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The 1, 2, 3’s of Net Tuition Revenue For Independent and Private Schools
Claire Hollowell

Even schools with bright, hard-working enrollment professionals are not always successful in attracting enough students. Low birth rates and rising tuitions ensure that achieving full enrollment will remain challenging for schools.

While not a panacea, I know of nothing else that can improve a school’s enrollment and financial health quicker than switching to a strategy that focuses on net tuition revenue.

Drew Miller Bio

What exactly is a net tuition revenue model?

Although different net tuition revenue models have many nuances to them, one simple one is based upon the concept that, under certain circumstances, even after all budgeted financial aid has been allocated, it is smart for schools to fill spaces that would otherwise go unused with students who can pay only part of the tuition.

How would I implement this type of net tuition revenue strategy?

Here are three steps to help you implement a net tuition revenue strategy:

Step 1

Determine how many more students you could accommodate in each grade without having to incur large expenses such as having to hire additional teachers.

Step 2

 When each student applies, ask yourself: from now until graduation, is the total amount of tuition greater from enrolling this partial pay student or from enrolling a full-pay student for fewer years? Here is an example: Charlie can pay your school $8,000 each year in grades 6-12 for a total of $48,000. Or, you could leave this space empty for grades 6-8, then enroll a student in the future who pays your full tuition of $15,000 in grades 9-12 for a total of $60,000. Sorry, Charlie, there is no funding for you at this time. But, if Angelita can pay $12,000 per year for a total of $72,000, then congratulations Angelita, you have been accepted with a financial aid grant.

Net tuition paid chart

Step 3

Repeat Step 2 until your school is at capacity.

Questions and Objections:

Objection 1: “The plan seems like a sleazy, discounting scheme.”

A very limited number of schools are fortunate enough to be able to fund 100% of the financial need of all their students from the investment returns of their substantial endowments. However, most schools can only fund a portion of their students who receive financial aid from the school’s endowment proceeds, and for the rest of the students who need financial aid, they simply discount their tuition. Of course, “discount” is too crass a word for schools, so this line item on the budget often refers to Unfunded Financial Aid Allocations or something of that nature.

At its most basic level, a net tuition revenue model is simply extending the amount of discount given to students beyond the traditional financial aid budget. There is nothing sleazy or mysterious about this; it just makes good business sense. Your school enrolls more mission-appropriate students and receives more money. More students who have financial need receive a great education at your school.

Objection 2: “How can adding more financial aid students be responsible or sustainable?”

This net tuition revenue model does not take the place of strategic marketing and hard work to enroll as many tuition capable families as possible. If you are completely successful filling your school with students who pay full tuition and students who receive grants from your financial aid budget, then there is no reason for you to further discount.

However, if you have unfilled spaces, you should consider this type of net tuition revenue model. This requires school administrators and board members to recognize and value the money and talent that these additional partial pay students bring to your school rather than counting the financial aid spent. What matters is how much money your school has to operate. The way to become comfortable with the percentage of your students who receive financial aid rising to higher levels is to think about what your school would be like if you do not fund these additional students.

Objection 3: “Isn’t this a slippery slope?”

Ideally, as your market strengthens, you will not need to fund as many students and eventually stop using a net tuition revenue model – it is easy to turn on when you need it and turn off when you don’t. You ask, “But what if the market does not rebound?” I answer this by asking you to consider, “Wouldn’t you be even worse off without these extra students who each pay some tuition?”

I thought of titling this piece “Enrollment Management for Dummies”, but it is the smart enrollment managers who employ appropriate net tuition revenue models at their schools at times when it makes sense. This type of net tuition revenue plan will not permanently cure all of your enrollment and revenue issues, but it is a very effective strategy to consider if you would like to add more wonderful students to your school while adding more dollars to your budget.

Finalsite's Admissions & Enrollment software makes adopting a net tuition revenue approach easy by offering net tuition revenue calculations and reporting. Learn more about this feature by signing up for a free demo.

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