How much financial aid is right? The school needs to balance both a family s needs and the school s budget.

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4 How much financial aid is right? The school needs to balance both a family s needs and the school s budget. 4

5 Generally, families find the process overwhelming and intrusive. Parents have a set lifestyle that they have become accustomed to. Each year, they have to start to the financial aid application process from scratch. 5

6 It is difficult for families to have to ask each year for financial aid, especially when their financial situation has not changed. 6

7 All schools see their costs going up. Some are losing students. In order to balance the budget, some schools decide not to meet the full financial aid needs of families, thereby placing additional stress on the middle class family. 7

8 The value of Jewish Education is social or moral. When the importance of these to diminish relative to financial values, parents will consider other options. 8

9 As we move left to right on the denominational spectrum, we see an increasing number of factors that come into consideration when determining whether or not families send their children to Jewish day schools. 9

10 These curves depict people s price sensitivity. Curve B is more elastic and more price sensitive that curve A. In other words, it takes smaller price increases in curve B to affect the quantity consumed. The next slide shows how families become more price sensitive as you move along the denominational spectrum. 10

11 Families place different value on various characteristics associated with Jewish day school education as you move across the denominational spectrum. For instance, as you move from left to right, the value a family places on the quality of Jewish education diminishes relative to the quality of secular education. The price of a day school becomes increasingly important as you move from left to right as well. As you move to the right, families become more price sensitive. Where do your parents body in this scale? You need to understand what attracts them. 11

12 There is a common misconception that full payers are covering the cost of financial aid. The truth is that they are paying for empty seats or capacity inefficiency. Actually, financial aid students help to cover school costs. 12

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16 This chart shows that as the number of students increases, cost/student generally decreases. 16

17 Average Total Cost (ATC) is a more accurate method of calculating per student cost. ATC measures the cost per student at maximum efficiency or when all seats are occupied. This new number provides a break even price which can then be used to determine whether a family is contributing above or below ATC. The next slide shows how the ATC breakeven analysis can be performed for each classroom. 17

18 The following chart and graph demonstrate the model for one grade. The top of the chart shows the effect of adding students to a grade, one-by-one. The actual cost per student goes down with the addition of each successive student until actual cost per student equals ATC. ATC is cost per student at full capacity which, in this case, is twenty students. Once we exceed twenty students, a new classroom must be opened (or ideally, students are put on a waiting list until such time as the cost of the new class can be supported). High school scheduling is more complicated. To calculate ATC, look at all of the periods you are offering at every grade level. Take the periods and allocate them to a grade, then add them up and divide by a common base. The cost of overhead can be factored into financial planning afterwards. However, it is important to know the costs associated with each classroom first to see if each class is at least covering its own costs. For financial aid purposes, when a family comes to you and is willing to pay, how do you choose to accept or deny a family? What are the implications for accepting this student? It is helpful to know whether they can afford to pay at least the ATC. 18

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20 Schools say, We gave away financial aid, because they are driven by a mindset that views those dollars as lost. The truth is the school has not given anything away if the seat was going to go unfilled. The school is actually gaining some funds and, in many cases, the family is contributing to overhead. 20

21 The multi-year portion of this process involves assessing the family once every three to five years and providing them with a financial aid award lasting for that duration. Many families see little change in their income and expense across the three to five year time frame. Flexible tuition is helpful, especially in communities with low religious affiliation. 21

22 These are data driven decisions. Depth = % of financial aid awarded by gross fees. Never express financial aid as dollars. Dollars do not allow you to meet need. A percentage tells you how much you need to stay viable overall. A dollar amount is too static. Answer the following questions: How much of the grade s costs do I need to cover on a year to year basis? If my school was completely full, what would each student need to pay? Identify which financial aid students are providing the highest financial benefit to the school. 22

23 Financial Aid has a negative connotation. Flexible Tuition is more attractive to middle income families. 23

24 Allow it to be flexible. Protect up and down sides of both the school and the family. If the families situation remains the same (plus or minus 5-10%) they can remain in the contract. You want to determine the family s value to the school. When a family decides to make other lifestyle choices, do you accommodate them? You gave them aid, and then hope they will become a donor. A school may be more flexible with a parent who is trying to save (college, retirement, etc) as opposed to making expensive lifestyle choices. Those people who experience temporary bumps, generally will be in the school for a while. 24

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26 The school benefits from assessing parents on a three-five year basis, because of an increase in predictability. The key determinant is the benefit to the school. First time applicants need to be assessed by the school. 26

27 The school needs to refer to their mission as they make financial aid decisions. In one case, a family was not able to afford the fees, yet the student was very bright in math. Therefore, the student brought other benefits to the school (publicity, marketing possibilities, etc.) How do you roll this out to attract families? Once you determine the type of community you are in, you will market this program to them. Target the middle income families. 27

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29 Financial Aid has a poverty relief type of connotation, whereas flexible tuition does not. Financial aid and poverty relief are associated with one another even when it is not the case. By changing the term to flexible tuition, we were able to remove some of the negative connotation. The base of the systems in in fact identical in that you use the family s financial need as the determinant. However, in a flexible tuition program, you also accommodate lifestyle choices that middle income earners typically choose over Jewish Education. That does not mean that you start negotiating without preset limits but it does mean that you first analyze your cost structure, then determine which families will benefit the school financially and then design a flexible tuition program around those factors. 29

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34 The model has different types of benefits for different types/sizes of schools. In a small school, we are particularly interested in attracting and retaining those few students that we have in our classrooms. Thus the model might include virtually all of the students in the school. In larger schools, we might be interested in providing better demographic mixes in our classrooms and because we run a multi-class grade format, we can use the model in that way. If you start your process with a 5 years gross profit projection (ask Eric for more info), you will know where and when trouble will come. You will then be able to design your financial aid policies in order to help mitigate those circumstances. If you do not have such a program, then you are in fact driving your school to an unknown destination, and there is no method for determining which is the best course of action.

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