Visualizing New Tuition Revenue Options Against Marketable Initiatives
Standing out in today’s higher education environment is nearly impossible. For Wofford College, a private, independent liberal arts college in South Carolina, gaining national visibility to drive higher quality applicants is a constant challenge.
One advantage that Wofford maintains is its ability to quickly adopt new financial structures, aid initiatives, and relevant programs. With approximately 85% of gross revenue coming from comprehensive fees, any ideas that could alter tuition revenue need to be thoroughly vetted.
To project the financial feasibility of these initiatives, Wofford analyzes various combinations of revenue models, projects, and student offerings with the Synario modeling platform.
Setting the Modeling Scope
New Tuition Models
In early 2018, Chris Gardner, previously Associate Vice President for Finance now Chief Financial Officer, and other members of Wofford’s finance team were tasked by the institution’s president to develop, analyze, and present alternative tuition models coupled with strategic initiatives that focused on the student experience and financial sustainability.
After performing market research, Chris and his team came up with the following five different tuition models:
Timesaving is also another boon for HTC. Prior to using Synario, Green had to pull data from close to 1,350 individual general ledger accounts for her yearly forecasts. As she explains, “When we used spreadsheets, it was much harder to obtain this information because I had to literally look at every account.” HTC kept much of this information on multiple spreadsheets, and the integrity of links was always a source of concern. As Green describes, “It’s very easy for links to get broken, and often times we thought we had updated spreadsheets to only find out later that the links were broken. We had to have a lot of checks and balances to make sure we had the information right.” Green also had problems with spreadsheet formulas. As she explains, “We had some formulas that at some point in time, multiple people had altered the formula and it would corrupt, so we would get a cell that was supposed to have a formula but we wouldn’t know what it originally was.” Security in Excel is also vastly inferior to that of Synario, in which administrators can limit access to certain users or give read-only rights. As Green notes, “We didn’t have a single user in charge of the spreadsheets, and that led to a lot of complications and limitations, often resulting in unusable workbooks.”
Wofford’s finance team also considered additional tuition models but decided not to pursue those options because they did not fit the character of the institution, among other reasons. Those unpursued ideas included fixed price degrees, post-graduation guarantees, and charging per credit hour.
According to Gardner, the overarching goal of this exercise was to see how Wofford could pair these tuition changes with “enhancements to the student experience and academic experience.”
We wanted to marry a set of tuition model changes to a set of programmatic initiatives that might really change the way we tell our story and the way we present ourselves to the outside world.
Chris Gardner, Associate VP of Finance, Wofford College
New Marketable Initiatives
Wofford modeled the following marketable initiatives for financial sustainability and impact:
To present their findings, the finance team created multiple slides as part of an interactive Synario slide deck. To start, they showed the president and his cabinet a familiar projection of Wofford’s current financial standing.
Each analysis displayed this “baseline” and showed the difference between the existing tuition model versus the new tuition model.
New Tuition Models
Tuition Reset Up
First, a simple increase to the overall cost of tuition was shown against the existing tuition model baseline. The baseline represents Wofford’s excess revenue after expenses from the current comprehensive fee structure. The values in the graphs do not represent Wofford’s actual financial standing.
Gardner and his team set standard assumptions for enrollment, discount rate, and other influencing factors and showed the revenue projection over a five-year timeline.
If the president or one of the cabinet members wanted to see different tuition growth rates, Gardner and his team could update the presentation live to show the results on the full set of Wofford’s financials.
As the conversation is evolving somebody says “I don’t like a 10% tuition increase. I don’t think the market can bare it, what if we try 7.5%?” We can go live and see that would create a negative revenue situation for us.
Chris Gardner, Associate VP of Finance, Wofford College
After the positive tuition growth rate was shown, the finance team showed a negative tuition growth rate for illustrative purposes. This view demonstrated to the president and cabinet members that this was not a financially viable option and would require extreme changes to other metrics.
Gardner continues, “The point of this slide for our group was to say, because we don’t have excess capacity on our campus, it is really hard to pay for a tuition reset down.”
