"I am land rich, but cash poor"
"The financial aid report does not describe where my finances are today."
“I am working full-time again, but not making the money I did before.”
“We are still upside down on our house and cannot borrow.”
We have heard all of those and more. When the US economy tanked in 2008, I found myself wishing for a process that was better at assessing a family's financial capabilities in REAL TIME. We document need from materials that are up to 18 months old--W2 forms, 1040s--and families are often sincere when they recoil with tuition sticker shock. Even though the economy is much better and we appear to be fully-recovered, families continue to express uncertainty about their ability to commit funds to tuition.
I wanted to explore the psychology of the post-recession parent, so I assembled some data from three years of financial aid records. I captured these data points:
1. Demonstrated need according to the methodology (SSS, FAST, etc.)
2. Expressed need (what the family stipulates that they CAN pay)
3. The financial aid award
I wanted to see if there was a correlation between what the methodology delivered and what the family felt they could pay. Not surprisingly, I found that nearly two-thirds of the families felt that they could pay less than the demonstrated need. I termed this "Psychological Need," and of course, that assumes that the methodology is accurate (and we have to make that assumption). While it can be argued that this difference is nothing new, I found that the psychological state of our current parents creates a higher level of uncertainty about their ability to meeting their tuition obligations. While in years past schools may have enrolled financial aid families even by meeting less than 100% of need, those days appear to be long gone. In short, there is no more “gapping.” Families are more likely to walk away if we do not meet 100% of need (or even beyond).
The recession officially ended in 2010, and according to the GAO, we are approaching the tenth year of a “bull” market, but financial aid managers continue to be challenged. I feel that the most worrisome thing about this persistent psychological state is that we may find that a whole generation of parents is so stressed by the thought of paying independent school tuition that they may decide on more affordable options like charters and magnets, and learn how to live without us. It is more important than ever for families to see our schools as essential, rather than as optional, to create the “value proposition” as clearly as possible. Why are we worth the money? We have to drive home the message of relevance. Are you selling what people want to buy? Or, perhaps more importantly—do you offer a premium product for the premium price you charge?
Mr. Lawrence Jensen Director of Admissions, Saint Stephen's Episcopal School