Most schools don’t like to talk about it, and most parents don’t like to hear it. “What does it cost,” asks the parent who calls the local Catholic school, for instance.
The school gives a yearly figure. “Well, our tuition is $4,500 per student, but that doesn’t include…” <click><buzzzzzzz>
The conversation stops there because the interested parent has just hung up the phone.
The bewildered school official is upset that she didn’t get a chance to tell the parent that if there is more than one child, there is a second child discount of $1,000, except that if the child is non-Catholic, then the tuition is $6,000 for each of the students in that family.
What if the first child is Catholic, and second one isn’t (you know – today’s “blended family”) or hasn’t been baptized yet? Schools then say, “We’ll it’s really not if the students are Catholic…it’s if the parents are Catholic.”
Or is the tuition based on which parent is paying tuition? If mom is Catholic and dad is Baptist, is each parent responsible for half of the tuition amount and charged accordingly?
What if the parent isn’t the person paying tuition, and grandma and grandpa are?
What if the parents are of another faith, but the grandparents are paying the tuition and they’re Catholic, but not members of the parish the school is affiliated with?
Are these discriminatory practices?
These are the kind of complex questions that arise in the minds of parents today, but may or may not be on the minds of Catholic school administrators.
The questions are important ones, especially with government monies or vouchers helping to fund private school tuition expenses, because with government monies come government strings.
I’m a firm believer that the problem isn’t the tuition – it’s all the other “stuff” that goes with it – just like all the disclaimers that come at the end of a car commercial that advertises a great payment yet assumes $3,995 cash or trade down and excludes taxes, registration and delivery charges, or the drug commercials that warn that the side effects of taking the drug could be worse than the condition the drug is trying to alleviate.
Even though faith-based schools charge tuition, parishes and churches associated with the schools still considered them to be a ministry and not necessarily a business. Often, they “subsidize” the cost of education in order to keep tuition at a minimum – or as minimal as possible – until the church discovers that the school is requiring so much financial support that it can’t support the parish or church adequately.
It may be then that they discover that some parents could be paying twice the amount of the announced tuition, but because the school continued to focus on the income from tuition and keeping it “low,” they discovered they were actually perpetuating a revenue model that was based on having religious men and women teach in the schools for little or no cost. Paying non-religious members of the laity put a significant price tag on the experience – and it’s a price tag that continues to be communicated in four- and five-figure numbers rather than breaking them down into the hourly value that parents understand today.
Until recently, the usual formula a Catholic school would utilize was that a parish where the school was housed provided half the cost of education and tuition covered the rest. That worked – until parish attendance at Mass and the parishioner base started declining. In some parishes, half the cost of education can be 75% of the parish income. Some Dioceses have put rules of percentages in place, mandating that parishes can contribute no more than X% of a school’s operating cost – and the rest must be made through tuition and “fund raising” income, whether through fundraisers or via development programs and revenue.
Some churches and schools today have changed the word “subsidize” to “invest.” Personally, I believe that word is also an incorrect one to use when talking about tuition. “Invest” infers that those who are investing will receive a financial return on investment. It’s not an investment, it’s a “gift,” since everything we have is a gift from God, and gifts are to be given freely…not coerced nor have strings attached.
Further, there is an ethnic proverb which states, “The beginning of wisdom is to call things by their right names.”
Like the word, “discount.”
The only companies that give discounts are those that want to get rid of merchandise to make way for the new inventory. If businesses offer a coupon, that’s because they want you to come back…not next year, but next week. Or tomorrow. That’s not what a school’s revenue model is built upon. Instead, “incentives” should be offered. Same effect, totally different mindset.
Fundraisers used to be a way to raise money quickly – as in, “We’re going to fall $3,000 short this month, so lets raise some money by selling some candy!” Now, parents are selling stuff all the time, and fundraising has become a way of life in the school.
