By: David Schriver
Education has always been an individual choice. Those that choose a private school are usually convinced that the education and experience are superior to that which is provided by the public school sector. Despite this, there is a nationwide discussion happening regarding tuition affordability and most of that is currently aimed at colleges and universities. The number of articles covering this topic increases daily, however it is not a new issue. Rather, this has been a long-standing concern of private school boards.
Tuition affordability is key to maintaining a diverse student population. The primary tool for preserving this has been financial aid and discounts. This allows qualified students from all economic backgrounds the ability to secure an education at a private school at a price point they can manage. Unfortunately, private school tuition prices have risen sharply over the past few decades and have outpaced gains in average family income. The result is that private school tuition now takes up a larger percentage of household income. Are tuition prices reaching a tipping point where all potential students will require some form of aid or discounting to be able to afford this education? It certainly appears that the current model is not sustainable.
There are several schools that have taken a proactive approach and have been experimenting with a change in the tuition model. This approach includes “tuition resets”, sliding scale tuition and indexed tuition. While they all operate in different manners, the basic premise is the same – set a tuition price that is affordable to the family and make up the difference with donations.
A “tuition reset” is a large reduction in the existing tuition price at the school. Tuition was always a percentage increase over the prior tuition rate and so on back to the original tuition price. This method is essentially establishing a new “original” tuition price. While it sounds like a large decrease in tuition revenue to the school, the reality is that they were giving away much of it through financial aid anyway. What it really does is make the school more accessible when the stated rate is affordable rather than going through the entire financial aid process not knowing the final price will be.
Sliding scale and indexed tuition are somewhat similar in that the school essentially publishes guaranteed financial aid. In the sliding scale model, the school might employ a tiered system whereby families in a particular household income range can expect to pay a specified tuition price for that range. So as not to give away all seats in the classrooms at the lowest tier, the school will only make so many of those available. When that tier fills up, the family that may qualify for it will have to move up to the next tier. This can also lead to a model that utilizes supply and demand to help drive up enrollment. Indexed tuition is geared toward capping the percentage of household income that will be used for tuition. The school may set different rates for income ranges and publish these rates so that a potential family will be able to calculate what tuition will cost them before they even apply.
The greatest advantage to any of these models is that the concept of financial aid is rebranded into different terminology. This helps to eliminate the stigma associated with receiving financial aid. It is certainly more dignified to say you are paying an individualized tuition rate rather than receiving financial assistance. Once the barrier of calling it financial aid is removed, families feel better about themselves and the process. It also tells prospective families what they can reasonably expect to pay to send their child to the school. Knowing the price in advance allows families to be better educated about their decision. Perhaps an even greater benefit is that employing any of these methods makes the unaffordable appear affordable. In a time of sharply rising tuition rates, this could be the breath of fresh air we’ve all been waiting for.
DAVID D. SCHRIVER, JR., CPA, is a director in the audit, accounting, and consulting department and chair of the education services group. His experience with financial reporting standards, board governance, budgeting and forecasting, and human resource functions for not-for-profit, education-based organizations spans more than two decades. David also sits on the board of the Montessori School of Westminster as Treasurer. He can be reached at firstname.lastname@example.org.