Time for Transparency: Exploring and Announcing a Tuition Reset
Year-after-year tuition costs at private schools, colleges, and universities have risen without pause. Over the past decade, the average tuition at NAIS day schools has increased by 50% and boarding tuition has increased by just over 70%, according to NAIS Independent School Facts at a Glance. Meanwhile, inflation has risen by less than 20%. These skyrocketing costs have made a high-quality education prohibitively expensive for many families.
I’ve seen it firsthand at The Kiski School (PA). When I arrived in 1990 as a rookie teacher, tuition was $12,800. In 2002, when I became headmaster, tuition was $26,250. This school year, our tuition is $61,300. That’s an increase of almost 400% compared with 1990. Over the same period of time, medical insurance increased by about 250%, and the consumer price index went up a little less than 100%.
Kiski’s tuition and price increases have been on par with our 250 boarding school peers, according to NAIS Data and Analysis for School Leadership (DASL) data. In order to maintain a student body representing all economic strata, our need-based financial aid spending has grown dramatically over time. Just 10 years ago, 44% of our families received aid. This year, that number had grown to 73%. To compensate for the increased aid need, boarding schools, and private colleges too, have adopted the practice of increasing annual tuition by a rate that’s a multiple of normal inflation. Compounded over time, the discount on “sticker price” tuition has grown larger and larger as schools have gotten swept up in this industry-driven trend. Looking at all this data, we said, “enough is enough” and decided it was time for a dramatic change.
Looking to Higher Ed
According to a 2018 Sallie Mae report, 65% of students eliminate colleges in their selection process based on published tuition price without any further research. In recent years, a growing number of colleges have addressed soaring educational prices with an innovative strategy. It’s called a “tuition reset.” The concept is simple in theory: Reduce tuition significantly and make up the lost revenue by growing enrollment and decreasing financial aid costs. Since 2010, dozens of colleges have executed tuition resets, according to information from the Integrated Postsecondary Education Data System.
An important consideration for a successful reset involves rethinking the school’s discounting strategy and focusing on net cost rather than the size of the financial aid award. Increasing enrollment is used as a way of balancing income lost by lowering tuition, but the most important dashboard number to focus on is net tuition revenue. In many cases, colleges that reset tuition see an increase in net tuition revenue per student since they are now attracting families that view the lower tuition as being within reach.
Lucie Lapovsky, a former college president who is now a consultant for colleges and universities, has studied tuition resets extensively and believes they can boost enrollment if done carefully and deliberately. In a new study published last spring, Lapovsky found that the colleges in her sample were able to generate higher levels of net tuition revenue than in the year before the reset.
Considering the Reset
Like many private schools, for the past several years at Kiski’s fall board meeting where the next year’s tuition is set, there’s been handwringing and expressions of “we need to address out-of-control tuition costs.” This was especially in focus last year when we were poised to cross the $60,000 tuition threshold. One of our trustees had been a board member at Muskingum University (OH) in 1996 when they became one of the first schools in the country to do a tuition reset, cutting tuition from $14,000 to $10,000. The price reduction was successful and, since then, Muskingum has seen a fairly steady increase in enrollment.
That was the first time the idea of a tuition reset was formally raised at Kiski. We obviously weren’t prepared to consider a reset for fall 2019 at that meeting, but the board charged our administrative leadership team with exploring this and other pricing models for consideration at a future meeting.
We thought about keeping tuition flat for a year but recognized that the boarding school pricing model was broken and needed to be reconstructed in a bold way. As we started looking at a significant tuition reduction, we initially focused on the loss of tuition revenue and tried to imagine how we could offset it without significantly changing class size, student-teacher ratio, and programmatic offerings.
To start, we created a matrix of tuition pricing versus total enrollment. We then calculated the net gain or loss of income and listed that value in the intersection cell for each tuition-enrollment combination. For example, if we reduced tuition by 15% and added 15 students, we’d have a net income gain of $300,000. Reducing tuition by 25% and adding five students would result in a loss of $500,000. As we debated the “right” tuition reset numbers among our team, the most important factors were finding a reduced tuition price that would be head-turning for families and an enrollment number that was reasonable and attainable.
We studied data and had phone interviews with admission deans at colleges that had successfully executed tuition resets. We determined that the average discount rate was around 20% and the associated enrollment gain over a period of two or three years was in the 5% to 10% range. Going back to our matrix, we found that reducing tuition by 20% and adding 13 students would yield a break-even result. Still, we thought that a gain of 13 students was too aggressive a goal in the first year. In the end, we settled on a new tuition of $48,500 (21% lower than our current tuition) with the goal of adding 8 students in year No. 1 and five more in year No. 2. This plan would require gap-funding of approximately $300,000 for the first year, and provide for ongoing growth in net tuition revenue for year two and beyond.
We kept our trustees informed as our analysis and planning came together, soliciting feedback and advice from board leadership. Before our summer board meeting, we held individual and small group meetings or phone calls with every single trustee in order to proactively address questions and concerns. The tuition reset proposal was unanimously approved. On the advice of several trustees, we decided to engage a consultant to help us with the next critical phase: organizing and preparing for our tuition reset announcement.
Getting Ready to Launch
We turned to Lapovsky, who conducted workshops for our senior staff, our admission representative, our external marketing firm, and a small group of trustees, outlining the many tasks that needed to be completed in advance of our announcement, scheduled for October 1, 2019.
We spent a great deal of time focusing on messaging—to our current families, prospective families, faculty, staff, and alumni. We decided to offer a modest cost reduction of 3% to 4% to all of our families who were currently paying less than our new tuition of $48,500. While there was an expense attached to this, it was a good decision in that it allowed everyone to feel included in the reset. We also created a new admission page on our website including frequently asked questions that explained the rationale and mechanics of the reset. We also added a net cost calculator tool where household income and family size can be entered to see estimated tuition cost.
Our marketing firm developed a wide-reaching campaign, “Rethink Tuition. We Did,” concentrated on social media platforms and also included email, direct mail, and print advertising. There were earned media placements with electronic, print, and television news outlets. The advertising efforts were carefully coordinated to be deployed on the day of our reset announcement for maximum impact.
Reset Announcement and Early Results
Personalized letters to every current family, explaining the reset and listing their lower tuition cost for next year, were sent the week before the public announcement, which was sent via email.
Early results have far exceeded our expectations.
The decision to do a tuition reset was not an easy one. In retrospect, we took on this project a little naïvely, thinking that the financial analysis and modeling we did to affirm its feasibility was an ending point. In fact, that was just the beginning of the more important work—leveraging the reset, through carefully crafted messaging, in order to maximize its impact. Moving forward, we’ll measure our success not only based on enrollment growth and associated fundraising results, but on whether or not this new pricing model leads to long-term financial sustainability and, most importantly, whether it truly provides more access and affordability for our families.
- Year-to-date inquiries are up 200% compared to our average number over the past four years, and we anticipate exceeding our goal of adding eight more students for next fall.
- Our fall annual fund appeal was sent shortly after our announcement, specifically focused on scholarship giving to support the tuition reset. Contributions for October through December were up 50% compared to the same period last year.
- One of our trustees, motivated by the board’s decision to reduce tuition, announced the creation of a $1.2 million endowed scholarship fund through his family’s foundation. That generous gift motivated others and over the past few months, we’ve raised almost $600,000 more for operational scholarships.