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Trends in Affordability and Demand
During this presentation, Kristen Power discusses trends in financial aid and affordability. She examines who is currently receiving financial aid, noting that applicants come from a wider range of incomes than in the past. She also analyzes how tuition growth has outpaced income growth, challenging affordability. Finally, she considers strategies like diversifying financial aid funding sources and articulating a school's broader benefits to address affordability issues.
Trends in Affordability and Demand
- 2. TRENDS IN AFFORDABILITYAND DEMAND KRISTEN C. POWER NATIONAL DIRECTOR, BUSINESS DEVELOPMENT JULY 9TH, 2015
- 3. During this session,we will: • Explore how we got here. What are the current trends in financial aid? • Examine the trends impacting today’s financial aid landscape. Who is receiving financial aid? • Discuss the affordability landscape. What does it mean to be “affordable?” #BBK12UC
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- 5. Today’s Aid Applicant Who’sseeking financial aid? #BBK12UC PFS Filer Medians 2013-14 2014-15 Income $88,651 $92,688 Net Worth $18,500 $27,475 Home Equity $5,000 $14,893 Family Size 4 4 Children in TCS 2 2 Parent Contribution $8,047 $8,335
- 6. Today’s Aid Applicant Who’sseeking financial aid? #BBK12UC Quintile US Families PFS Filers, 2014-15 Lowest $0 - $27,794 10.1% Second $27,795 - $49,788 13.2% Third $49,789 - $76,538 17.0% Fourth $76,539 - $119,001 23.6% Highest $119,002 + 36.2% Top 5% $210,000 and greater 10.5%
- 7. Dynamics of theEvolving Applicant Pool Who’s seeking financial aid? #BBK12UC 10.2 18.7 20.3 17.2 12.5 8.1 6.5 6.4 6.6 12.8 14.8 14 12.4 9.9 10.7 18.8 6.4 10.9 12.6 12.4 11.8 10.1 11.8 23.9 0 5 10 15 20 25 0-20K 20-40K 40-60K 60-80K 80-100K 100-120K 120-150K 150K+ 02-03 09-10 14-15 Range of Total Family Income Source: SSS By NAIS PFS Filer Pool. Reflects total income from all sources, before taxes or allowances, as reported by families on the PFS submitted.
- 8. #BBK12UC 1980 1985 19901995 2000 2005 2010 CPI--Urban Mean Fam Inc Top 20% Fam Inc Top 5% Fam Inc Mean Bdg Tuition Mean Day Tuition Pace of Tuition Change
- 9. The Affordability Landscape #BBK12UC 1.16% 5.70% Median Family Income Median Tuition Avgannual change, 1992 – 2012
- 10. Dynamics of theEvolving Applicant Pool -Why the dramatic demand shift? Income growth fell dramatically #BBK12UC 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% Lowest Fifth Second Fifth Third Fifth Fourth Fifth Highest Fifth Top 5 Percent 1960s 1970s 1980s 1990s 2000s
- 11. #BBK12UC Family Income Quintiles, 2013 (USCensus Bureau) Sample Academy % of Financial Aid Applicants Sample Academy % of Financial Aid Recipients Sample Academy Avg Grant $0 - $27,794 10.6% 2.6% $26,150 $27,795 - $49788 14.3% 8.6% $23,242 $49,789 - $76,538 14.3% 12.9% $24,030 $76,539 - $119,001 14.7% 23.2% $16,794 Over $119,001 46.1% 52.9% $14,159 Dynamics of the Evolving Applicant Pool -Why the dramatic demand shift? Income growth fell dramatically
- 12. Dynamics of theEvolving Applicant Pool #BBK12UC What are these new applicants like? Characteristics of the “New Financial Aid Family” Higher income, higher net worth More assertive, less of a sense of “shame” More entrepreneurial, savvy investors Access to better choices or alternatives More accustomed to having influence over decisions
- 13. The Affordability Conversation •Key Question: How does our price impact our ability to enroll the students we want? • External shifts are promising – Income growth and school-age population projections – Next five years projected gains over past five years • Recently, less selective among declining number of applicants, tougher to yield an accepted student? • Slow down in financial aid investment impacting enrollment and net revenue? • Examine relationships between these factors – Population problem, quality of pool problem, or willingness/ability to help problem? #BBK12UC
- 14. The Affordability Landscape #BBK12UC MedianTuition (All Grades) Full-Pay Income* $27,500 (middle school) $171,000 $32,950 (high school) $190,000 What’s your Affordability Range? Tuition prices reflect ‘15-’16 tuition at Sample School Assumptions: Family of four, two parents, two children, one in a tuition-charging school, parents age 47, both work, one earns $20K, Maine residents, COLA = 1.000
- 15. The Affordability Landscape #BBK12UC MedianTuition (All Grades) Full-Pay Income* $27,500 (middle school) $273,000 $32,950 (high school) $317,000 What’s your Affordability Range? Tuition prices reflect ‘15-’16 tuition at Sample School Assumptions: Family of four, two parents, two children, two in a tuition-charging school, parents age 47, both work, one earns $20K, Maine residents, COLA = 1.000
- 16. Where Are theFull Pay Families? Current top towns (draws) *Data from NAIS Demographic Center **Assumption: tuition increase 5% each year #BBK12UC Towns Average household income in ’14* Projected household income in ’19* Projected upper school tuition in ’19** Dover $80,511 $90,853 (12.9%) $40,050 (21.55%) Exeter $105,976 $118,333 (11.7%) $40,050 (21.55%) Kittery $79,947 $89,421 (11.6%) $40,050 (21.55%) Portsmouth $92,398 $103,022 (11.5%) $40,050 (21.55%) York $97,234 $108,205 (11.3%) $40,050 (21.55%)