While fundraising has its place, it’s not the place to raise “reliable” and consistent revenues, and not from parents who may already be struggling to pay tuition. But that’s another conversation for another day.
The sad thing is that some organizations I’m familiar with have the “Fundraiser of the Month,” which means parents are fundraising all. the. time!
And many of those fundraisers have been in place for years – like selling magazine subscriptions, for publications that are still printed, arrive at the house, pages are flipped through, and then put in the recycling bin. Then school leaders wonder why traditional fundraisers are generating less and less funds as the years go by.
Further, it may not be the safest thing in the world for kids to go door to door to sell fundraising items today, and, as for magazines, they’d better be digital subscriptions.
What makes matters worse is when tuition is set at $4500 and the cost of education is $6000 – and parents still apply for financial aid. It means for every new student enrolled, the school “loses” $1500 right off the bat. If the parish is to provide that extra $1500, that would be an equivalent of a parishioner giving around $30 a week in the collection basket.
Then there are the dreaded fees – technology fee, uniform fee, supplies and materials fee, book fee, development fee (if you don’t want to participate in fundraising), graduation fee, and of course, the application fee.
It’s important to realize that if you have a fee to ensure a child’s seat in the classroom, you should not call it a registration fee anymore. Registration implies unconditional acceptance. If, as a Catholic, Christian, Hebrew Day or Independent school, you are not equipped to handle the needs of a child, and you accept that child in your school through registration, you are obligated to provide whatever accommodations are needed for that child to achieve to his/her fullest potential. Using the words “application fee” means that there is some type of process that must occur before a student is accepted.
But back to the tuition. If you’re giving a “multi-child incentive” on your tuition in a subsidy model, please note that your parents are not only receiving the equivalent of financial aid for their first child, but that they’re also receiving more financial aid for the second child whether they need it or not. The danger in having parents complete an application for financial aid is that they will then be receiving even more financial aid that will be applied to the tuition cost that they pay out-of-pocket.
The big question is, ‘Do they really need it?”
Knowing today’s economic climate, I’ll bet your first response is, “Of course they do!”
Let’s examine this scenario:
Cost of education at school = $5,000 per child. Take your school’s operating budget (expenses), and divide it by the number of children in your school. Many schools are afraid to do this simple yet effective exercise. Remember Jim Collins’ first step in his acclaimed book, “Good to Great:” Confront the Brutal Facts (Yet Never Lose Hope).
Even though the cost of education is $5,000 per child, here’s the school’s tuition structure as advertised on their Web site, which, by the way, is also a mistake today. If you advertise your tuition and all the breakdowns thereof on your Web site, you may be turning away more families than you realize. They take one look at the tuition, think, “We can’t afford that,” and don’t even call to check out the school or ask what the tuition is. But for now, let’s examine one of those models:
Family with two children – tuition for first child = $2500; tuition for second child = $2000.
The biggest question is this: Two children at $4500, but the cost of education is $10,000. You’re already going to be searching for $5500 to help fund the gap for these students. But say that the parish offers $500 for the first child, and $400 for the second, because that’s what your tuition structure infers (parish gives 20% of tuition in financial aid). Parents are happy – maybe – but you’re still looking for $5500 for these two students.
But then the family then says they cannot afford their net $3600 for both children, so the school finance committee considers their letter, takes pity on them and offers them an additional $250 each for a total of $500. The resultant amount is $3100, and the family pays it on a monthly basis at $310 per month over 10 months.
Then the family’s dumbfounded, because from their perspective, that’s the equivalent of their second car payment! Their first car payment is the truck that’s necessary for dad’s work, and that’s $800/month, and their mortgage has just increased to $1500/month. Surely, there needs to be more financial aid available if the school wants our children to be enrolled there!
And THAT’s the where the mindset problem hits home.
It’s not that the parents want their child to be enrolled in the school; rather, the conversation becomes how much does the school want our children to be enrolled in their school.
Why is this important?
