The Kohl's Cash Problem for Higher Ed

💰 How merit aid is expanding; the new EARLY early admissions round at U. of Chicago; and an era of deeper collaboration in higher ed. Here are excerpts from Next. Sign up here.

EVENTS

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Innovation and Inclusivity: Leading Change on Campuses, where we’ll examine the forces that are reshaping higher ed and how to design an innovation process that is both inclusive but bold.

👉 Register now for free here. (Support from the ASU Georgetown Academy for Innovative Higher Education Leadership )

THE LEAD

Merit aid/tuition discounts are nothing new, a reader wrote to me recently after seeing my byline at the top of a piece in New York magazine. The article was headlined: “The New Trick Families Are Using to Lower College Tuition Bills”

I wrote back, trying not to sound defensive, but I don’t write the headlines. I wouldn’t have used the word “new,” for instance, but there’s no doubt who pays what for college and where is continuing to shift.

First a quick history lesson: The idea of giving out financial aid to prospective college students who don’t qualify for need-based aid first took hold in the 1970s, as my former Chronicle of Higher Education colleague Stephen Burd outlined in this essential read in Washington Monthly in 2013. 

• For much of the 1970s and ‘80s, merit discounts were pretty limited. Not every middle- and upper-income student received one and the discount rate at colleges that played the game were closer to 25% off the sticker price, not today’s 50%-plus. 
• Discounting started to spread in the 1990s, as college costs increased and the number of high school graduates tapered off. 
• It flattened again in the early 2000s, when enrollment surged as millennials arrived on campuses.

Fast forward to present day: The latest iteration of tuition discounts is that they continue to move up the income scale and are spreading to more and more colleges. 

• There are fewer families able, or willing, to pay full freight. As I wrote in Next last summer, it’s “the curse of the full payers” for colleges. 
• The rapid deterioration of full-payers has been most acute at small liberal-arts colleges that rank between 51 and 100. Today, nine out of every ten full-pay students who go to any liberal-arts college are enrolled at a campus in the top 50.

These graphs above were the origin for my story in New York magazine.

They are from previously unpublished calculations of federal data compiled by Wellesley College economist Phillip Levine. In April, Levine published a report using the data for the Brookings Institution. 

• Levine found that what lower- and middle-income families pay out of pocket at private colleges—their “net price” after financial aid is applied—has been relatively flat for the last decade. 
• But when you look at the graph that Levine produced, the flat line for the net price at private colleges turns into a hockey stick around the $200,000 family income mark, the point when schools expect more full payers.
• “At private institutions, the net price…has only increased for higher-income students,” Levine wrote in his study.
• Meanwhile, at public universities, while the net price has risen for all students, “the increases have been larger for higher-income students,” he wrote. At public colleges, the net price makes a steep rise starting at the $125,000 income mark.   

Bottom line: Discounting is so widespread in higher ed now that the frequent comparisons of merit aid to “Kohl’s cash,” the discount strategy employed by the mid-market retailer–where basically every day is a sale–are not wrong.

• “With a few exceptions, colleges all now have an opening bid with families,” said Brian Zucker, who runs Human Capital Research Corporation, one of several firms that assists colleges with their discounting strategies. 
• This discounting approach worked when institutions were able to raise their top-line prices and thus extract more revenue each year from students.
• But at many colleges, net-tuition revenue is flat or falling. Fitch Ratings said last week that institutions it rates for bonds saw their net-tuition revenue rise just 1.1% last year–not enough to keep up with inflation or have enough of a financial cushion to weather the current enrollment storms. 
• Just like in the 1970s, when colleges developed tuition discounts, the time has come for higher ed to come up with a new pricing scheme in addition, of course, of finding ways to reduce costs. 

1. It Was Bound to Happen 

One question I get often from parents is whether summer programs hosted by colleges on their campuses make a difference in admissions decisions later on.

The short answer is No, although the summer experience can help the student connect with faculty who might have influence with the admissions office. It could also help the applicant write a better “Why X College?” essay.

Driving the news: The University of Chicago announced last week that it will provide an admissions pathway to students who complete one of their pre-college programs.

• The University of Chicago has long been at the forefront of pushing the boundaries of admissions practices. Now, in addition to offering Early Decision I, Early Action, Early Decision II, and Regular Decision, the university will offer this extra option. 
• According to the university, students who complete one of its pre-college programs, "may apply from September 1 to October 15, and will receive an admissions decision three weeks (or prior to November 1) after completing their full application during this time frame."

It was W. Kent Barnds who alerted me to this news in a post on LinkedIn. Barnds is an executive vice president at Augustana College in Illinois. 

Barnds called Chicago's announcement a “brillant” admissions and recruitment strategy. “We can expect elite college across the country, which offer robust pre-college and talent identification programs, to follow along," he wrote.

• What’s more, he said, “the EARLY Early Decision program might as well (and most likely will evolve into) be Direct Admit for program participants.” 
• That means students in the summer program may not actually even need to formally apply to be considered for admission. 

