University administrators nationwide are currently knee deep in scenario planning for bringing students back to campus. There are a lot of unknowns – including when federal and state restrictions will be lifted and the modality of instruction that will be in place across the year. While many schools have announced plans to hold classes face-to-face in the fall if at all feasible, it may not be.
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There are several features of the current landscape, however, that are known. The U.S. (and global) economy is entering a significant recession, unemployment is at unprecedented levels, many incoming students and families will struggle to pay for college, and competition for domestic students will be tougher than ever – due to demographic factors, the NACAC changes, and the impact of the pandemic. And, students simply do not value remote instruction as highly as they do the on-campus college experience.
Based on these assumptions, schools will need to rethink pricing for the fall – to meet the financial needs facing many of their students, and to acknowledge that the “college experience” likely won’t meet the expectations students typically have when enrolling in college, and taking on debt to pay for it. All this while institutional expenses are actually going up, between fixed costs, supporting increased capacity for remote instruction, and the need to put public health measures in place to ensure the safety of any who might be on campus. In this context, EAB recommends thinking through both pricing and aid strategy – what to expect and offer and how to communicate it – to maximize enrollment and access in 2020-21.
How are institutions rethinking price?
Price is an obvious lever to pull in an uncertain or competitive enrollment environment. However, EAB strongly advises that institutions first articulate what goal they are trying to achieve, before committing to any particular policy or pricing change. Depending on whether it’s maximizing yield on admitted students, retaining current students, making a PR splash, maximizing revenue this year or over the next five years, or improving access, it needs to be identified and agreed to by institutional stakeholders. This decision is a prerequisite to making any pricing changes or decisions.
Once an institution has committed to a goal (or set of goals) to target with a pricing change, what are the options?
Fundamentally change your price or pricing strategy
A few schools have announced major changes to their approach to pricing and aid. Southern New Hampshire has announced what amounts to a large tuition reset. EAB has written extensively on the pros and cons of tuition resets in the past, and our skepticism about them as a viable long-term strategy. Thinking back to the goal you’ve set, keep in mind that tuition resets can be good for getting a PR boost in the short-term, but are often costly in the long-term. In the current context specifically, institutions won’t have a full recruitment cycle to play up this affordability move if they announce it now, losing some of its marketing potential.
Beloit College announced a public price match guarantee: Students from surrounding states will not pay more than the cost of attendance at their own in-state flagship. We think an idea like this can work well (Robert Morris has implemented something similar with good success), but the largest benefit is at the top of the funnel. The goal of a program like this is usually to convince students who would otherwise have ruled out private colleges altogether to consider your private college since you’ve shown them that it’s no more expensive than a public. Again, if your goal is to start to build a stronger pipeline for next year, this is a worthwhile strategy to consider. However, it will have less of an impact on yield for this fall.
Most commonly, schools are announcing tuition freezes or rollbacks of previously announced tuition increases. These strategies may have some positive PR benefits; they are simple and thus easy to talk about. They also convey a measure of understanding and compassion from institutions to many students’ current circumstances. On the other hand, the rollbacks are more effective for returning students, who were expecting the increase, and they may not be enough to satisfy students if the fall is entirely remote. Furthermore, they can prove costly in the long-run, as they reduce the value of future percentage increases.
EAB POV: A big announcement on price is tempting at this time – a tuition freeze, a price match, a tuition reset. However, it is critical to weigh the benefits and drawbacks of any strategy you’re considering and be sure it aligns with the institutional goal(s) you have established. It is also important to consider the impact over a period of time, e.g. how will this impact enrollment and NTR next year vs. over the next five years?
Institutions must also ask themselves what they can afford. In some cases, the revenue sacrificed in the long-term by putting off a price increase or freezing tuition will be impossible to make up. That is not to say that it isn’t worth doing to some other end, but institutions must be clear that the strategy they intend to pursue will deliver on the goal they’ve set, be that yield, access, or publicity.
Recalibrate price to recognize remote status
Assuming most instruction is remote in the fall, schools can anticipate a widescale reduction in room & board revenues. While this is a huge hit for institutions, it may be a silver lining for high-need students, for whom they represent a significant portion of net costs. Though logical, this may also feel like a “discount” for some families, who are used to seeing a much higher bill from the school each semester.
For many, though, this won’t represent enough of a recalibration of what’s reasonable to pay for an online-only learning experience. And institutions are feeling this already – questions and reluctance from families about what they’re getting for their money. The college experience without extracurriculars, drop-in office hours, dorm living, and use of campus facilities just isn’t what families feel they pay tuition for.
