Net Revenue and Financial Aid Implications of Going Global
Increasingly, college and university leaders are recognizing that no undergraduate education is complete without exposure to cultures outside the United States. Therefore, many institutions are striving to create a more global experience for their students, through enrolling more international students, encouraging students to study or work abroad, setting up satellite campuses in other countries, or some combination of all three.
According to Institute of International Education (IIE) research, colleges and universities report that more than 18,700 students did for-credit internships or worked abroad in 2008-2009, (the most recent year for which data are available), an increase of more than 5,000 over the previous year. However, the impact on net revenue (charges minus financial aid) is sometimes forgotten as plans for globalizing the curriculum are under discussion. For tuition-dependent institutions, particularly those that are under capacity already, this can be a serious omission.
Let's start by examining the implications of enrolling more international students. Certainly there are some pockets of full-pay international students, and many institutions are beginning to target them in an effort to increase enrollments and net tuition revenue. The State University of New York, for example, issued a press release in June announcing their plans to use agency recruiters to add 14,000 international students by 2016. If they meet their goals, they anticipate using the resulting revenues to support study-abroad scholarships and faculty grants.
The reality is that increasing international representation often means attracting students with financial need.
Because of the competition for full-pay international students, however, the reality is that significantly increasing international representation at many institutions means attracting students who need assistance. Internationals who require financial aid are not eligible for federal or state funds, so any aid that is provided will need to come from institutional resources.
Furthermore, it is very difficult to accurately assess the need of international students. Most institutions simply use the family's statement of what they can provide as the expected family contribution, rather than attempting to calculate an EFC. As a result, needy international students often are discounted at a much higher level than needy U.S. citizens.
For example, Macalester College (Minn.) is listed by the IIE as one of the top U.S. institutions in terms of international student enrollment. For freshmen entering in fall 2010, however, the average institutional grant for enrolling international students was more than $9,000 higher than for U.S. citizens.
As Brian Lindeman, director of financial aid at Macalester, says, "We believe that enrolling students from around the globe is a vital part of our mission. We strive to enroll a significant number of international students from a significant number of countries. The distribution of the financial aid budget is a reflection of Macalester's values."
Considering Net Revenue
Similarly, encouraging more students to study abroad can have unintended consequences for net revenue. Most institutions that fully embrace the idea of encouraging students to study abroad will allow students to take their financial aid with them both on institution-sponsored programs and, through consortium agreements, on other affiliated programs.
Under consortium arrangements, institutions typically keep only a small processing fee, and the rest of the tuition charged goes to the institution sponsoring the program. This means that institutional financial aid is being used to pay for tuition that will never show up as revenue on the home institution's books. In addition, even if the program is sponsored by the home institution, more students studying abroad can mean empty dorm rooms, especially if the numbers going abroad aren't balanced between the semesters.
That's why some institutions are beginning to reconsider study-abroad financial aid policies. For example, beginning next year, all Taylor University (Ind.) students enrolled in off-campus programs will be billed as though they were on campus, plus an extra fee of $750 and up, depending on the cost of the program.
Furthermore, explains Tim Nace, director of financial aid, "They will receive all financial aid, including institutional aid, for their first off-campus experience based on our normal cost of attendance, not including the extra fees. For the second off-campus experience, the student will only receive federal and state aid, not institutional aid." Taylor does not set up any individual consortium agreements with other schools. "Since we don't provide any financial aid for these students, we don't have many students attending these non-Taylor programs," Nace says.
As a means of encouraging study abroad and yet not negatively impacting net tuition revenue, some institutions have set up satellite programs in other countries. For example, the Florence, Italy branch campus of Marist College (N.Y.) offers full bachelor's degree programs, a master's degree in museum studies, traditional study-abroad opportunities, and a full-year Freshman Florence Experience. These programs allow Marist to accomplish its mission and strategic objectives without taxing the limited classroom and residential space on their main campus in the United States.
"These unique opportunities … have played an integral role in allowing the college to establish new markets across the United States and around the world," says Sean Kaylor, vice president for enrollment. "The Freshman Florence Experience, in particular, a highly selective first-year abroad program, allows Marist to accommodate 60 additional students in its entering freshman class."
Even when the student is working (rather than paying tuition) abroad, some institutions are providing financial assistance to enable students to take advantage of the opportunity. Northeastern University (Mass.) has established a special scholarship fund to enable students to accept overseas co-op jobs that may not pay as well as opportunities at home. The Presidential Global Scholars Program, notes the institution's website, "supports outstanding students seeking international co-op and will help to ensure that our students have the support and opportunities they need to continue taking co-op around the world." These grants of up to $6,000 support more than 200 students annually in pursuing an international co-op experience.
Given that Northeastern's co-op program is an integral part of the university's brand, and that the university describes itself as a "global, experiential research university," such an investment is clearly strategic, and mission critical, but not every institution has thought about the costs and benefits of investments in global education so thoroughly.
Avoiding Unexpected Impacts
So, what should leaders at institutions interested in globalizing the undergraduate experience do to avoid unexpected impacts on net revenues?
1. Take a look at the difference in average net tuition revenue (NTR) currently generated by international versus domestic students. Assume it's likely that any differential would increase if international enrollments were to be increased. This will help develop a realistic picture of how a shift in the mix of international versus domestic enrollments could impact the overall discount rate.
An increased value proposition will build willingness to pay among all constituents.
At some institutions, international students have lower discount rates than domestic students, and the shift could improve NTR. However, if international students currently have a higher discount rate than domestic students, the shift would be of particular concern at institutions that are at capacity, where higher-cost students would be replacing lower-cost students rather than adding to overall enrollments.
2. Determine whether increasing international enrollments will have implications for staffing in administrative offices. Often, international students need help with language skills; transitioning to a new culture; integrating with other students; etc. So it may be necessary to rethink services and increase staffing and programming to meet new demands.
3. Analyze the amount of institutional financial aid currently going to students studying or working abroad compared to the tuition and fee revenues generated by those students. This discount rate will likely be higher than for those students studying on campus. Again, this analysis will enable the institution to understand how increasing the number of students studying abroad will impact the overall discount rate and NTR. Officials at institutions not at capacity in their residence halls also need to consider the impact on auxiliary revenues.
4. Understand how best to market the institution's growing globalization of the undergraduate experience to ensure that it positively impacts the value proposition. An increased value proposition will build willingness to pay among all constituents, thus helping to counteract the cost of "going global." Many institutions are starting to refer to themselves as having an international emphasis, so being able to demonstrate how that impacts the undergraduate experience and the outcomes of graduates is becoming increasingly important.
Kathy Kurz is vice president of the enrollment management consulting firm Scannell & Kurz, Inc. She can be reached via the firm's website, www.scannellkurz.com.
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