Wofford could weather a tuition decrease in the long term, however, it would put the institution in a financially unstable position in the short term.
Wofford raisedthe tuition growth rate for fiscal year 2020 by 10% and then reduced the rate back to approximately 3.3% in the following years. The discount rate and enrollment assumptions remained at existing levels to focus on the impact of changing the comprehensive tuition fee. The change in Wofford College’s bottom line between the old tuition model and the new tuition reset is shown in the bottom line graph.
While a large tuition increase results in a marked improvement in Wofford’s contributions to its operating reserves, a marginal increase does not have a similar effect. In this model, Gardner and his team showed that a minimal increase with only a slight margin over the economic inflation rate would significantly lower the contributions to operating reserves over time.
The slower growth rate of the Inflation Plus model compounds over time. The slow growth rate coupled with Wofford’s rising expenses means the two models diverge significantly at the 2025 and 2026 fiscal year.
Similar to a tuition decrease, this tuition scenario is not financially sustainable for Wofford without significant changes to contributing revenue factors such as tuition discount rate, enrollment, or inflation margin.
In this example, the inflation assumption is set to an average of just over 2.0% while the college’s margin on top of the inflation rate is just above 1.0%. Discount rate and enrollment levels are left the same from the previous example. The result was a slightly lower bottom line in the short term with increasing disparity in the long term.
Wofford analyzed the difference in revenue if they offered incoming students a tuition price that remained the same for all four years of their education. For Wofford’s finance team, this was the first scenario that required new logic rather than a simple percentage increase of an existing assumption.
Without the ability to alter tuition pricing while students were enrolled at Wofford, the college’s revenue would stagnate in the short term, dropping below the existing baseline tuition revenue projection. However, in the long term, the tuition promise model could exceed the baseline revenue as new cohorts of students enter the college and are charged a higher flat rate for all four years.
The president and his cabinet were able to see that this model, like the previous models, would require significant changes to contributing revenue factors to offset the short-term losses.
In the tuition promise model, the comprehensive tuition fees are set to an approximate 6% growth rate while discount rate and enrollment remain the same. The graph depicts a severe decrease in the bottom line in the short term with more promising return in the long term.
Three Year Degree
Gardner and his team wanted to show the president and his cabinet a novel idea that could have a tremendous impact. Although this option would take the greatest amount of structural change for the small liberal arts school, it offered an interesting contrast to previous models.
The idea behind this model was that Wofford could effectively increase enrollment without impacting or altering the college’s physical capacity. Under this tuition model, Wofford could cycle more students through the academic pipeline while increasing enrollment rates accordingly.
Ultimately, the three-year degree model was not pursued due to the extreme changes that would need to be made to curriculum and degree formats. However, the model showed that this type of organizational change could result in significant revenue gains in the short term and only a slight decrease in revenue in the long term.
In the three year tuition model, the student participation rate assumption is set to 10%. Chris and his team believed that those that entered in to the three year program would all see it through, so the retention rate assumption is set to 100%. Summer aid and enrollment are the same as previous models.
Although the focus of the exercise was to examine new tuition models, the secondary purpose was to incorporate new initiatives that Wofford could use to differentiate itself from its higher education competition.
The goal of these initiatives was to enhance the student experience without significantly impacting the college’s bottom-line. One contributing factor to the financial feasibility of these initiatives was timing, especially if the initiatives were launched when tuition revenue is in flux. Synario allowed the finance team, president and cabinet to explore the effects of different launch dates for each initiative.
Continuing Student Scholarships
One way Wofford considered differentiating itself from competitors was to offer each student a $1000 scholarship if their GPA is at or above a 3.00. This initiative provides Wofford’s marketing team with a unique way to draw in student interest and give high performing students a discount on tuition fees.
Offering more student aid, however, directly impacts the college’s contributions to operating reserves. Through Synario, Wofford’s finance and executive teams were able to alter the initiative to look at the bottom-line impact if the GPA threshold was increased to 3.25 and 3.50.
