How to determine whether you should modify your financial aid strategy mid-course, and how to do so without students and competitors knowing.
he best way to develop a financial aid strategy is to build a statistical model, using historical data, and then use that model to simulate changes in aid on the historical pool. This allows us to predict what would have happened, with that pool, if a different aiding strategy had been used. We can test many different scenarios to arrive at the one that achieves the desired class composition and then apply that strategy to the following year’s admit population.
The tricky part is that we have to make the assumption that the following year’s pool will look just like the pool used to build the strategy. Sometimes we can anticipate changes at the top of the funnel and bake-in assumptions about what the pool will look like. But, these are just that – assumptions. And in reality, we all know that admit pools never look exactly the same from one year to the next. On top of that, competitors change their strategies, and this can have an impact on the effectiveness of an institution’s awarding plan. In addition, the world changes in ways that can affect student behavior (e.g., we encounter a global pandemic that forces most institutions to shut down all in-person activities for a considerable period of time). The predictive model should guide the strategy, but we have to be nimble enough throughout the admission cycle to respond to unanticipated changes. Often the packaging formula needs to be tweaked in order to keep a school on track to meet its enrollment goals.
Given that, how can you determine whether your aid strategy, or even your admit strategy, needs to be adjusted mid-course? And, if so, how should you respond and when is the right time to take action?
For some institutions, they have set their strategies but have either not started admitting or awarding students when we determine that modifications to the plan are needed. Other times we’re well into an admission cycle. The latter poses additional challenges, but changes at this stage can still be very effective when done right.
Some of the things we work with our partner institutions to monitor and think about throughout the cycle, that help determine if and when they should shift-course, are:
We use an interactive dashboard to compare the current year’s applicant and admit pools to prior years’ pools, in real time. This dashboard can be quickly and easily updated so that the pool can be monitored daily, or even multiple times per day. Having frequent updates is critical when it comes to ensuring that any adjustments made will be as effective as possible. The key to making an adjustment without your prospective students or competitors knowing, is doing it early. An adjustment to need or merit-based aid that happens before prospects are notified of their awards makes the adjustment undetectable. The data visualizations within the dashboard show us how an applicant or admit pool differs from what we were expecting, or the past several years’ pools, making it easy to see:
- How interest indicators compare
- How the rate of students applying test-optional is trending
- Changes in data coding and storage that may influence comparative analysis
- The softness of a pool
- The price of applicant pool (e.g., compare average offers to prior years)
- Shifts in demographics, financial need, and academic credentials
Real-time access to data can provide great insight into how the class is taking shape. However, we still need to carefully consider what the comparative data tell us. For example, right now, campus visits are up at many institutions compared with the previous cycle, which is typically a positive indication of interest. And while greater opportunities for students to experience and fall in love with a campus is a welcome change, we also have to consider that the availability of visiting is vastly different than it was at this time last year, when we were at the height of the pandemic. All changes in the pool and how they may impact yield, composition, and financials need to be assessed within context.
The expertise and intuition of the enrollment management team at an institution is a crucial piece of the puzzle when managing to goals. Comparative statistics like those we list above are informative; but numbers only tell us part of the story. We ask our partners, throughout the cycle, what they are hearing from:
- Prospective students
- High School counselors
- Their admission and financial aid teams
- Peer institutions
We also have to keep an ear to the ground to monitor national data. Two months ago, FAFSA filing was down nationwide. It’s always concerning when FAFSA filing has decreased at a particular institution, but our interpretation is very different when we know FAFSA filing is down everywhere.
At times, determining whether strategy adjustments should be made comes down to weighing the potential risks against rewards and reassessing priorities. Some of the questions to ask yourself are:
- Would you prefer to hit headcount or revenue targets, if a choice is necessary? Or is discount rate the most important target? What about program goals? For us, answers to these questions often impact our recommendations.
- What are your admissions/awarding deadlines – Are you thinking of admitting more applicants in general, or in one pool (EA/RD)? Do need-based awards and merit offers go out together or separately? The mechanics of the offers may help or hinder blending adjustments with what the students already expect.
Hedging your bets before appeals, if the risk warrants, is typically a preferable strategy, as the timing of awards can moderate their effectiveness.
We use predictive modeling to help institutions set financial aid, admission, and retention strategies for an upcoming cycle. We also use these models to project enrollment, class composition, and financials throughout the cycle. Models can be utilized in real-time to forecast future outcomes and simulate the impact of mid-course corrections. We’re regularly using models to answer questions such as:
- What is likely to happen, given the composition of the live pool?
- What levers are available? These could include adjusting the awarding strategy, admitting more students, encouraging students who have not yet applied to do so, and strategically admitting from a Waitlist before the May 1 deposit deadline.
- How do the distribution of enrollment likelihoods within the pool compare to the prior year? When we build and run predictive yield models, we create likelihood groups based on each admit’s relative probability of enrolling. Throughout the cycle, we track the volume of admits within each group in order to gain a better understanding of the softness of a pool and where we might need to adjust.
The most common reason that schools explore a mid-cycle adjustment is that they are concerned they will fall short of their headcount targets. However, we have also seen cases where we expect an institution to exceed their headcount goals and, in these cases, we have had the opportunity to manage the discount rate or the composition of the pool by adjusting strategy mid-cycle. Enrollment managers are tasked with hitting a wide range of goals every cycle. Using the data available, combined with the experience of having done this for many years, we can assess whether our partners are poised to hit their targets, and, if not, what actions need to be taken.
One of the things we have learned in the time that we have been helping institutions shape their classes and hit targets is that the execution of an adjustment can be just as impactful as the adjustment itself. We know that time is of the essence during the admission cycle and it’s important to get awards in front of students long before they need to make decisions. By carefully tracking data, utilizing advanced analytics, and talking to colleagues about what they are seeing, we greatly increase the likelihood of meeting both headcount and revenue goals.
If you'd like to talk to us about assessing your 2022 admission or financial aid strategies, or if you would like to hear about our other work, please email us at [email protected] or visit our higher ed solutions page.