We're all aware of the economic crisis and there is probably no better place to experience it firsthand than the financial aid office! An excellent question came up recently on the Business Manager's List Serv.. .so excellent that I asked Todd if I could share it with you on this Blog - So, here it goes!

In past years when I've received a financial aid application from a parent who had a healthy salary and nice lifestyle but just lost a job, I would tell them that I couldn't offer aid until we saw how their unemployment played out. Most of the time they would end up paying their tuition by obtaining another job and/or liquidating some assets and I wouldn't need to grant them financial aid.

In this economy I'm not sure it's as easy as that anymore. It will probably take them a lot longer to land a comparable job and it may not be as easy to liquidate assets (e.g., they may be upside down in loans), but I'm still not sure I'm comfortable granting aid when there are many other families that never had the financial options that this family once had.

I'm considering offering tuition loans in lieu of financial aid for these situations and would welcome any advice (and policy & document samples) from schools that may already be doing this.

Thanks for your assistance with this.

Todd Fuller
Director of Finance & Operations
Westminster Christian Academy
10900 Ladue Rd.
St. Louis, MO 63141

Todd, thanks for the post.

First, in this market, we must do everything we can to maintain our enrollment. Critical mass is a component of long term stability. So are waiting pools.

Like anybody else, I hate waiting for a restaurant table –but it’s a sure sign of success. If we can walk right in on a weekend, even my kids will say, “Dad, I don't think this place is gonna make it.” People are willing to wait because it’s good. The same thing goes for highly desirable schools.

So, what if we rephrase Todd's question? What if we ask, are there creative ways to use financial aid to retain current families and keep those new ones waiting in line?

I like that question!

Consider the following:

1. An empty seat costs money. Not only do you lose the revenue that a partial-pay student generates but long term families may bail out if classes get too small.

This point is critical - it is always best to fill EVERY seat with a full-paying student, either from your current families or from the waiting pool. But if that isn't possible, in ISM's opinion, THE legitimate use of financial aid is to fill empty seats.

2. Financial Aid isn't really a budget expense. Technically, it reduces income. Be sure you understand the REAL cost. It isn't the amount you spend in any given year that matters. The real determiner is comparing the average tuition received per student, year to year.

3. If I fill the seat with a discounted student we'll carry that student until the end of our program. Normally, this is true. BUT, we're in a recession and unemployment is expected to increase. As a result, some of our families who are applying won't be on financial aid forever. Eventually, this crisis will be over and hopefully most of these families will recover and be able to pay full tuition again.

So maybe it's time to think about a different financial aid model.. dare I say it… a Stimulus Model!

Normally, we'd tell schools to be cautious about going "over budget" on financial aid. However, look at the results of President Reagan's 1981 stimulus package, which snapped the U.S. out of a deep recession and began the tech boom. President Obama's $787 billion investment in our country is designed to have the same kind of impact.

Perhaps we need to look at our financial aid budget much the same way. Consider this statement: In the current economy, we will invest dollars we don’t really have in financial aid for our current families, retaining their commitment to the school until they can once again pay the full cost.

This may put pressure on reserves, endowment, and fund raising in a time when doing so won't be easy. But I'm not sure we have any other choice. Perhaps, just perhaps, we can find a way to make additional financial aid available to support our families, protect our schools, and build a strong future.