Tuition increases don’t affect school enrollment – if anything, they make schools seem more valuable.
The more expensive the school’s tuition, the better we think it is.
That’s what one new study is telling us, anyway. The National Business Officers Association, Independent School Management and Measuring Success co-sponsored research revealing that we don’t see rising costs at private grade schools as a reason to go somewhere else.
Instead, we see it as a sign the school is worth the money, and assume tuition increases go toward expanding programs, raising faculty pay and ultimately strengthening the quality of the school.
“There is an understandable concern that increasing tuition to enhance the quality of the program could drive families away,” the study says. “Overall, the fear is just that, fear, and schools can increase tuition concomitant with perceived quality and expect enrollments to remain at least constant.”
Third time’s the charm?
The new study builds on previous smaller research that Measuring Success, an analytics company that helps nonprofits make business decisions, released over the past decade. It basically comes to the same conclusion as before, but there was controversy around the initial study’s findings in 2006 due to the economy, and again right after the Great Recession.
This time, Measuring Success partnered with other organizations to scale up its analysis. It analyzed six years’ worth of tuition pricing and enrollment data from 259 nonprofit private schools in the U.S., almost double what it looked at last time.
“The last time this study was conducted was immediately following the recession,” said Jeff Shields, NBOA’s president and CEO. “The research, once again, indicates that changes in tuition do not have a direct link to changes in enrollment demand.”
The study also concluded that at private high schools with tuition costs above $25,000 and those with costs below $15,000, tuition increases don’t affect enrollment rates at all.
According to the Private School Review, the average annual cost for private elementary school is $8,908 and is $13,538 for private high school.
Given the already high tuition prices, the authors of the study stress that schools shouldn’t focus on increasing rates to maximize profits.
“We recommend that all schools focus on driving their quality, not limiting their price, to maximize net revenues,” Shields says. “Regardless, these findings support the idea that an independent school is better off embracing its identity as an expensive school or a fairly expensive one, but being caught in between those poles can be difficult. Such schools must carefully balance distributing financial aid and collecting net revenue.”
The study also cautions against offering additional financial aid simply to drive enrollment: “This research group believes that in nearly every case the cost of increasing enrollment by increasing financial aid outweighs the benefit. By lowering your price you may indeed increase enrollment, but you also decrease net revenue, which means that increased enrollment served no actual revenue advantage.”
Instead, the authors conclude, schools should just price according to their services, be honest about what they offer, and do their best. “It’s the mission and excellent execution of that mission that are the significant enrollment stabilizers,” the study ends.
Article last modified on April 3, 2017. Published by Debt.com, LLC .