Increase tuition aid twice as fast as you increase tuition

Rule of thumb:
When tuition exceeds 7%-10% of a family's net monthly income, it becomes difficult for them to pay.

Every time you increase tuition, you increase the number of families within your school who cannot afford your tuition.

To ensure that there is an adequate amount of aid available you should plan to increase tuition aid twice what you increase tuition. In other words, if you increase tuition 5% you should increase tuition aid 10%. If you increase tuition 7% you should increase tuition aid 14%.

In surveying schools for nearly 20 years we have seen a disturbing trend. Schools have increased tuition with little or no increases in tuition aid. As a result, the percentage of enrolled families making $35,000 - $100,000 has been decreasing at a rapid rate.

For many schools the percentage of families making under $35,000 hasn't changed appreciably. This is because the meager tuition aid they do give out meets this group's needs. The group shrinking is families making between $35,000 and $100,000. They are being replaced by families making over $100,000.

Using the 7%-10% rule of thumb, if your tuition is $4,000, and a family taking home, say, $90,000, has 2 children enrolled, they will be having difficulty paying tuition. ($90K yields about $6K/month take-home. 7% of that, $420/month = the stress point.)

Not over 50%

Do not give over 50% to anyone, including employees.

Why not give more?
If the services you provide have value, which they do, then they should be paid for. We have found that most families applying for tuition aid can adjust even meager budgets to handle a reduced tuition payment. There may be times when this is impossible, but for most families these times will have a clear beginning and a clear end. Restrict any exceptions to the 50% policy to this time frame if you can.

We have found that when tuition exceeds 7-10% of a family's net income it becomes difficult to pay. If your tuition is average for the US, about $4,000, then it is out of reach for nearly half of your community's families.

If you give a family a 50% scholarship, this reduces their tuition to about $2,000 per year for one child. This brings your tuition within reach of about 80% of your community's families. You could reach even more with creative ways to provide even more subsidy for families making under $50,000, such as part-time employment.

With regards to employees - unless your salaries are so low that you have to subsidize salaries with free tuition for your employees we would suggest that the maximum you give to employees is also 50%. Some schools will only provide tuition breaks to employees with a demonstrated financial need.

What about exceptions?
There will always be exceptions. We recommend that exceptions to this rule be made only in response to a written request presented to the committee by the family. The committee can make a decision based on the facts they have gathered, but that exceptions should be limited to one year, or one semester, at a time. The committee's decision should be documented and placed in the family file.

Accurate assessment

Whenever you award tuition aid, it is critical to accurately assess a family's ability to pay. Compliance with your 501(c)3 only requires that you consistently apply the same criteria to each applicant. This only guarantees equality. It does not guarantee accuracy. An accurate evaluation should tell you with a high degree of certaintly how much a family can truly afford.

An accurate assessment will accomplish two very important functions:

1) Enable you to help the family in a manner that will allow them to pay tuition and survive financially.

To give a family an inadequate award will certainly entice them to enroll, most of the time. Way before they ever apply for aid they have decided they want to enroll their child in your school. Most families don't have a very good handle on their ability to pay tuition, so if it looks like your aid package will help them, they'll enroll. Unfortunately, if the amount is inadequate, there will eventually be a time when they have to choose between tuition and another high priority demand. If they choose against tuition, they will leave and your tuition aid will not have provided their child with a Christian education, but rather a Christian interlude to a secular education.

2) Enable you to help the maximum number of families.

If 2 families get a awards that are 50% too much, there will be a third family who will get nothing because you won't have the funds available.

CFS's Confidential Financial Analysis accurately and quickly evaluates a families ability to pay.
You can even choose to have us verify the family's information for reliability.

(copyright) Confidential Financial Services, 2009
PO Box 6903 Colorado Springs, CO 80934
888-685-5783
info@cfainfo.net

Require counseling

If you go to the doctor and he says your numbers are not good, he may tell you: "You cannot carry on the way you are and expect to last for very long."

We may need to tell families receiving financial aid the same thing.

CFA's standard recommendation is for a maximum grant of 50% of the tuition amount. If a family receiving aid cannot afford even their half of the standard tuition, some times schools will make an exception for them. This exception is typically because of a circumstance that, hopefully, has a time limit.

If you make an exception to your standard award that enables a family to enroll, we recommend that you require that they see a financial counselor. Better yet, provide training for an employee in your school, or a family, or even a board member, so that they can become certified as a Crown Financial Coach.

You may think "who are we to tell a family to get financial counseling?" In reality, you are just the ones. They have asked you to make an exception and give them more financial help than you would give to another family. So, if you're giving a little extra it's not out of line to ask them to give a little extra as well. This "little extra" may very well save them financially.

To find a free coach in your area, the family must request a contact name from Crown. You cannot do this for them. They can do this at: www.crown.org/financialwisdom/church/budgetcoach.asp or by calling 800-722-1976.

An alternative: you may be able to find a free non-profit financial counselor in your area by going to dexonline.com and searching for "credit & debt counseling."

Some schools have even required every family receiving tuition aid to attend a series of money management classes. Do this and you may find non-aid families asking to attend as well.

Commit to aid for the duration

If you bring someone into your school using tuition aid and their financial situation doesn't change, you need to have a commitment to continue the aid.

Okay, so this doesn't need much explanation. Obviously the ethical thing to do is to continue your financial commitment to the family if their situation doesn't change.

Maybe you have seen cases where school boards have cut tuition aid because of pressure to cut the school's budget to account for tuition shortfalls. We have. Certainly areas not critical to the school's commitment to excellence are at the top of the hit list.

However, if the board is willing to cut aid to families already enrolled, the damage of that decision will extend way beyond the two or three families who will have to dis-enroll because of finances. Not only does it generate negative PR in the community, it also communicates that there is instability within the school's leadership.

I read the other day that companies that choose to continue a healthy commitment to their marketing budget during financial downturns come out much stronger than their competitors two years later.