It’s the college mindset, and if most of today’s parents in your school went to college and experienced that type of negotiation, they believe they can do it with your school. After all, education is education.
When you try to explain to them that colleges have pools of financial aid and scholarship endowments they can draw upon, families don’t care. They just don’t. They want to know what’s in it for them. Now.
Here’s the other problem – this family may not need the extra funds – but they asked and they received. Or, this family might need a lot more than the $400, but the school doesn’t have any funds to give – even if it’s just for a year to get the family through a crisis they’re experiencing.
The family then becomes a candidate for disenrollment, especially since the $310 a month doesn’t include the fees for field trips, technology, supplies and other items, like lunch, uniforms and after-school care. If the fees are $100 for band, $50 for the field trips, $200 for technology, $50 for supplies and $300 for development. That’s an extra $700, which has to be paid before the school year begins and cannot be spread over 10 months. That family must REALLY love your school, and their experience has to be an incredible one in order for you to retain them throughout all the grades your school offers. If they don’t disenroll, they might be the family you end up “chasing” to pay their tuition when they stop making payments.
In reality, the cost of educating these two children is $10,700 (2 x cost of education plus the $700 in fees per family). The family is receiving a total of $5,500 in “unfunded” financial aid. They’re also getting an extra $1,400 in financial aid from the parish and the limited pool of funds the school has to award. That’s $6,900 in funding that the parents don’t have to pay.
Here’s the “69 hundred dollar” question: How do you know the family needs $6,900 in financial aid? If you don’t have a financial aid assessment tool, and operate on a cost-based tuition/need-based aid model, then you really don’t know. They might need more! They might not need anything, and only receive because they ask.
There are two more problems with “subsidizing” tuition today. Such a practice was great when the only students in a parish’s Catholic school were from that parish, or the Christian school accepted students only from the affiliated Christian church or churches
And that’s not the way it is today.
In fact, most schools across the country are “regional” ones. The “parochial” school (that means that all children in the school are from the parish) is quickly disappearing because there are either children of various faiths enrolled and/or there are children of the same faith from other faith communities enrolled.
The third problem with subsidization is that it makes a pastor shudder when the principal reports an enrollment increase. If the pastor is subsidizing the school at the 50% level, exciting news to the school (such as 20 additional students for the coming year) leaves the pastor wondering where he’s going to get the extra $50,000 that will be consumed from his parish income if tuition is only $2,500 per child, and the cost of education is $5,000.
Here’s the real issue with a parish-based school. While the “subsidy” funds are “given” to the school, the school can show that it’s operating in the black; however, that could mean that the parish is operating in the red. When push comes to shove, the organization that must remain a viable one is the parish – and if the money that’s being given by the parish to the school can be used to support the financial viability of the parish, the school will more than likely merge or close.
In a cost-based tuition model, all expenses – fees, costs of administration, staff, curriculum, cleaning supplies – every expense is put into a column, tabulated and then divided by the number of students in the school to come up with a cost per student figure. Don’t forget to include savings for capital expenditures to your school, as well funds so you can award financial aid and build an endowment. Even, if you choose to, cover credit card fees. And, perhaps, a bit of an “extra” cushion. Businesses call the “profit margin,” but non-profits call this “surplus.” This way, families that are paying “full tuition” are helping to fund those that cannot pay the full amount. Yes, that’s budgeted financial aid! And no, it’s not “unfair,” either. In fact, this practice has its basis in Scripture:
“Our desire is not that others might be relieved while you are hard pressed, but that there may be equality. At the present time, your plenty will supply what they need, so that in turn their plenty will supply what you need. Then there will be equality, as it is written: “He who gathered much did not have too much, and he who gathered little did not have too little.”” – 2 Corinthians 8:13-15
The amount that the parish or church provides to the school, as well as non-designated funds from development, are then used to provide financial aid to families based on a third-party’s assessment of the family’s financial need. Some families might be expected to pay the full $5,000 for their daughter to attend your school, but others may not even be able to pay $500 a year for their son to attend. The only way you’ll know is with a Grant and Aid Assessment evaluation tool.
