1 Tuition Discounting Practices Breaking the Cycle Matt Scotty, President National Education Servicing Stephen Storck, Senior Assoc. VP Finance Kent State University October 16, 2012

2 Vicious Cycle * A complex series of events, with no tendency toward equilibrium, in which each iteration of the cycle reinforces the previous one. The cycle continues in the direction of its momentum until an external factor intervenes and breaks the cycle. * As defined by Wikipedia

3 Vicious Cycle A complex series of events, with no tendency toward equilibrium…. School Sets Firm Price Enrollment Projection Falls Short School Increases Discount to Attract More Students

4 Vicious Cycle A complex series of events, with no tendency toward equilibrium…. Student Appeals School Reviews Appeal School offers more aid Discount Rate Increases School Sets Firm Price

5 What Does the Future Hold? What will happen if the current cycle (trend) of rising tuition and discounts continues?

6 Discounts – Historical & Projected …in which each iteration of the cycle reinforces the previous one.

7 Well-recognized Issue …the cycle continues in the direction of its momentum Many Industry Studies have highlighted the challenge: -The 2012 IHE Business Officer Survey indicates: -Over 81% of CFOs at private schools identified increasing net tuition revenue as an important strategy over the next 2-3 years -More than half of CFOs at private master’s institutions (54.7%) and baccalaureate colleges (56.2%) cited their discount rates as “unsustainable” -Some have tried to address the issue, but very few have done so successfully.

8 SOLUTION … until an external factor intervenes and breaks the cycle. One solution is a product we’ve designed – Hybrid between a loan and tuition payment plan – Schools recapture revenue they had been giving away as institutional aid.

9 What is … An extended tuition payment plan Financed by your institution Managed in full by National Education

10 How did this come about? – Small CFO meeting a couple of years back – Focus Groups – Scores of direct conversations with private schools across the country

11 What are the advantages…. SAGE Tuition Advantage increases net tuition revenue by providing financing options instead of unfunded institutional aid. – Increase student retention and graduation – Manage discount rates – Recaptured Revenue can be used at school’s discretion

12 Program Features Up to 25% forgiveness Potential 0% APR Interest Free until repayment Manageable loan sizes

13 Sage Tuition Advantage Calculator SageTuitionAdvantage.com

14 Summary Tuition Discounting is stuck in a vicious cycle Small changes on the fringe will not break the cycle Schools must use some external factor to break the cycle One such external factor is SAGE Tuition Advantage.

15 Questions / Discussion How will you break the cycle?

16 Additional Resources Blumenstyk, Goldie. “One-Third of Colleges Are on Financially 'Unsustainable' Path, Bain Study Finds.” Chronicle.com July 23, on/133095/ Denneen, Jeff & Dretler, Tom. “The financially sustainable university.” Bain.com July 6, Green, Kenneth C. “The 2012 Inside Higher Ed Survey of College & University Business Officers.” Insidehighered.com July 27, Hoover, Eric. “Two-Fifths of Parents Expect Children to Cover All or Most College Costs.” Chronicle.com July 23, cover-all-or-most-college-costs/30907 Kiley, Kevin. “Short-Term Focus, Long-Term Problems: A Survey of Business Officers.” Insidehighered.com July 27, Kiley, Kevin. “Cost of Free Money.” Insidehighered.com August 30, reflects-affordability-concern Kiley, Kevin. “Bigger Picture, Smaller Numbers.” Insidehighered.com September 14, enrollment>. enrollment Lederman, Doug. “Maintenance Over Management: A Survey of Business Officers.” Insidehighered.com July 6, NACUBO. “2011Tuition Discounting Study Report.” NACUBO.org. April >.