the DR when they are included in the numbers and choose to exclude it.
NASFAAListServeComments
§RoomandBoard§FSEOG/FWS§TuitionBenefits§Full-TimeversusPart-Time§Endowed/Funded§NonDiscountedPrograms
Definition?
NACUBODiscountRateTrendsAllStudents
0.364
0.386
0.4070.398
0.4160.425
0.33
0.34
0.35
0.36
0.37
0.38
0.39
0.4
0.41
0.42
0.43
2010 2011 2012 2013 2014 2015
DiscountRate
DiscountRate
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NACUBODiscountRateTrendsFirst-YearStudents
0.42
0.443 0.4480.464
0.48 0.486
0.38
0.4
0.42
0.44
0.46
0.48
0.5
2010 2011 2012 2013 2014 2015
DiscountRate
DiscountRate
AccountabilityandInstitutionalChoices
While enrollment managers and business officers are generally held accountable for discount rates, many of the factors that ultimately determine discount rates are outside of their control.
§Location§Mission§AllocationHistory§EnrollmentCharacteristics
UncontrollableDrivers
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Location
• CostofDoingBusiness• Competition• StateFundedFinancialAid
Costs on the East Coast Tend to be Higher
Tuition Prices Tend to be Higher
Discount Rates Tend to be Higher
RegionalCosts
35 Colleges in Boston
60 Colleges in Iowa
30 Private Colleges in Kansas
Importance of NAIA Athletics
Financial Aid Arms Race
Competition
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StateFundedFinancialAid
VTAG
$3,200
NJTAG
$12,169
§ReligiousAffiliation§Socio-EconomicAccess§HBCU’s§HHU’s§HighAcademicTalent
Mission
Just increase “Full Pay”Enrollment Culture
IncomeRange NumberofChildren %ofChildren
Under$30,000 931,000 22.27%
$30,000to$50,000 762,000 18.23%
$50,000to$70,000 654,000 15.65%
$70,000to$90,000 531,000 12.70%
$90,000to$110,000 393,000 9.40%
$110,000to$130,000 277,000 6.63%
$130,000to$160,000 255,000 6.10%
$160,000to$200,000 162,000 3.88%
$200,000to$250,000 91,000 2.18%
$250,000+ 124,000 2.97%
Distribution of Family Income for the 2013 Cohort of 17-Year Olds in the United States
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§DateofParticipation§PopulationCharacteristicChanges§SignificantGrowth§FISAPRequestsandReporting
AllocationHistory
• AcademicQuality• GeographicDiversity• ResidenceHallRates• FinancialNeed• EthnicDiversity
CurrentEnrollmentCharacteristics
Resident/Commuter
0 5000 10000 15000 20000 25000 30000
Resident
Commuter
$30,000
$22,000
DirectCosts
DirectCosts
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AverageIncomes
$74,297
$60,256
$42,291
$35,398
0 10000 20000 30000 40000 50000 60000 70000 80000
Asian
White
Hispanic
Black
AverageIncome
AverageIncome
$0 $0 $0 $0 $0 $1 $1 $1 $1
ChristopherNewPort
HamdenSydney
Shenandoah
Roanoke
RandolphMacon
Randolph
Lynchburg
ODU
VWC
Guilford
VirginiaUnion
16% 20% 22%
25% 25%
29% 34% 35%
39% 43%
71%
FederalPellGrants
FederalPellGrantPercentage
§EnrollmentCharacteristics§TitleIVParticipation§InstitutionalProgramming§StructureofInstitutionalAidPrograms§ControlAuthority§PackagingStrategies§Pricing§Retention§Recruitment§Fund-Raising
ControllableDrivers
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• AcademicQuality• GeographicDiversity• ResidenceHallRates• FinancialNeed• In-State/Out-of-State
EnrollmentCharacteristics
0
0.2
0.4
0.6
0.8
1
COLLEGEONE COLLEGETWO COLLEGETHREE COLLEGEFOUR COLLEGEFIVE COLLEGESIX
0.74 0.68 0.66 0.640.51
0.35
In-StateVersusOut-of-State
IN-STATE OUT-OF-STATE
Residency Status
§ImpactonPricing§MeetingFinancialNeed§PressureonEndowment§Fund-RaisingNecessities§ConcernforFuture§MissionAchievement§MissingOut
TitleIVParticipation
$66,260$50,260
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§FineArts§ScholarshipAthletics§Co-CurricularOfferings§BreadthofAcademicOfferings(Demand)