Such an approach does two things:
1) It demonstrates transparency and fiscal responsibility to parents, as well as community constituents – including donors. Donors will give to your school if you have a program where excellence is demonstrable, you have a handle on your costs and can provide a report that demonstrates outstanding stewardship of the resources which have been entrusted to you.
2) It allows you to fill every desk. If there is an empty desk in a classroom, it doesn’t cost you anything more to fill it after the school year has started and the budget has been met – so fill it! The parent is then pulled into the financial aid application process for the following year. What happens is quite magical! In a cost-based tuition model, as enrollment goes up, the cost of education can go down. Once that happens, and people find out tuition is declining, waiting lists start to be created. When tuition decreases under a cost-based model, time can be spent discussing enrollment strategies rather than worrying about how much of a tuition increase “we can live with” for the next year.
Here’s the real problem: a “tuition by subsidy” mindset does not allow for long-range planning and the compelling vision necessary to present to your school’s parent community relative to the kind of educational experience their child will have – and that’s REALLY what parents want. They don’t want to make decisions from year to year. A cost-based tuition/need-based aid approach allows you to plan for what’s down the road.
You also need to engage a third-party to collect your tuition. You are not in the business of bill collection. If you just invoice the family, your invoice receives the lowest priority from the family because they have other bills to pay that have consequences if they miss a payment. Their mindset is that since you’re a faith-based school, you’ll have to understand their inability to pay! They need to understand your inability to remain open and viable without them accepting the responsibility to pay their tuition obligation for their children.
Consider using FACTS, since FACTS allows your school to control the process, as well as provide flexible payment options, convenience, and payment security. The last thing you want to have in your school is cash and checks from tuition payments. Cash is, of course, a source of temptation (and you know what Scripture says about leading one there), but checks have the payer’s routing and account numbers on them. Great care must be taken today to protect personally identifiable information (PII), and a name, address, signature and an account number are present on checks. PII is usually spoken of in terms of using technology today, but PII is a legal concept, and not a technological one – and checks are non-protected sources of personally identifiable information.
Asset Management affects Retention, Marketing, Enrollment and Development. Your tuition has to be marketable, and your school office needs to know how to communicate tuition costs to your prospective families. What would you rather hear if you were a parent:
– “Our tuition? It’s $4,995 per child…yes, I know it’s steep, but we need to pay our teachers.” I would even venture to say that as soon as you said, “$4,995,” you’d hear that fatal click and dial tone buzz as stated at the start of this article.
– “Our tuition? Most of our families apply for and receive financial aid, with the average award being around $2100. That means the average amount a parent pays is around $2900 per child. Higher amounts of financial aid are awarded to those families who have multiple children enrolled. Of course, if you’ve been blessed to the point that you can afford the full cost of $4,995 per child, that would be a great blessing to share with the school.”
Perhaps you’re not even receiving those phone calls. Parents see your school’s tuition on its Web site – and don’t even call! Now, you’re not even getting parents to call and ask, and you just “hope” they call. Make no mistake, hope is one of the three things that last, but it’s not a strategy.
Also note that the tuition is NOT the cost of education. The tuition is based on the cost of education (hence the name, cost-based tuition), not on how much of an increase from the previous year school administration assumes a family will accept. That type of approach starts with revenue, and then makes expense cuts to balance the budget. Not utilizing a new way of budgeting, talking about tuition and being keenly cognizant of the mindset of your target market explains why some schools continue to perpetuate the “shrink, merge, shrink, close” process so prevalent today.
Want additional help with developing and conveying this concept? Tap or click the link to send an email to [email protected]. Use the words “Cost-Based Tuition Setting” in the subject line, and let’s set a time to have a chat.
© Michael V. Ziemski, SchoolAdvancement, 2006-2023