By David McCabe
In early February, administrators presented the Board of Trustees with a summary of how the College would spend nearly $113 million over the course of the 2012-13 fiscal year. That summary included the $25,452,213 the College had budgeted for need- and merit-based financial aid, the second largest expenditure by function next to the funds devoted to instruction.
The Board approved the budget.
But two months later, as the Office of Admissions began hearing back from admitted students, staff members there quickly realized demand for financial aid was much higher than what had been budgeted. What went wrong with the model that had been carefully crafted to determine who would come to Kenyon, and how much aid they would need?
Thats the million dollar question, said Vice President for Enrollment and Dean of Admissions and Financial Aid Jennifer Delahunty.
Its actually more like the $700,000 question. The class of 2016 alone required $7,423,871 in financial aid, or $678,859 more than was budgeted for their class.
Every other class required less aid than was expected, however, bringing the net additional cost for all aid to $280,493, according to Teri Blanchard, the Colleges associate vice president for finance.
Now, as the College prepares to fill the gap in the budget created by these unexpected requests, it will have to grapple with not just the immediate need to stay in the black, but also with the idea that this might not be a simple statistical blip: this might signal a shift in the economics of higher education, leaving more students in need of more aid just as colleges are seeking to increase revenues.
The short-term solution to end the fiscal year with a balanced budget is fairly simple: administrators will likely take the money out of a $1.5 million contingency fund established for operating expenses. (Separate funds cover unexpected maintenance costs on College buildings and equipment failure). Thats why you budget a contingency, because you dont really know on a $113 million budget whats going to happen, Blanchard said.
What the increase in aid means in the long-term, however, is more complicated. Financial aid costs follow a class for four years, so the class of 2016s aid requests will have to be factored into every College budget through their graduation.
The operating contingency can handle [the additional requests] this year, but when youre modeling forward, those are real costs to real students, Blanchard said.
We confront a number of possible strategies and choices, none of which are very attractive, said President S. Georgia Nugent.
These strategies include accepting more students who can pay full tuition, considering a students need more heavily before accepting him or her and offering a student less than 100 percent of their demonstrated need for financial aid.
The unexpectedly high yield of students requiring financial aid could have been a consequence of other institutions adopting policies like these to reduce their financial aid expenditures, according to Delahunty.
This past year, Delahunty said, many schools became more need-aware meaning admissions officers consider a students need for financial aid along with their application.
More colleges became more aware, and some of these students [who were] completely capable academically, in fact some of them extra capable, were cut out of other admissions pools and our offer of admission was both the most academically desirable and also the best financial one, so we saw a higher yield on those students, she said.
According to Delahunty, more of Kenyons competitors are using merit scholarships to lure students who can pay close to full tuition. The revenue from these students can be used to fill gaps in colleges budgets, and are often used to subsidize financial aid for students who need it.
Nugent called this system broken.
But no one, she said, is willing to disarm unilaterally. College presidents, she said, do not want to ban the use of merit aid at their institutions, because competing schools could use that to their advantage. Kenyon awarded $4,908,630 in merit aid this year.
Every year, Delahuntys office builds a predictive model for the financial aid budget using data collected about the previous years yield the percentage of students who accepted Kenyons offer of admission and factors in academic ability, geography and socioeconomic status. As the class of 2016 began to form, admissions officers found that more students who required financial aid based on need were accepting their offer of admission.
The class of 2015 was sort of an anomalous year, and our model was based on the class of 2015, Delahunty said. We didnt expect to have the high yield that we had on students that needed very large grants.
Kenyon also guarantees they will meet 100 percent of demonstrated financial need, rather than providing prospective students with only a fraction of the funds they require, in a practice known as gapping. Administrators said Kenyon is one of only a handful of institutions that does not gap.
The requests come at a time when many families are still dealing with the aftermath of the 2008 global financial crisis and the reality of an economic recovery that has been slower than expected. As home prices have fallen, home equity has become a much less liquid asset for families who have to pay college tuition.
Youre finding that the aftershocks of the recession are fully hitting families now, Delahunty said. People now know this is the new normal.
For the class of 2016, the Office of Admissions and Financial Aid adjusted the formula they use to evaluate financial need to reflect that a familys home equity is not an indicator of their ability to pay for college. The Office requested $200,000 in extra aid to cover the additional grants offered to accepted students who were receiving those offers as a result of the changed formula.
Despite the continued sluggishness of the U.S. economy, Delahunty cautioned that this years financial aid expenses may not be a new norm. I dont think one year makes a trend, she said.
[starbox id=”david mccabe”]