The Right Way to Stretch Your Financial Aid Budget
Vol. 16 No. 6
Financial aid is a sticky subject for most Business Offices. Your team wants to strike the delicate balance between offering mission-appropriate families the right amount of aid while also preserving your school’s bottom line.
There is a right way to budget your financial aid program. The proper way ensures that you use it as a tool to advance your school’s mission, while also strategically increasing revenue and enrollment.
The first step is knowing your school’s financial aid formula. Many schools complain that their financial aid program often rewards families who have chosen to buy expensive clothes, cars, or housing. This is usually a symptom of misunderstanding how your school’s financial aid formula works.
The Business Office must have a full understanding of the financial aid formula used and agree with its methodology. Whether you use a formula that was created by your school or an outside vendor, ensure you understand how the algorithm works and you agree with its premise.
The two main factors in determining appropriate financial aid are the applicant family’s income and their expenses. Income encompasses wages and salaries, including tips, interest, alimony, Social Security, support offered by grandparents and other relatives, and income tax refunds. Assets include cash, savings, home equity, other real estate investments, stocks, bonds, securities, retirement accounts, stock options, and vehicles.
It’s unreasonable to expect a family to have no savings, home equity, or retirement funds. With local economies differing across the country, you’ll need to set reasonable expectations for a family’s living allowance to purchase clothing, transportation, entertainment, etc. This will differ for families of varying sizes. Once you’ve determined a set of thresholds that make sense for your area and other factors, you’ll be better able to assess each family’s individual needs.
Financial aid determination is about serving the school’s mission and strategic objectives, as well as assessing a mission-appropriate family’s ability to pay. It is as much an art as it is a science. Schools that keep these concepts in mind serve their families well and assure a fair and consistent process that supports everyone in their community.
Additional ISM Resources:
The Source for Business and Operations Vol. 16 No. 4 What You Should Know Before Setting Your School's Financial Aid Policy
The Source for Advancement Vol. 12 No. 3 Your Financial Aid Formula: Does It Match Your School's Mission?