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Data-Based Decision Making for Retention

Seven policies that may be working against retention and net tuition revenue goals
University Business, Jan 2008

MUCH HAS BEEN ANALYZED and written about the price sensitivity of new students, but an increasing number of institutions are beginning to think in a more data-driven way about how pricing and discounting decisions impact returning students as well.

Typically, the first way institutional leaders begin to gather data on retention is to survey students who have left or are planning to leave. "I couldn't afford it" is certainly a frequently given reason for withdrawing. But survey responses can be unreliable and even misleading. Many students who leave will not respond to a survey, and those who do respond may be reluctant to share their real reasons for leaving. Saying "I can't afford it" is easier than admitting "I can't do the work" or "I'm homesick." Consequently, for survey responses to be translated into strategic policy changes that will make a difference in retention, more needs to be understood. One valuable source of information in studying retention is the National Student Clearinghouse. Participating institutions can use the Clearinghouse's StudentTracker ( service to understand where students who have withdrawn are now attending college. Do students who say they can't afford it actually choose to transfer to less expensive institutions, or are they choosing an equally expensive but more prestigious option? If the latter, the comment "I can't afford it" may actually mean "I don't think this college is worth it."

However, probably the most valuable source of information on the price sensitivity of returning students is the institution's own student system. Student system data can be used to answer such questions as:

To retain a merit scholarship,
one young woman
had to maintain her 4.0
high school GPA in college.

Is attrition disproportionately high for students with high levels of unmet need?

Do full-pay students leave at greater rates than financial aid recipients?

Do students with changes to their aid awards have higher attrition?

Clearly, it is not necessary (or even valuable) to rely on student survey or interview responses alone to understand more about how grants and unmet need impact persistence.

When beginning to use institutional data to study retention, it's important to explore the impact of specific financial aid policies that might be working against retention and net tuition revenue goals. Some of the most common candidates for analysis are discussed below.

Some institutions offer scholarships for students upon entry that are available only for the first year of enrollment. Even when information about the award makes this policy clear, it's important to assess whether the loss of the award in the second year negatively impacts the persistence of recipients. (Institutions should not simply assume that such programs affect retention and make the scholarships renewable. Without the data to support such a policy change, institutions could find themselves significantly increasing the financial aid budget with no change in retention rates.)

One of the most poignant statements we have ever heard in a student focus group was from a young woman who had won her institution's most prestigious merit scholarship because she had had a 4.0 GPA in high school. Unfortunately, to retain the scholarship, she needed to continue to achieve that same GPA at the college. As she told us, "Getting an A minus is my worst nightmare."

Although this is an extreme example, many institutions do make students "reearn" scholarships that they were originally offered based on prior performance as an incentive to enroll. To understand whether these policies are impacting retention, compare the retention rates of merit recipients with high GPAs to those who achieved GPAs above satisfactory academic progress but below the level needed for scholarship renewal.

Most institutions hold need-based grant aid constant for students as they progress beyond their first year of enrollment, barring any unusual changes in family circumstances. The expectation is that increased Stafford Loan eligibility will be used to cover tuition increases. While this assumption is sound for most students, it is important to analyze whether it impacts persistence rates for some students.

For example, administrators should explore whether attrition is higher among students who take out alternative loans. Clearly for these students, Stafford eligibility is already insufficient to cover the gap between charges, grants, and family ability to pay.

Similarly, institutions may find that attrition increases dramatically among students who enter with high levels of "unmet need" (cost minus expected family contribution minus grant aid). If so, it may be necessary to cover some portion of tuition increases for these students to improve retention. Before making that decision, however, do a cost-benefit analysis to see if the projected increase in retention will more than cover the cost of providing additional funding to all of those who would have continued their enrollment without it.

Although 100 percent verification of incoming student aid applications to ensure funds are being spent wisely is not uncommon, some IHEs continue to verify 100 percent of returning students as well. Particularly at schools that hold aid constant for returning students, this additional paperwork is burdensome to students and their families (and staff ) with little gain in terms of financial aid "savings." This additional burden alone may not increase attrition, but it can delay aid offers to continuing students and be seen as "unfriendly" from a customer service perspective.

In an effort to save financial aid dollars, some institutions institute severe penalties for returning students who apply for aid after certain deadlines. If those students are not then able to re-enroll, the effort to save a few dollars in financial aid could actually cost the institution significantly in terms of lost net revenues. Examining retention rates of late filers compared to on-time filers can shed light on the impact of this policy on persistence rates.

Some institutions offer new merit scholarships to continuing students who might not have been eligible on entry but are now performing better than their entry statistics would have predicted. Academic departments also frequently use endowed funds to recognize outstanding performance of upperclassmen. Although such programs may make staff and students "feel good," retention analysis typically finds that students performing well academically are more likely to come back, whether or not they receive financial recognition for their academic success.

Saving a few dollars in aid could actually cost an institution significantly in lost net revenues.

Consequently, these programs may do little to improve retention and may in fact divert funds from subpopulations where they could have more of an impact on retention behavior. Again, however, before making a decision about alternative uses of those funds, analyze the impact of programs on retention at your institution.

Colleges and universities typically conduct extensive research to understand their price and prestige positions against competitors and to ensure that future increases won't impact demand from new students. But when it comes to continuing students, little has been done to track how retention (especially of aid recipients versus full-pay students) has been affected in the past by various rates of increase. Typically, returning students are less price sensitive than new students, so holding tuition constant for returning students seldom results in a corresponding increase in retention. However, leaders need to be conscious of how increases and aid policies have impacted past persistence, especially when contemplating multiple years of aggressive increases.

Once retention analysis reveals areas of concern, it's often wise to test the impact of a change in policy before implementing it across the board. Stephanie Anderson, associate vice provost at Texas Tech University, is doing just that. Even among students who were performing well academically, persistence has fallen off sharply for those with unmet need (need minus grants from all sources) of more than $11,000. Consequently, over the course of the next three semesters, some students with a >_2.25 cumulative GPA and with high levels of unmet need will receive additional grant assistance.

As Anderson explains, "There is a comfort level that your new aid program will have the desired impact towards your goals when your decision is based on research and data. Everyone seems to have an opinion on how to spend scholarship/financial aid funds; the data allows the institution to base the decision on more objective criteria. If this pilot program has the impact that we anticipate, we believe we will have a strong case, based on increased revenue from retention, for permanent funding."

Strategic use of financial aid isn't just about achieving new student enrollment goals. It is equally important to understand the price sensitivity of returning students so that aid policies and price increases that will impact upperclassmen can be established in a "culture of evidence."

Kathy Kurz and Jim Scannell are partners in the enrollment management consulting firm Scannell & Kurz. Samantha Veeder, formerly the director of Financial Aid at Hobart and William Smith Colleges (N.Y.), is the firm's senior consultant. They can be reached via their website,

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