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Perceived Value, not Tuition Price, Drives Private School Enrollment

By Net Assets posted 02-28-2017 02:34 PM

Tuition price elasticity study

Enrollment & Financial Aid |

Major study of tuition price elasticity tracks 259 schools over six years.

Do tuition increases adversely affect enrollment in independent schools? Only in rare instances, finds a conclusive new study released today at the 2017 NBOA Annual Meeting and co-sponsored by NBOA, Independent School Management and Measuring Success. In the third major research effort of its kind, the study of tuition price elasticity in independent preK-12 schools finds that there is statistically no correlation between changes in tuition pricing and enrollment demand. In other words, regardless of whether or how much a school increases tuition in any given year, parents are no more or less likely to enroll or re-enroll their child.

What does influence the family’s decision to enroll? The perceived value the schools provide, the findings suggest. By increasing tuition, schools can expand programs and raise faculty salaries, thereby strengthening their quality and enrollment.

These findings analyze results of a six-year study of tuition pricing and enrollment at 259 nonprofit independent schools in the U.S. Participating schools represent a broad range of sizes, locations, tuition prices, affiliations, ages served and boarding/day enrollments, and provided data for six consecutive school years (2010-2016). The study (Effects of Tuition Increases on Enrollment Demand: an Updated Study by ISM, Measuring Success and NBOA) builds on two much smaller studies, released in 2006 and 2009, that first hypothesized the absence of a relationship between tuition price and enrollment. Those findings were controversial, and then as now schools are cautioned to consider them in the context of their specific location, mission and other circumstances.

“The last time this study was conducted was immediately following the recession,” said Jeff Shields, NBOA’s president and CEO. “It was critical for NBOA, ISM and Measuring Success to join forces to help heads of schools, business officers and trustees understand tuition price elasticity in today’s economic environment. The research, once again, indicates changes in tuition do not have a direct link to changes in enrollment demand.”

Among other survey results:

  • Among schools with tuition above $25,000 or below $15,000, increased tuition has no effect on enrollment.
  • Among all schools, tuition increases have no effect on total number of applications or retention from one division to the next (e.g., lower school to middle school).
  • Among “mid-range” schools ($15,000-<$25,000), a tuition increase of $1,000 was associated with a smaller enrollment increase (1.5 percent) than lower- or higher-cost schools.

Despite these findings, study authors say schools should use great caution in interpreting the data. “We recommend that all schools focus on driving their quality, not limiting their price, to maximize net revenues,” said Shields. “Regardless, these findings support that idea that an independent school is better off embracing its identity as an expensive school or a fairly inexpensive one, but being caught in between those poles can be difficult. Such schools must carefully balance distributing financial aid and collecting net revenue.”

Download the white paper, Effects of Tuition Increases on Enrollment Demand: an Updated Study by ISM, Measuring Success and NBOA.

Read a press release about the study.

#Tuition #Enrollment

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