Changing the Lens: Shifting the Conversation around Net Tuition Revenue

By Andrew Cocco posted 02-11-2020 15:16

  

At face value, Net Tuition Revenue (NTR) is the dollars generated for the school by the influx of tuition. For most schools, tuition revenue comprises the vast majority of the annual operating budget. When that operational need is not fully met, then schools need to make some tough decisions that impact the short and long-term sustainability of the institution.

There may be some sense that adopting NTR is something that a school might do at the end of the year when the financial aid budget is exhausted. The trouble with that approach is that it does not work as a repeatable strategy since it is derived from sheer necessity rather than from a strategic position.

To adopt NTR as a strategy is not to do so out of year-end necessity, nor should it exist at the expense of making sound, mission-driven decisions (a student’s fit should still be the primary driver for enrollment). Rather, I would like to propose and briefly explore the following:

  1. That we complicate our definition of Net Tuition Revenue, recognizing and using it as a tool by implementing it as one part of an overall enrollment management strategy. By looking at Net Tuition Revenue in a data-driven landscape, we can glean a host of insights by combining that information with the biodata on both current and prospective students. You might, for instance, use that information to track the flow of full-pay, high-pay, or high-need students by zip code, feeder school, or school district. That kind of information can help you strategize your marketing initiatives as it will help you better understand how to target your messaging to areas of opportunity and cultivated success.
  2. That we move away from the concept of a fixed budget so that we shift our strategic planning to one that is grounded in Net Tuition Revenue. Who sets your school’s financial aid budget? What is the driving logic behind the number? How frequently do you end up going “over budget” to meet enrollment numbers? I suspect that for many schools, the answers might be, in this order: the finance committee/CFO; it’s 5% more than what was awarded during the previous year; almost every year. Unless your financial aid and scholarship dollars are fully endowed, they are not “real money” in the sense that when we award tuition assistance, we are not cutting families a check. Instead, it is a discount. Therefore, to call financial aid, a budget can be misleading. You can’t run out of money that doesn’t exist. You can, however, get yourself into trouble by over-discounting your product. If we move away from the concept of a fixed financial aid budget to one that is NTR-oriented, we can still achieve the discipline that a budget would provide, but more fluidly.

As an example: by taking a look at the NTR of your school’s current population of students and doing some basic math, you can figure out your average NTR per capita for each student and disaggregate for division level down to grade level. If your operations are currently sound, you have given yourself a specific range of tuition dollars that you must net to remain solvent. From there, you can work backward to figure out how much discounting it might require to net the desired tuition. Thus, rather than a financial aid budget, per se, we have changed our lens and shifted to the ability to project and re-project in real-time the amount of allowable discounting per capita and as a broad average to meet our target revenue. (You might even use that biodata analysis and apply it to your candidate pool to start to get a rough projection of what your discounting rate might look like.)

  1. That we begin thinking about NTR in August rather than in April. With the above two proposals in mind, it is imperative to begin strategically planning around Net Tuition Revenue from the start of the cycle rather than the end of it. It’s a little bit like backward-designing your admissions year by viewing NTR as a roadmap and using the available data in new strategic ways.

Yes, Net Tuition Revenue is still quite literally the revenue that a school nets from the influx of tuition dollars. However, diving a bit deeper into the data around it has a strategic power that reaches far beyond that basic definition and gives schools the power to analyze their macro and micro enrollment decisions so they can adjust mid-stream. To fully harness and recognize that power, we need only change our lens.


Andrew Cocco

Drew Cocco, Director of Enrollment Management
Montgomery School | montgomeryschool.org

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02-11-2020 15:26

GREAT article, Drew. :)