It was quickly determined that Wofford would need to implement a tuition model that significantly increased its contributions if the college planned on offering the scholarship at the 3.00 GPA threshold.
In this initiative model, the student scholarship is consistently set at $1000 and discount rate just over 30%. Each graph shows the difference against the bottom line if Wofford offered the scholarship to students with GPAs ranging from 3.00 to 3.50.
As an alternative to the student scholarship initiative, the guaranteed graduation initiative was a programmatic strategy to ensure more students graduate within four years. Wofford considered putting measures in place that would effectively “guarantee” a four-year graduation rate if students met certain criteria.
The impact to the contributions to operating reserves was minimal, as the initiative was less monetary and more procedural. When presenting this initiative to the president and his cabinet, the finance team described it as an easy win for the college; requiring relatively minimal changes but improving the student experience.
Increase Foreign Study
Wofford, among other higher education institutions, understands that student interest in study abroad programs is growing. Current data shows that “approximately 1 in 10 U.S. students study abroad during their undergraduate career.”
To differentiate itself from its competitors, Wofford wanted to make it more financially attractive to participate in study abroad programs. This initiative had two major implications for the college’s contributions to its operating reserves.
Through Synario, Wofford projected the drop in overall enrollment as well as the financial impact of increased financial aid for student’s studying abroad. The aid and enrollment assumptions, as well as the overall growth in study abroad participation, were analyzed at various levels to determine the viability of the initiative.
Wofford’s foreign study initiative uses a 10% growth rate assumption for study abroad participation. In this model, Wofford did not raise enrollment to make up for the increasing number of students not enrolling due to study abroad.
Interim Subsidy & HIP Stipend
Wofford’s finance team modeled two more unique financial incentives for students. The first was offering select students a $3,500 subsidy in order to incentivize greater participation in internships and travel experiences. The subsidy would only be available during the month of January and could only be utilized by students who met specific academic and aid qualifications.
The HIP stipend, on the other hand, would be a smaller monetary amount available for students to use for a variety of different “high impact” areas. The finance team determined that Wofford could afford to offer $2,000 to a larger group of students if a new higher revenue tuition model was put in place.
The predetermined criteria that the HIP stipend could be used toward included study abroad, research opportunities, conferences and presentations, and civic engagement, among others.
The goal of modeling these projects and initiatives was not to analyze them individually, but to determine which combinations could grant Wofford a competitive edge while maintaining or improving the college’s contributions to its operating reserves.
Gardner and his team finished their presentation to the president and his board by creating and visualizing the impact of three scenarios composed of a mixture of the previously reviewed initiatives.
Each scenario utilized the Tuition Reset UP model, as it was the only model that significantly raised Wofford’s contributions to its operating reserves.
By quickly comparing the three different live scenarios, Wofford’s finance team was able to quantitatively demonstrate that not only was scenario #3 a financially viable trajectory for Wofford, but it also gave the marketing team the most ammunition to differentiate the college from its competitors.
The president and his cabinet were able to explore scenario #3 further by adjusting assumptions such as comprehensive fee growth rate, stipend and scholarship amounts, and overall student enrollment, among other key assumptions. This brought increased buy-in to the new trajectory because each stakeholder could answer individual questions and adjust the model accordingly.
These adjustments could be quickly vetted by the group and incorporated into the plan if they enhanced the college’s trajectory, all within a single meeting.
Gardner and his team were able to quickly and accurately project the financial impact of various tuition models and student-focused initiatives. More importantly, they were able to mix-and-match these initiatives to create a full-field view of future possibilities to present to the president and his cabinet.
Through Synario, Gardner enabled the president and each cabinet member to explore Scenario #3 and encouraged them to adjust the model’s assumptions or incorporate a different mix of initiatives.
As stakeholders began to participate, the presentation turned into an active exploratory session where stakeholders contributed to create a better future for Wofford College.
Wofford regularly uses Synario as part of their strategic planning process. Board communication using Synario is common when presenting their financial plan or evaluating new strategic directions.