Wednesday, September 19, 2007

Hierarchy of Student Decision Making Step 2- Can I Afford it?

This is the third installment in an on-going discussion on the Hierarchy of Student Decision Making.
To read the introduction to the Hierarchy of Student Decision Making- How they Choose click here

To read the second installment, The First Step in the Hierarchy- Can I Get In? click here.

Hierarchy of Decision-Making Can I Afford It?

Once the primary concern of can I get in is satisfied, an immediate issue come flying forward. Can I pay for this? Though it will seem at times that some students give the impression that college should be free just like high school was, most will realize that it costs money to go to school. As to whether or not college should be free or at least affordable for most students is an issue for another day.

Very often students who are looking to go to a school concentrate so much on hierarchy question one, Can I Get In?, that they put off worrying about paying. Students will actually not encounter the reality of paying for college until they are admitted and are sent a bill. They will have an idea of costs since most will have looked at schools by some sense of cost banding.

Cost bands
A cost band is a mental grouping by tuition such as high, medium and low costs schools in relation to the student’s or the family’s self-conceived economic position and social connections. For example, students from an affluent neighborhood may assume that any of the top Name Brand schools will be affordable because they live in an affluent area and everyone else seems to be applying to Ivies or name brands. So they apply to schools in an expensive but affordable “cost band” that others would see as way out of their reach. A student from the inner city would not see her band including the expensive private schools for the most part. A student from a solidly middle class neighborhood or town would look to schools that fit within the affordability band appropriate to the family’s income. They might apply to state universities and colleges as well as a “stretch school” which expands the band itself with the hope that “if I get in, we can find a way to pay for it.” In fact, banding is a bit elastic since students are pushed to apply for a “stretch school” and worry about the costs later. Moreover, simply put, many students do not consider the real costs as they apply.

The banding often expands beyond the financial means for many families due to a couple of elasticity factors. First is the culturally promoted belief that anyone can become president and there is a way to pay for every student to attend the college or university of his or her choice. Anyone who has had to pay for school knows this is a cultural fabrication that is only true for those with the discretionary income to pay or the credit rating to take out loans that will lower the family’s fiscal stability and/or the student’s life after graduation for years to come. And the becoming president part… It’s true that C students have done it but there was that family money and connections thing.

The second band elasticity factor is set upon another misbelief often promoted by the school itself which talks vaguely about scholarships and grants available for those who qualify. As part of the recruitment approach, costs are left out of the discussion or details. “Oh tuition is $X but most of our students get scholarships and grants to help out” is a quite common line many admission reps will repeat to answer the tuition affordability cost. Scholarships and grants do exist but not in the amount or quantity required by most students to be able to afford the school of their choice. Scholarships and grants such as Pell can help out but many students who elect to go to a school that is really outside of their fiscal band will be left with large debts.

At the same time, there is a psychological aspect that restricts band elasticity from including what might be sensible and feasible financial decisions. This is the socially acceptable aspect of choices that dictate the range of schools that may be included in the band. For example, students from an affluent area would not place a community college into their band since that would carry too high a social esteem cost. The affective return on investment would be far too low. To even be known as considering a community college (which is a very wise fiscal choice for the first two years by the way) would lower the social status. So the banding is a combination of perceived financial and social cost.

The initial selection of schools to apply to might have some fiscal controls on it but once the applications go out, the “can I get in stage” takes full command. Actual costs remain secondary to gaining acceptance. During this stage, hope springs eternal and “first get in and then we’ll figure it out” attitude is prevalent until acceptance. When the letter comes welcoming a student to the school, then issue 2 takes complete importance. Reality suddenly comes in the door with the welcoming package. What often doesn’t come with the package is enough help and customer service assistance with financial aid.

Making Financial Aid Even More Difficult
Yes, most schools send out some details about financial aid and what the family must do but the information usually confuses the hell out of the potential student and parents. It is almost always written in academic in-group language as well as the state and federal legalese to make sure the students and parents do not really understand what they need to do and then how to do it.. There are times when I have this cynical belief that we use confusing and technical language to dissuade families from applying for all the financial aid they might be entitled to. This is not all that far fetched cynicism either. The June 2007 Harvard Business Review has an article by Gail McGovern and Youngme Moon. The article’s title is Companies and the Customer Who Hate Them. The article discusses companies that deliberately confuse customers into making bad purchases.

