Research Dissertation: The Price of Independence

Overview

This dissertation—presented by William Lee Walton Jr.—is based on a quantitative study drawing on 11 years of longitudinal financial data (2003-2013) collected by the DASL tool of the National Association of Independent Schools (NAIS). Although the study does not account for the substantial differences in the cost of living from state to state and from geographical region to geographical region in the United States, findings shed light on the most expensive type of school and the relationship between tuition growth and financial aid with traditional measures of institutional wealth. Walton also offers suggestions for independent school praxis and further research.  

Executive Summary

The purpose of this research is to develop a deeper understanding of the interplay of endowment, tuition, and financial aid practices for schools that are members of NAIS. Although a small group of independent schools have amassed sizable endowments, the average endowment for an NAIS member school is only $20 million. Large endowments produce substantial investment income that can be used to create generous financial aid funds and moderate tuition increases, making schools more accessible to families. While independent schools have traditionally relied on tuition and endowment revenue to cover costs, Walton asserts that it is imperative that schools redefine their tuition-heavy financial models to continue serving a broad and representative group of students.

For this study, Walton focused on conducting exploratory data analysis of key financial metrics collected annually by NAIS, such as total enrollment, total financial aid students, financial aid dollars, day tuition, seven-day boarding tuition, total income, total endowment, and total annual giving.

Using different metrics of institutional wealth, such as annual giving, endowment, and total income, Walton establishes a clear relationship between tuition price (both boarding and day) and the percentage of financial aid students. For example, he finds that both boarding tuition and day tuition are higher at schools whose student body is made up of at least 50 percent boarding students, but that these institutions are subsequently able to provide more financial aid. He also notes that a greater ratio of total annual giving to total income is directly related to the percentage of students receiving financial aid (when this ratio approaches or exceeds 10 percent).

On the basis of these findings, Walton presents some recommendations for practice in the world of independent schools. He suggests that schools examine the effects of raising money for endowments versus raising and re-raising money each year in annual giving. He urges schools to determine their commitment to providing access and affordability through moderated tuition price, financial aid, or a combination of the two, and then to develop a long-term financial strategy of tuition increases, annual giving increases, and increases in financial aid allotment to reach their goals.  

Last, Walton calls for a qualitative analysis of the thought processes and decision-making behind tuition growth based on the findings of his work.

Downloadable Content