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Is Philanthropy-Based Financing Our Future?

By Jeffrey Shields posted 28 days ago

  

CEO Notebook |

Could a mammoth fundraising push enable independent schools to lower tuition?

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Jeffrey Shields, FASAE, CAE
NBOA President and CEO

Strained as independent schools’ financial aid budgets may be, they are relatively healthy compared to those at private colleges, where the average discount off stated tuition price runs about 50 percent. A countertrend has involved dramatic tuition cuts. The moves attract attention, but are they the best ways to address the affordability issue?

Consider “tuition resets.” In most cases, tuition-dependent liberal arts institutions cut both the published tuition that gives families sticker shock as well as the aid that softens the blow, with the idea that pricing transparency will attract more families. An example is Birmingham-Southern College — alma mater of NBOA’s own Jennifer Hillen — which slashed tuition by 51 percent last year. While critics call the practice a short-term gimmick, supporters say pricing changes bring positive media attention, alumni support and, crucially, more students in the door.

While critics call the practice a short-term gimmick, supporters say pricing changes bring positive media attention, alumni support and, crucially, more students in the door.

I was intrigued last week to learn about another pricing model announced by St. John’s College, a liberal arts college with campuses in Annapolis and Santa Fe. It will cut tuition from $52,000 to $35,000 next year, but it’s not a reset. Instead, donations will cover the remaining cost of education, shifting the model from tuition-based to “philanthropy-based.” St. John’s has already raised $200 million toward the $300 million it needs, with $50 million coming from an alumni couple’s foundation. Some say this could be a new model for private colleges more broadly.

I have my doubts. Less than 1 percent of U.S. colleges receive more than 28 percent of all higher education donations, which means most aren’t bringing in nearly as much as the top fundraisers. Couple that with downward trends in charitable giving, and the model doesn’t seem workable for more than a few institutions. Moreover, the number of donors and overall donations to charitable organizations are down this year, and longer term trends show small and medium donors are also on the decline.

But let’s not dismiss out of hand these bold actions to address the affordability of our schools. Golda Och Academy, a preschool-grade 12 day school in West Orange, New Jersey, for example, simplified and expanded its aid program to bring in more middle class families, mostly thanks to a generous family donation. When CFO Julia Malaga presented GOA’s process at the 2018 NBOA Annual Meeting, she said it has been instrumental in combatting the barbell effect and convincing families they can afford GOA.

What do you think? Could your school dramatically drop its tuition price while raising the necessary funds to cover expenses? Has your school tried disrupting traditional tuition pricing in a way that was successful — or fell flat? I’d welcome your thoughts.

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Follow NBOA President and CEO Jeff Shields @shieldsNBOA.
From Net Assets NOW, September 25, 2018. Read past issues of CEO Notebook.

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