The Milk Trout
“Some circumstantial evidence is very strong, as when you find a trout in the milk.” - Henry David Thoreau
Last month's announcement by Harvard University that it will cap effective tuition for families earning between $120,000 and $180,000 to no more than 10 percent of their income has precipitated an avalanche of reaction in the form of op-ed pieces, letters to the editor, blogs, and online chatter.
Much of the reaction has been skeptical as to Harvard’s motives and uncertain as to the impact of this move by the nation’s richest, if not most prestigious, university on other elite and not-so-elite institutions; and, more to the point, on the prospects for economically disadvantaged students to access and afford a quality college education. *
There are three questions that our clients and others are asking us about the latest chapter in this still unfolding story: What are the likely effects of Harvard’s latest shift in financial aid policy? How would we advise our clients to cope with this situation? What do we advocate as the most appropriate way to deal with the inequities that persist in America’s higher education system?
What are the likely effects of Harvard’s latest shift in financial aid policy?
Our prediction that there would be few copycat effects beyond the ranks of the so-called elite institutions seems to be borne out by the responses of other colleges. Only Yale University has similarly reduced tuition for families in the upper-middle income ranges. Several others have simply removed loans from their financial aid packages. Dartmouth, with a nearly $4 billion endowment, has decided to eliminate tuition for students from families earning less than $75,000 per year. But, very few schools without billion dollar endowments are able to match the largesse of their wealthier counterparts. Tuition dependency is the lot of most colleges, and they can ill-afford to discount their sticker prices much beyond current levels.
Which is not to say they will not be affected by intensifying price competition at the most selective institutions. To the extent that the prudent, selective use of so-called “merit” (or non-need-based) aid has enabled high quality, but less richly endowed, institutions to have a fair shot at attracting some of the excellent students that flock to the elites, they are likely to encounter more difficulty going forward. It will be tougher for these schools to make the case that they offer a better educational value by delivering a comparable academic experience at a lower cost. When more prestigious competitors have reduced their net cost, what’s to be done?
How would we advise our clients to cope with this situation?
We recommend to those clients (and others) most likely to be immediately affected – schools that compete with or aspire to compete with colleges revising their financial aid policies in emulation of Harvard, Yale and Princeton – not to overreact by adopting an unsustainable “me-too” approach. It’s much more difficult to cut back on institutional generosity once granted than to take measured, incremental steps on a case-by-case basis.
So first, assess how your applicant pool is actually being affected. Determine how extensive the impact on applications and yield might be under a worst-case scenario. Using targeted market research and predictive modeling tools, it is possible to get a good sense of the price-sensitivity of those segments of your applicant market that are of particular interest to your institution. You may be pleasantly surprised by the relative price inelasticity of the demand for your academic offerings. And, in the process, you may be able to craft a more savvy program of non-need based aid than you had before – one that takes into account the new price dynamics in the marketplace.
Secondly, use this possible threat to perceptions of your school’s value proposition as an opportunity to examine both sides of the value equation by renewing your focus on the underlying quality of your programs, on their substance as well as their appeal to those prospective students and families that represent your primary market. Reexamine your messaging to this and other markets. Without any significant change in your tuition pricing and financial aid policies, you may still be able to preserve – or even improve upon – the perceived value of your school’s educational experience.
And finally, we suggest that, whether or not you are immediately affected by these changing financial aid policies and their attendant impact on perceptions of relative value, you adopt a longer view of what is at stake in the system dynamics of enrollment. It’s not just about landing a class this enrollment cycle. It is about building lifetime relationships with those who do matriculate. Looked at this way, achieving enrollment goals becomes merely the first phase in a multi-phased series of interactions with the institution, yielding all along the way mutual benefits that include support of many kinds – including financial.
What do we advocate as the most appropriate way to deal with the inequities that persist in America’s higher education system?
The latest flurry of concern about the widening gap between the “have” and “have-not” institutions has tended to focus on competitive inequities. Very fine colleges will find themselves at an increasing disadvantage in attracting the best students. But, the have-not colleges are not the only losers in all this. As is so often the case, prospective students from have-not families are losers, as well. This is because the have-not schools disproportionately serve the neediest students. Thus, whatever hurts these schools further pushes the economically disadvantaged to the margins or completely out of the higher education system.
Unless the colleges with the financial wherewithal significantly expand the percentage of needy students they admit (and these latest changes aimed at improving access to middle and upper middle class students surely don’t do that), the only answer is to encourage them to share their wealth with institutions of quality that do reach more such students in need. We offer one admittedly immodest proposal along these lines in our “Sand to the Beach” article in this issue of The Maguire Network. There are doubtlessly many creative solutions out there to be tested. I welcome your reactions and good ideas. You can reach me at: jmaguire@maguireassoc.com .
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* My colleague, Larry Butler and I have weighed in on this debate. See the lead article in this issue of The Maguire Network. This piece was published under the title, “Have Not Colleges Need New Ways to Compete with Rich Ones” in The Chronicle of Higher Education.
Jack Maguire
Chairman and Founder of Maguire Associates