Barnds went on to write: I believe there is a very good possibility that when admissions rates are released (if they do so), they will look something like this: 

EARLY Early Decision admit rate: 75%

Early Decision admit rate: 25%

Regular Decision admit rate: < 10%

The big picture, according to Barnds: Elite colleges with robust pre-college programs have always had an advantage because of their attractive programming and emphasis on fully utilizing their physical plant. Many have also launched online summer enrichment programs, too. Programs like EARLY Early Decision will only accelerate the market advantages of elites and the demand for these programs now that they are more transparently connected to admissions will explode.

2. AI and Admissions

For all the talk of AI in the classroom, so far the biggest impact on college campuses might be with administrative functions, including admissions. 

What’s happening: Admissions offices using AI report saving staff time to allow human workers to focus on other activities. 

• In one month, the admissions bot at Texas State Technical College engaged in more than 1,200 chats, with 95% of them ending in a successful conclusion, Michael Bettersworth, the college’s chief marketing officer said during a recent edition of the "Next Office Hour."
• “It saved us around 2,700 minutes of staff time,” Bettersworth said. 
• Meanwhile, finalizing admissions decisions at Southeast Missouri State University have gone from one month to two days thanks to AI, said Lenell Hahn, the university’s director of admissions.

What’s next: The University of Miami is piloting AI to review essays for fall of 2025 applicants. 

• The university built models using essays from the fall 2022 admissions cycle, said John G. Haller, Miami’s vice president for enrollment management and new student strategies. 
• The experiment targets students who remained enrolled as well as those who left “to see if there's content that can be identified that determines which students stick here,” Haller said. 

Bottom line: Right now, AI is seen as another tech tool, largely to save time. It’s much like the internet in its early days, which was then viewed as a giant encyclopedia. It was only over time that we saw the ways the internet transformed how we socialize, shop, and learn. The real advantage of AI in higher ed is when we learn how it can unlock the expertise of staff and faculty to develop new models for everything from the student experience to how institutions are run. 

🚨 Watch an on-demand recording of the "Next Office Hour" here (With support from Element 451) 

+ As I told enrollment and marketing leaders at a conference in Raleigh last month, we’re in the very early stages of AI in higher ed. As an example, I showed them an excerpt from an article I wrote while on a reporting fellowship with The Arizona Republic in the summer of 1995. Yes, the article was explaining what the letters WWW meant: 

3. The Networked University

Collaboration in higher education is nothing new. But often partnerships are forged among small groups of campuses located near each other.

• Now, higher ed is moving into a new era of collaboration—one that promises to provide more efficiency and cost savings for institutions and a better experience for faculty, staff, and students, according to a discussion during the June edition of the "Next Office Hour."

What’s happening: This new era of collaboration is being forced on institutions through a combination of declining numbers of high-school graduates, downward pressure on tuition revenue, and a labor market for faculty and staff that demands different skills than in the past. 

• “We have come together to share tools and talent in a common system so our colleges can focus their resources on the things that matter and make them special as institutions,” Kathy Ulibarri said during the discussion.
• Ulibarri is CEO of CHESS, the Collaborative for Higher Education Shared Services. It is made up of six independent New Mexico Institutions that share payroll, financial, and human resources functions and soon will share a single student information system. 

By the numbers: It’s still early in the collaboration, but Ulibarri said it has allowed the six colleges in just the area of payroll to go from 16 full-time employees to half that number.  

🖥️ Watch an on-demand recording of the "Next Office Hour" here (With support from Workday)

SUPPLEMENTS

🎢 Things Can Turn Quickly. In May, Moody's Investors Service affirmed Emerson College’s bond rating and said the college’s outlook was “stable.” Among the things Moody’s cited for its guidance was Emeron’s enrollment, “up a notable 13% since 2019.” Then, last month, Emerson announced it was planning a series of layoffs because of enrollment declines. It blamed the enrollment drop, in part, on student protests during prospective student open houses. Was it the campus protests that made things turn so quickly? Or is it the affordability of a private college in Boston? Or might it be less interest in what Emerson does: arts and communications? It’s hard to really know because it's usually not one thing, as enrollment leaders are quick to remind us, although presidents and boards usually like to fix one thing. (Boston.com)

🍴 Put a Fork in FAFSA. With the June 30 deadline for the Free Application for Federal Student (FAFSA) now past, it’s probably time to focus less on this past year’s debacle and start to worry that it doesn’t happen again next year. The FAFSA tracker by the National College Attainment Network (NCAN) shows completions this year were down 11.2% over the previous year, with declines of over 10% in states such as Pennsylvania, New York, and California. (NCAN)

💰 This Is What Elite Failure Looks Like. That headline on a New York Times op-ed caught my attention last week because my new book looks at how we can see past “elite schools.” So much good information packed in this piece, including this passage: 

⛱️ Hope you're enjoying your summer. 💦 Stay cool. Until next time, Cheers — Jeff  

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