InstitutionalProgramming
Under-Represented Majors
Nationally Competitive Programs
Fine Arts
New Offerings
Over-Represented Offerings
Scholarship Athletics
Institutional Programming
ABHEMostPopularMajorsforStudentsAttendingBibleCollege
0.47
0.42
0.32
0.25
0.24
0.23
0.19
BiblicalStudies
Business
Ministry
Counseling/Psychology
Science/Mathematics
Education
Health
0 0.1 0.2 0.3 0.4 0.5
NewStudents
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§NumberofPrograms§Stacking§RenewalRequirements§Percentage/Flat§FullScholarships§DesignandPredictability
StructureofInstitutionalAidPrograms
§FacultyCommittees§FinanceOfficeParticipation§IndividualEndowmentAwardParameters
ControlAuthority
§FlatversusPercentageTargets§GapsandCaps§FederalDirectStaffordLoans§FederalWork-Study§RenewalRequirements§TuitionIncrease§OutsideReductions§Timing
PackagingStrategies
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Flat Targets versus Percentage Targets
Gaps and Caps
Tuition Increases
Federal Direct Loans
Renewal Requirements
Renewal Enforcement
Dealing with Outside Reductions
Private Sources
Timing
PACKAGING STRATEGY
FEDERAL DIRECT LOAN ($30,000 Tuition)
$0$5,000 $10,000 $15,000 $20,000 $25,000
$30,000
YearFour
YearThree
YearTwo
YearOne
$7,500
$7,500
$6,500
$5,500
$8,000
$8,000
$9,000
$10,000
$10,000
$10,000
$10,000
$10,000
DirectLoan InstitutionalAid Other
33%
30%
27%
27%
FEDERAL DIRECT LOAN/3% TUITION INCREASES
0 5000 10000 15000 20000 25000 30000
YearFour
YearThree
YearTwo
YearOne
$7,500
$7,500
$6,500
$5,500
$8,000
$8,000
$9,000
$10,000
$10,000
$10,000
$10,000
$10,000
DirectLoan InstitutionalAid Other
33%
29%
25%
24%
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§SituationalMinimums§Increases§Manipulation(TuitionversusRoomandBoard)§MarketAwareness/Competition§Reductions/Freezes
Pricing
PricingInfluencesDiscountRates
TUITION$12,000
$5,815
$5,500
$685
$12,000
FederalGrant FederalLoan UnmetNeed
TUITION$20,000
$20,000
FederalGrant FederalLoan UnmetNeed
Not a New Idea (Wabash)
Public Relations Tactic
Does Not Change Out-of-Pocket Expenses for Families
Financially Dangerous
Most Colleges Increase Tuition Back to ”Normal” Levels within 3-5 Years
Reductions
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Limited Impact on Enrollment
Administrative Nightmare for Billing, Financial Aid Budgets and Grade Levels
Restricts Institutional Flexibility to Address Changing Market Forces◦ State Grant Reductions◦ Federal Aid Reductions◦ Increased Energy or Health Insurance Costs◦ Economic Downturns◦ Fund-Raising Challenges
Financially Dangerous
Four Year Guarantees
Opportunities for Good Press
Nominal Financial Risk
Restricts Institutional Flexibility to Address Changing Market Forces
Can Be Reconsidered Every Year Based Upon Market Conditions, Enrollment, Financial Aid and Net Revenue
Opportunities for Multiple Years of Positive Public Relations
One Year Freezes
Maximizes Flexibility
Considers Budget Realities and Reasonable Financial Needs
Less Focus on Competitors
Can Be Reconsidered Every Year Based Upon Market Conditions, Enrollment, Financial Aid and Net Revenue
Data-Driven Modest Increases
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Academic Efficiency
Less Stress on Resources
Impact of Tuition Increases
Federal Direct Loan Program
Less Recruitment Costs
Multiple Years of Revenue
Retention
Retention Coordinator
Learning Communities
Mentoring
Early Warning Systems
Improve Academic Quality
Academic Support Services
Orientation
Student Success Course
Summer Programs
COMMON STRATEGIES
Why Professionals?
