The Chinese Proverb states, “The beginning of wisdom is to call things by their right names.”

We can relate.  Think of those telemarketers that call you at dinnertime and mispronounce your name.  Recall the embarrassment you’ve experienced when you’ve called someone by an incorrect name…and someone else reminds you of their correct one.

So why do we use terms like financial aid, tuition assistance and scholarship interchangeably?  If they were all the same, we’d only need one word to describe the reduction in tuition received by students attending an institution which charges tuition.

That brings up other terms, too.  Do you call a reduction in the amount of tuition charged a reduction, a discount, or an incentive?  Now we have six terms to define.  Let me put it into a systemic framework, with five elements and an emergent principle.

The emergent principle is “tuition reduction,” because all these terms deal with parents or guardians paying less than what the “announced tuition” is at your school in return for the privilege of enrolling their child or children in your educational environment.  Let’s look at these 5 different ways of making your school more affordable for parents.

Financial Aid is based on a family’s financial need.  Calculating financial need appropriately by a third-party allows you to objectively determine a baseline which applies to all students.  A simple paper application where a parent states their financial need is purely subjective, resulting in aid being granted to the family which has the most persuasive story.  The problem is that EVERY parent today has a persuasive story.  And, most school administrators get upset when they are so moved that aid is granted, and the family then requests the child be excused from school for a week so that the family can take a cruise or a vacation experience, or arrives in a brand new vehicle.  Until recently, my family had 4 vehicles – a 2001 Saturn with 168,000 miles, another 2001 Saturn with 148,000 miles, a 2006 minivan with 101,000 miles, and a 2008 Jeep with 215,000 miles.  Now that the kids are on their own, we now have 2 vehicles – both are 5 years old, and one has 18 more payments to go.  If I was in an administrator’s position, I’d be the wrong person to talk with about needing additional financial assistance and driving up in a newer vehicle.  For that reason, when I was an administrator, I used FACTS Grant and Aid Assessment to “level the playing field,” so to speak, and proportionally allocate the amount of financial aid I had available to award.  I could then tweak awards based on the current status of the family – perhaps dad recently lost his job, or mom just had a new baby.  Using a third-party like FACTS allows the school to be good stewards of financial aid funds when financial aid is based on financial need.

Tuition Assistance describes those programs that are available so that parents can reduce the amount of out-of-pocket tuition they pay regardless of their financial circumstances.  Scrip is a program that many schools use so that parents can benefit.  Tuition assistance programs such as this may be going by the wayside as rules governing non-profits are being enforced.  Funds raised by a non-profit must benefit the non-profit, and cannot directly “inure” to the person that generated the funds, lest they be considered to be “earned income,” and therefore, taxable.  What that means is that if a parent receives $600 in Scrip benefit that reduces their child’s tuition by $600, then the parent could very well receive tax documentation from the school stating that $600 was earned since the parent received a direct benefit from the Scrip proceeds.  Be sure to review this type of assistance with your school’s legal counsel to make sure your school is operating in accordance with established statutes and guidelines.

Scholarship means a reduction in tuition for excellence in academic achievement.  Be sure to establish the guidelines for scholarship, include them in your school’s financial policy, and monitor the recipient’s performance and/or adherence to established criteria relative to maintaining the scholarship.

Discounts are usually offered by schools for payment in full and up front, before the school year begins, as well as if there is more than one student in a family attending the school.  Discounts, however, have a negative connotation.  Discounting means that your product really isn’t worth what you’re asking price states.  For instance, I just purchased some lights for the Christmas season.  I could get a set of lights at a local big box retailer for $16 a set.  However, the local Christmas center, with trees and trimmings with free popcorn and mulled cider that provides an intimate and festive shopping experience sells theirs for $28.50 a set.  But, if I’m on their mailing list, and I have a coupon, I can get a 50% discount if I remember to bring the card in!  What’s good for me is that I can get that set of lights for $14.25 a set, but the person behind me who’s not on the mailing list who’s buying the same lights just got upset because I got a discount.  Now he wants the discount.  What happens when everyone wants the discount?  They come to expect the discount, so that your tuition really “isn’t” your tuition.  Discounts are also offered by retailers who want to increase business…which means their business may be experiencing difficulties.  That really doesn’t inspire confidence in a parent who wants to enroll their child for the next 9 years in your K-8 school.  Stop discounting, and start offering…

Incentives have a completely different connotation than discounts, even though the monetary effect is the same.  Incentives are fleeting.  They are commonly known to happen one month and not the next.  Incentives are usually the benefits of membership.  You can even “incentivize” your tuition, so that if parents pay on time for three months, they can receive a lower tuition payment for the next three months, and so on.  Sure beats having to charge and try to collect on punitive late fees.

Want more information on incentivizing your tuition?  Check out my e-book called “Shift,” available at http://www.lulu.com/shop/mike-ziemski-med/shift-a-strategy-geared-to-solidify-school-finances/ebook/product-21320559.html.