Financial Aid Assessments Series 2: Determine Your Available Aid
By: Jonathan Boulos, CEO
Edited by: Mary Stange, Client Advisor
Funded or Unfunded
When you have Funded Aid, the monies are tied to some sort of external dollars. This can be a scholarship or tuition assistance program from a foundation, endowment, or donors or these can be vouchers available from the state. Funded aid is wonderful because it is much lower risk. A decrease in net tuition is directly offset by an increase in development dollars, and the school is no worse off when granting funded aid.
There is, however, increasing competition and scarcity to these funded scholarships. For example, if your local diocese offers a scholarship funded by an endowment, this would be funded aid. The diocese will have strict parameters around qualifying for aid as well as a communicated application process. Enabling applications from your school and reminding families about deadlines is the best way to ensure that your school maximizes the funds received through funded scholarships. So many families fail to apply due to misunderstanding or missed deadlines.
Unfunded Aid uses the school’s budget to reduce the net tuition received. In accounting terms, unfunded aid is a discount and reduces the overall revenue of the school. This aid is the most common and the fastest growing, and most schools can’t even quantify it correctly! If you are using discounts, it is recommended to plot these out in your tuition schedule, in order to track your gross and net income for use when budgeting. Tracking the discounts in your tuition schedules allows you to charge every child the same amount and capture the discount totals in your budget to get to their appropriate net tuition. It’s only through this consistent application that a school can appropriately measure the amount of discount provided (and income “lost”), and the only way the school will be able to manage the unfunded aid strategically is if it is first measured.
Recommended Action: What is your tuition rate? If you cannot answer with a single number (excluding an international program if you offer that) you likely need to reset your understanding of tuition and discounts. How much is your net tuition collected? We usually see a serious sustainability issue if it drops below 75%, but our best-performing schools are over 85%.