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The Milk Trout


“Some circumstantial evidence is very strong, as when you find a trout in the milk.” - Henry David Thoreau

Several issues ago, I commented in this space about the hidden discount that schools with exceptionally large endowments provide in offering rich educational products at sticker prices comparable to those of other, less well-endowed institutions. This value advantage has existed long before the highly publicized deep discounts that Harvard and other elite colleges instituted last year. Indeed, I’ve argued in several forums during this latest round of financial aid one-upmanship that schools like Harvard and Princeton, if they wished, probably could afford to give all of their admitted undergraduates a free ride, sacrificing near-term tuition dollars for the lifelong stream of contribution dollars that are sure to flow from grateful alumni – and in so doing, boosting their alma maters’ endowments to greater heights.

How can other schools even begin to compete in a league where the extravagantly endowed possess such daunting programmatic and price advantages? Well, I’ve been chewing on this particular bone and have concluded that there is another “trout in the milk” going unspoken here. It is certainly true that a huge endowment can support funding generous financial aid awards. But there is another side of the equation: the potential increase in alumni gratitude for receiving such aid in the first place that leads, in the long term, to increased generosity that, in turn, builds endowments. There is, in other words, a way out of this particular chicken-egg conundrum. If you don’t have the nest-egg to produce the chicken, start with the chicken and the eggs will follow.

This “gratitude effect” actually may translate into a quantifiable return on financial aid investments. Maybe we should call it FAIR – Financial Aid Investment Return. We know that prudent, selective deployment of financial aid (so-called “merit aid” or, more appropriately, “strategic pricing”) has many measurable benefits from assisting in crafting a first-year class to increasing net tuition revenue. Maguire Associates works every day with institutions to optimally allocate those financial aid resources. But what if we could calculate the long-term return on financial aid in the form of alumni donations? If that projected fiscal benefit were to prove greater than the more seductive near-term boost in tuition dollars, would this not argue for a strategic tradeoff early on in favor of lifelong support for the institution? And might it not strengthen the hand of those willing to take the risk that enabling those of lesser means to lift their lives educationally and economically will ultimately redound to the mutual benefit of the student and the institution?

Add to this the possibility that projected FAIR outcomes may not be entirely a postponed benefit. There may well be a more immediate increase in current alumni giving as a consequence of an appeal based on the institution’s commitment to expanding access for the economically disadvantaged and other worthy recipients with augmented financial aid awards.

This notion of FAIR outcomes is a provocative thought that begs at least two kinds of exploration. The first is a well-designed research effort to establish the relationship (if any) between financial aid and alumni giving. Armed with historical databases of sufficient depth and duration from enough different institutions, such a research project would be eminently feasible.*

More complicated, however, would be an effort directed at overcoming the silo mentality that keeps admissions-related issues such as tuition discounting and financial aid strategy in a policy-making realm separate from issues of alumni engagement and institutional advancement. With practitioners in each arena seeking to maximize near-term outcomes – enrollment folks looking to actively manage net tuition revenue in the current enrollment cycle and advancement folks looking to increase alumni giving in the current fiscal year – this organizational link is likely to be far more difficult to establish than the mathematical connection between today’s investment in and tomorrow’s return from financial aid. Let’s face it, a leader can get credit (and be rewarded) for near-term results, but may not even be around to claim, never mind be granted, credit for long-term success.

Then again, if it turns out that there is a compelling mathematical connection, perhaps such an institution-wide metric tied to appropriate incentives can serve to establish a common framework of expectations within which enrollment and advancement professionals can work together to serve each student/alum – and the institution that serves them all. But that’s just what I think. What do you think?


Jack Maguire
Chairman and Founder of Maguire Associates

* It is a troubling fact that the “have-not” institutions with their limited endowments already serve a disproportionate share of the “have-not,” economically disadvantaged students (as measured by Pell Grant eligibility). Ironically, the resulting socio-economic stratification among colleges has not changed much since the “have” institutions loosened their financial aid policies. They seem to have done so without increasing access to the most financially needy students. Against this backdrop, it is important that any research in this area also test for the impact that long-term FAIR strategies adopted by under-endowed schools might have on exacerbating the socio-economic stratification in the system.

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EM=C2: A New Formula for Enrollment Management will be released at the NACAC National Conference in Seattle, Washington later this month.

We also will launch the online and ongoing forum on the book's ideas and the latest Enrollment Management innovations.

We hope to meet you in:
The Community Square

Opening September 25th, 2008

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