Companies have found that confused and ill-informed customers, who often end up making poor purchasing decisions, can be highly profitable indeed (p79)… the majority of firms have unwittingly fallen into a trap/ Without ever making a deliberate decision to do so, they have, over a period of years taken greater advantage of their customers. (p.80)

And when schools make it even more difficult than it needs to be to properly complete financial aid requests and applications for scholarships or grants, they are doing what McGovern and Moon found companies doing. It seems as if there has developed a probably unconscious yet insidious lack of real help that frustrates, confuses and stupefies parents and students trying to complete the required forms. As colleges and universities tried to “follow state and federal rules” they found Byzantine and impervious to full understanding without seminars on them, they have simply repeated them verbatim to parents. Most all of them do not know what to do really. Want to see if it is true for your school? Just open your catalog and read what’s there. Then look at the financial aid information sent to parents. Does your information provide your customers the service they need? Likely not. It includes such helpful directions as "COMPLETE THE FAFSA ONLINE. Don’t forget to enter your pin!" Bowling or brooch?

To most people these three words are tantamount to “here is your do it yourself proctoscope kit”. I have never found anyone who has ever found completing the FAFSA easy or enjoyable even if they knew what they were doing. They remind parents and students of the joy of doing their annual taxes. What school would not want to be considered in the same thought as the IRS?

Parents hate the forms whether they are on-line or not. Colleges should realize this and provide them all the human help they can. Briarcliffe College in New York does this by having people come to the school and sit through a full introduction to the FAFSA on line. Then if the people bring their materials in, Tuition Planners help them complete the forms so they can get every penny for which they qualify. I even observed a planner helping a father whose other son was going to a different school complete the forms for the other school. I believe I heard that the father was talking to the other son about transferring to the college that provided real service for students. Service that made financial aid easier and more profitable for everyone. The students have more money to make college more affordable and the school has greater assurance of the student being able to pay and attend.

I am amazed at how many parents and students do all they can to not complete the FAFSA, either on line or in hardcopy. All they need is one excuse not to complete it and they will leave it “for later” or just never get it done. For instance, I have discovered over the years that there is one bit of information that too often provides parents a perfect excuse not to complete the FAFSA and send it in. And that one bit of information is one that you should make sure is right there for them because it affects you directly. It is the college code number. For some reason, we hide these numbers from students and their families.

Try this, go to your financial aid office and see if the code is posted in an unobstructed, easily noticeable location, or in a somewhat prominent spot or for that matter, anywhere. Odds are pretty good it is not. Yet, without that code, students cannot complete their FAFSA. And if they cannot or do not complete it, who is ultimately hurt? Sure the student, but the school too. Without the financial aid the student might get, he or she is not coming there. All the time, effort and money spent to recruit that student is just lost, as is the chance to provide that student the best education he or she could get anywhere. The faculty loses the chance to fulfill its mission to educate that student.

So get the college code out there. Post it in the office. Print it on the forms. Make sure it can be obtained easily on the financial aid section of the website. Also, help people with the form. Provide counselors who actually call to potential students to offer their aid in completing the form. Create an on-line tutorial for parents to use as they try and complete the form. Offer hybrid workshops that will take a group of parents from the start of the form through to the end. Hybrid? On line and by conference call. Also, provide them at the school. Invite parents in to complete their forms with hands-on assistance.

Payment Plans and Other Ways To Make it Affordable
Make sure you help students and their families answer the question Can I afford it? If they do not believe they can, they won’t EVEN IF THEY ACTUALLY COULD.

Do you have a payment plan? A way for normal people to make payments for school over a period of time? Most people get paid weekly, bi-weekly or even monthly yet we want it all at one time. Lump sum. No other major investment people make calls for all the money up front. A house – a mortgage. A car- five year loan. Even a doctor’s bill can be charged and paid out over time. College? Not always so.

The hardest thing for people to do in paying a college is to save it all up to make a single payment. Life often gets in the way. Yet, if they can plan for regular payments, college can be affordable. Provide a payment plan that allows them to be able to pay for school over a semester or year or even longer if possible. There are many ways to do this. Twenty percent down and then monthly payments. Run an in-house plan or let a professional like FACTS do it for you. Charge for the service or not. There are many ways to do it but do it.

If you cannot make college affordable or at least within reach of affordability, students cannot answer the step 2 question, Can I Afford IT? and will not come to school. Or of they do start they will soon run out of money and drop out. In fact this is the major reason why there are fiscal drops in the second semester and sophomore years.

AcademicMAPS has recently published a new retention white paper on the subject of retention and ROI. The paper discusses the power of retention and provides formulas for a college or university to determine the ROI loss or gains from retention. There is no cost for this white paper. It may be obtained by clicking here.

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