The financial aid process is the single most important factor in improving the value proposition to students, and the area where students are desperately seeking more personal guidance. As the single most important support service from admission through graduation, administrators and students agreed that the increasingly complicated process, which plays a critical role in student success, is a leading "pain point" and needs considerable improvement.
These are the primary findings of a survey by The Parthenon Group's Education Practice; a related paper, "How Can Improved College Services Better Retain Students?," outlines how institutions can use external partners for key business elements of the financial aid process, which will improve efficiency, reduce cost and, most important, free up staff to focus on student interaction, satisfaction and likelihood of graduation.
"A confluence of factors, including rising costs, flat enrollments and unsustainable levels of student debt have put the traditional higher-education business model under unprecedented pressure," said lead author Chris Ross, a partner in the Education Practice. "Understanding what students care about most will help institutions better allocate limited resources, focus on areas critical to student success and identify services that schools are best suited to deliver – and where partners might be better leveraged." In the survey, 80 percent of administrators and 74 percent of students identified the financial aid process as the most important support service provided by a university, yet only 44 percent of administrators and 54 percent of students were satisfied with the current system and each group cited it as an area most in need of improvement. Tellingly, just 23 percent of community college administrators were very satisfied, citing increased pressures in serving a traditionally higher-risk population.
In all cases, administrators identified reduced enrollment, lower student completion rates and increased loan defaults as primary consequences of a breakdown in the financial aid process. At the same time, the system is increasingly complicated for students and schools alike, thanks to growing regulatory requirements, frequent changes and shifting student populations.
"With the cost of education out of reach for so many, and the award package a critical piece of a student's enrollment decision and ability to complete the program, schools would be wise to find ways to free up staff from administrative work to address students' need for personal attention," said Ross.
Considerations for Selecting External Partners
In assessing its findings, the Parthenon team focused on three areas administrators should consider when weighing whether to outsource some element of financial aid, and selecting a partner with the right capabilities:
University Needs: How well is financial aid processing keeping up with the mix of degrees, programs and services being offered, including those in hybrid or online format?
Compliance: Is the university adhering to existing rules and regulations and is it able to keep up with annual modifications to those regulations?
Student Needs: Can the university fulfill students' desire to interact with the financial aid team face to face, rather than through email, text or some form of self service?
The survey indicated that administrators are giving more consideration to this issue than anticipated; in fact, almost 40 percent have partners for some financial aid elements.
However, opportunities remain nascent and the market fragmented, with organizations providing mostly niche services, such as file review and verification or disbursement of funds. Given the importance of financial aid in the student lifecycle, the Parthenon team expects the market to evolve so that administrators can soon choose from a portfolio of offerings aligned to their needs.
"Financial aid is just one example of a trend in higher education in which institutions recognize that partners can provide many services at a higher level and lower cost than the schools – and this is increasingly the case with services that are mission critical," said Ross. "Understanding the gaps and opportunities will lead institutions to broader strategic consideration of external partners to meet student needs; this will ultimately help improve student satisfaction, retention and graduation rates – the best possible of all outcomes. "
About The Parthenon Group
The Parthenon Group is a leading advisory firm focused on strategy consulting with offices in Boston, London, Mumbai, San Francisco and Shanghai. Since its inception in 1991, the firm has embraced a unique approach to strategic advisory services built on long-term client relationships, a willingness to share risk, an entrepreneurial spirit, and customized insights. This unique approach has established the firm as the strategic advisor of choice for CEOs and business leaders of Global 1000 corporations, high-potential growth companies, private equity firms, educational institutions, and healthcare organizations. For more information, please visit www.parthenon.com.