There are two general philosophies schools can adhere to here.
There has been some talk about trying to quantify the value of things the school can’t offer – perhaps using IPEDS data on student services spending – and reducing tuition to reflect these calculations.
There are a few drawbacks to this approach that EAB has identified. The first is that most university costs are fixed. In fact, costs will almost certainly be higher next year associated with improving remote instruction, increased financial aid, as well as testing and other public health compliance measures. Many schools simply won’t be able to afford this. Secondly, there is some forward-looking danger in ascribing specific values to various aspects of the student experience. How do you decide how much the opportunity to study abroad is worth? What if students want to go on paying only for what they use and opting out of certain fees or charges that they don’t agree with? Institutions must decide if this is a risk they are willing to take, and whether the benefits it might provide this year outweigh the potential drawbacks in future years.
The other philosophy is transparency and communication, coupled with a commitment to increased aid (more on that below). They key to this is putting together a proactive, transparent, and compassion-focused communication plan for students and families. This includes making an effort to quantify why you’re keeping tuition steady (e.g. you’re committed to paying faculty, facilities and janitorial staff, avoiding lay-offs, maintaining safety standards on campus, and committing to new spending on student health and public safety), and being able to explain your reasoning in a way families understand and accept.
EAB POV: This will need to be coupled with a commitment to increased aid and proactive messaging to students and families both that the school wants to support those that are struggling to pay for college right now, and that they acknowledge the difficult and unideal situation the pandemic puts college students in.
Institutions will have some existing resources to draw from here and should promote and maximize those as much as possible right now – things like aid set-aside for financial aid appeals, emergency grant funds, and financial counseling.
It is worth reviewing student financial aid records to identify students who just missed cutoffs for federal or state grant aid, and proactively reaching out to these students to see if they have had a change of family financial circumstance. If they have, a professional judgement by the financial aid officer may help these students become eligible for Pell and state grant aid, which will provide more support to these students at no cost to the institution, outside of the time spent on this exercise.
EAB also encourages schools to consider awarding more aid, in the form of a one-time, one-semester pandemic grant. This could be as little as a few hundred dollars, or maybe as large as a few thousand dollars, depending on tuition. It should be clearly labeled as related to the pandemic and the suboptimal educational environment, accompanied by messaging such as, “we’re sorry we can’t teach in person, we wish we could.” If the second semester is also conducted remotely, these can be applied again. This ensures you’re not awarding students for four years for a disruption to instruction that may be only one or two semesters. This also gives you the flexibility, if some number of students are on campus in the fall, to allocate these funds where they are needed most – and not to those students who are less affected by fall reopening plans.
This strategy will make less of a PR splash, but is a more targeted, short-term solution. It gives institutions the opportunity to communicate compassion and understanding to affected students, without making a long-term financial commitment that may prove unsustainable.
Even within this broad recommendation, there are a number of decisions institutions must make about how they will allocate these funds. For example:
There are three options institutions have in determining how best to allocate these aid dollars:
- They can wait for students to ask for more money.
- They can encourage students to tell them if they need more money.
- They can award students more money without them asking.
In a world without face-to-face instruction in the fall, we recommend the second or third approach. The opportunity to communicate compassion and understanding on a wide scale is lost if grants are made individually upon request.
You will want to decide if these grants will apply equally to new and returning students. It will likely be more influential with new students but it may feel uncomfortable to offer new students a pandemic grant that isn’t available to returning students essentially in compensation for the same set of circumstances.
Depending on your tuition and make-up of your student body, determine what size grant will have the intended effect for your population, as well as be feasible from a financial perspective. As stated above, we are recommending that these grants are meaningful but relatively small, assuming that drastic changes to a student or family’s financial situation will still need to be accommodated via financial aid appeal.
Regardless of what pricing and aid changes you make, you need to communicate them well to derive the maximum benefit from them. To start, be sure to emphasize how much smaller a family’s bill will be overall – with any communications about a pandemic grant, remind them of any discounts they are already receiving, and that room & board charges have been removed. See further EAB guidance on COVID-related communications here.
As we get more clarity on reopening plans, we know this will change. Perhaps the need for hybrid pricing or a scaled model to reflect who is on campus. EAB is constantly monitoring the public health and college planning landscape and will update our recommendations accordingly.