CEO Notebook

Jeff Shields

Jeffrey Shields, FASAE, CAE

President and CEO
Twitter: @shieldsNBOA

What Is "Affordability" for Independent Schools?

From Net Assets NOW, April 25, 2017. Read past issues of CEO Notebook.

What does affordability mean for preK-12 independent schools? It's a word that is used with great frequency in discussions regarding the future of our industry. Recently, I read an article in the Washington Post, "What does college affordability look like?" by Danielle Douglas-Gabriel, regarding research conducted by the Urban Land Institute related to college affordability. The article stated, "There is no monolithic college experience or archetypal college student." I would say the same for an independent school or independent school student. Moreover, she wrote, "Affordability is a far more nuanced matter than just the cost of tuition, fees, books, room and board." Hear, hear!

Higher education certainly finds itself in the affordability spotlight with even greater frequency than independent schools. Small liberal arts colleges particularly, which are highly tuition-dependent, have many of the same stresses on their business model as we do and are faced with many of our same challenges.

Our traditional business model, in short, whereby professional educators deliver face-to-face learning in a classroom with a limited number of students, is costly. And "affordable" is an elusive bar to reach, if it is attainable. What is "affordable" for independent schools? If our schools were $1,000 or $2,000 less expensive annually, would we be affordable? If we increase tuition next year by 2 percent instead of 2.5 percent, would we be "affordable" then? I have my doubts.

According to our recent research study, in partnership with ISM and Measuring Success, it appears that we may be looking at affordability through the wrong lens. Instead of looking at our independent school's published tuition price or proposed tuition increase (our research finds no correlation between tuition pricing and enrollment declines, according to a representative sample of nearly 300 schools over six years), we should ask, what is our perceived value? What are we best known for, and does our market know and value that distinction? And if what makes our program unique is not as highly valued as we would like, what choices should we make regarding our future investment of resources?

As a trustee, I would welcome this type of conversation around the board table. For years our working hypothesis has been that declining enrollment is due to the high price of tuition. In some cases, this could be true. But what is the answer? Lower our tuition? Manage incremental increases? Or, focus on the mission and the value of our program and make sure it's clear internally and externally? We are in a competitive environment that is more crowded than ever, and we have to reach families who perceive that they can find "the same or similar education at a much lower cost (or free) elsewhere."

A few years ago, a business officer shared an analogy with me regarding price and perceived value that really resonated. He asked, "Is Mercedes-Benz discussing how much they should be charging for cars? Probably not." His point: They're focused on building a high-value brand and delivering world-class automobiles. Why would someone choose to buy a Mercedes when they can get a much less expensive vehicle? Because they perceive that the cost is commensurate with the value they will receive.

Our study, "The Effects of Tuition Increases on Enrollment Demand," with ISM and Measuring Success, found the same thing. In the study, schools that raised their tuition had the same chance of growing their enrollment as seeing it decline. The difference wasn't the tuition price but the market's perception of its value. In fact, tuition increases that corresponded with investments in quality teaching, relevant programs and other high-value services for students increased enrollment.

I hoped I've piqued your curiosity. For more information on this research, join us for this week's webinar: Effects of Tuition Increases on Enrollment Demand (on Thursday 4 p.m. Eastern). It may not answer all the questions regarding independent school affordability, but it certainly provides compelling research that will inform the discussion going forward.

Jeff Shields

Jeffrey Shields, FASAE, CAE
President and CEO

Jeff has been NBOA's president and CEO since March 2010. Prior to joining NBOA, he spent almost 10 years at the National Association of College and University Business Officers (NACUBO), serving most recently as senior vice president and chief planning officer. An active member of the American Society of Association Executives, Jeff earned the Certified Association Executive (CAE) designation in 2002 and was selected as an ASAE Fellow in 2008. He currently serves as a trustee for One Schoolhouse and Georgetown Day School in Washington, DC.

Business Office NOW: Human Resources

Business Office NOW

If you're in the Dallas area, join your regional colleagues at NBOA's Business Office NOW: Human Resources, May 4 at Greenhill School. This program gives business officers who have responsibility for human resources the latest and most relevant information for your role in the independent school business office, through an affordable and accessible one-day workshop.

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