Structure
Academic Advising
Proactive Intervention
Broad Authority Backed by President
FULL-TIME ACADEMIC ADVISORS/STUDENT ADVOCATES
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§ExcessCapacityDecreasesImportanceofDiscountRates§Larger,ViableApplicantPoolsCanIncreaseSelectivityBasedUponAbilitytoPay,HousingStatus,Major,Etc.§Freshmen/TransferMix§HeadcountGrowthCanMitigateImpactofDiscountRate
Recruitment
The Admissions Funnel
Inquiries
Applied
Accepted
Enrolled
College Night
Student Search
Transcript Sent InCampus Visit
College OutlookGuidance Counselor
FUNNEL THEORY OF COLLEGE ADMISSIONS
The Admissions Funnel
Inquiries
Applied
Accepted
Enrolled
70%
EXPECTED CONVERSION RATES
20-36%
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SAMPLECOLLEGEFeederHighSchools2015(representmorethan40%offreshmenenrollments)
2014
129
87
5555
McMinnCountyMcMinnCentral
SequoyaWalkerValleyPolkCountySweetwaterLenoirCity
LoudonCountyMeigs
TellicoPlains
0 5 10 15 20 25
FreshmenEnrollments
SAMPLECOLLEGEInitialContactSourceofInquiries2015
7899
2218
1864
983
685
PCU
Zinch
CollegeFish
ChristianConnector
StudentPaths
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Inquiries
SAMPLECOLLEGEInitialContactSourceofNewlyEnrolledStudentsFall2015
6
5
3
1
0
PCU
Zinch
StudentPaths
ChristianConnector
CollegeFish
0 1 2 3 4 5 6 7
NewlyEnrolledFreshmen
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18
0
200
400
600
800
1000
1200
1400
1600
Applications Acceptances Enrollments
1560 1432
166
COLLEGEONE
COLLEGE ONE
0
1000
2000
3000
4000
5000
6000
Applications Acceptances Enrollments
5237
2292
389
COLLEGE TWO
0
200
400
600
800
1000
1200
1400
1600
Applications Acceptances Enrollments
1435
313 205
COLLEGE THREE
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§AnnualGivingRelievesBudgetStress§LargerGiftstoEndowTargetedScholarshipsIncreasesCashFlow§IncreasingFund-RaisingisDifficultandCanTakeTime§PoliticalWhimsandEconomicTrends
Fund-Raising
§President/Chancellor§AdministrativeCabinet§FacultyandStaff§BoardofTrustees§Donors§Auditors
EducatingConstituentGroups
§AssessReasonableFinancialNeeds§MarketPosition§ModelImpact(includingfinancialaid)
ActionPlan:GatherPricingTeam
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§AssessCurrentCurricularandCo-CurricularOfferings§ConsiderRetiringCurrentPrograms§ConsiderNewPrograms§ReviewCurrentStudentCharacteristics§ConsiderBenefits,CostsandPossibleChange
ActionPlan:GatherProgrammingTeam
§ReviewTargetMarkets§ConsiderOutcomesforStrategiesandTactics(data-driven)§IntroduceAccountability§InitiateAppropriateTrackingMechanisms
ActionPlan:RecruitmentTeam
§ConsolidateInstitutionalAidPrograms§CentralizeControl§InstituteChangestoEnsurePredictability§ReconsiderInstitutionalFinancialAidPackagingPolicyforNewandReturningStudentsatCabinetLevel
ActionPlan:FinancialAidTeam
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§Outlinethemostsignificantdriversofyourdiscountrate§Initiateconversationsandmeetingsinvolvingbroadconstituentgroupstoaskhardquestions.§Allgoalsarenotachievableandanagreeduponinstitutionalapproachto“balance”anddiscountratesisimportant.
BALANCE
Headcount
AcademicQualityRevenue