- 17. The Affordability Conversation •Zero in on what it means to invest in affordability – Aspirational: Establish or affirm the primary purpose and goals of the aid investment – Financial: Clarify and diversify sources of financial aid funding – Professional: Ensure staff training for tactical and leadership skills development – Societal: Articulate the community-wide benefits of the investment; understand the impact of external trends and realities • Set benchmarks and measure progress • Leverage the admission and financial aid voice ‘at the table’ • Encourage school-wide ownership and accountability #BBK12UC
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- 19. Presenter Information Kristen Power NationalDirector, Business Development SSS by NAIS power@nais.org 202-973-9759 #BBK12UC
Editor's Notes
- #6 Evaluating over 150,000 applicants who filed a PFS for the last two academic years, we can see a picture of the typical family who applies for financial aid at SSS subscriber schools. This snapshot confirms that the commonly held stereotypes of the financial aid recipient as a poor family no longer hold. This family is earning on the low upper income side of the economic scale, though with fairly modest net worth. Income rich, but asset poor, they struggle to find a way to be able to have a couple of children in private schools and perhaps college.
- #7 How does the distribution of aid applicants compare to the nation at large? It’s wealthier…families seeking financial aid are far from the “low income, high need, inner-city kid who needs a way out” stereotype that may come to mind. Low income and middle income families are underrepresented in seeking financial aid while high-income families are over-represented. In fact, trends and snapshots that we have seen among schools are suggesting that the “traditional” financial aid family is actually becoming less and less likely to get the help they need, as the higher income families tip the scales in increasing ways.
- #8 Evaluating over 150,000 applicants who filed a PFS for the last two academic years, we can see a picture of the typical family who applies for financial aid at SSS subscriber schools. This snapshot confirms that the commonly held stereotypes of the financial aid recipient as a poor family no longer hold. This family is earning on the low upper income side of the economic scale, though with fairly modest net worth. Income rich, but asset poor, they struggle to find a way to be able to have a couple of children in private schools and perhaps college.
- #11 Incomes don’t grow like they used to, at all levels. But tuition growth has been pretty steady, creating a long-term pressure that peaked in the 2008 recession. This chart shows the average annual change in average income for each decade, for each income quintile. In the 1960’s, the dark blue column, average income for each quintile group typically grew about 8% per year. In the 2000’s, however, the light blue column shows that only the top 20 percent saw an average income growth over 2% per year. These slowdowns, in conjunction with steady tuition growth rates of 5 to 6%, until recently, have helped to create greater demand for aid. Families can’t keep up with tuition change like they used to, so more will seek help with it. So far, these data suggest a new financial aid applicant. It’s important to know whether there’s a noticeable shift in who’s actually receiving financial aid.
- #12 The best analysis of who receives aid starts with the school. SSS has a lot of data on who applies and NAIS has a lot of data on what is spent on aid, but we don’t have much data on the families who end up getting aid at your schools since that is your final decision. This exercise, though, can help illustrate who is receiving financial aid at your school. This is especially useful if your purpose with aid is to help create economic diversity. Using US Census Bureau quintiles as a starting point, determine the percentage of families in your aid recipient pool that fall into each band. Also, include the average award that those families received. This chart is actual data from a day school that revealed a counterintuitive reality about their “financial aid family.” The higher your income, the more likely you are to receive aid. What if you saw something like this with your own data? What questions or observations would you raise? This is unlikely to be an outlier example. The income pressures on families, and the retention/revenue pressures on schools, is creating this kind of shift to a new type of financial aid family all across the country. So, with higher-earning families in the applicant pool and in the recipient pool, it’s important to explore what families think about the aid process, how they choose to pay their share of tuition, and what implications there are for schools to handle the shifting dynamics.