Magazine article University Business

No Surprises: Financial Aid Reports That Work

Magazine article University Business

No Surprises: Financial Aid Reports That Work

Article excerpt

FINANCIAL AID EXPENDITURES, influenced by a variety of factors, are not always easy to predict. Which admitted students will accept their offers? Which upperclassmen will return? What will happen to external aid sources? Will the admit pool percentage applying for aid change? Will family contributions keep pace with increases in charges?

The answers to these questions can have a dramatic effect on institutional aid expenditures, discount rates, and net tuition revenues (NTR). Yet financial aid officers are expected to accurately assess their budget needs and, with others in enrollment management, keep senior administration informed of in-cycle shifts that could impact results. Even worse than missing net tuition revenue targets is having a deficit come as a surprise after the budget has been balanced and put in place.


Tracking historical trends is the first step to avoiding unexpected outcomes. When estimating future aid budget needs, look at retention and funding trends by class year rather than overall. The first chart (top right) illustrates why this is important. In this example, although the freshman discount rate and total enrollments have been stable over the last three years, the overall discount rate would need to increase, because "cheaper" senior classes are being replaced by more expensive freshman classes.

Understanding differences in discount rates by subpopulation, combined with trends in the applicant pool, is important in predicting how freshman discount rates may change. As can be seen in the second chart, although discount rates for in-state and out-of-state populations have not changed, the discount rate for the overall class has changed because the geographic distribution has shifted.

Potential impacts of proposed changes in federal and state funding also need to be considered when estimating aid budget requirements. For example, when state funding is tight, state grant award amounts may be reduced or eligibility criteria tightened. This could significantly affect the discount rate if institutions step in to make up the difference for needy students. Financial aid staff typically are very aware of potential changes but may need senior team input regarding the institutional response. Don't be surprised to find that increased institutional aid to make up lost state funds approximately equals projected lost net tuition revenue from students who will withdraw without that financial support--a real catch-22 for colleges and universities.

Changes in family willingness/ability to pay also impact budgetary needs. For example, if yield rates among full-pay and low-need admits are declining and yields among high-need students are increasing, the discount rate will be affected, even if awarding policies themselves don't change.


No matter how well historical trends might project expenditures, student application, funding, and enrollment patterns can produce different results--so monitoring how well reality is matching up to expectations during the admissions, awarding, and registration cycle is also key.

Begin with identifying any unexpected changes in the applicant and admit pools. Historical data may show that different subpopulations likely require more or less aid. If high discount subpopulations are increasing at the expense of low discount subpopulations, then that may be a signal to expect higher financial aid expenditures even before students begin submitting financial aid information. For example, campuses will typically celebrate an increase in the quality of the applicant pool, but leaders must also recognize that yields may decrease as a result and that discount rates may increase because at many institutions quality costs money--merit awards.

Once financial aid applications (ISIRS) begin to arrive, date-to-date comparisons of the percent applying for aid, average need, and average institutional grant can be routinely generated. …

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