Overview
Given the increasing level of competition independent schools face in the growing school marketplace, along with new economic and demographic realities taking hold in the United States, the strategic role of tuition and financial aid is becoming increasingly critical to the enrollment outcomes of independent schools. NAIS was interested in understanding recent trends in tuition, what factors are contributing to increases in tuition, and how school leaders are making decisions about programs and tuition as they compete for students to enroll.
To explore these phenomenon, NAIS partnered with the Capstone Program at Vanderbilt University's Peabody College of Education to study the drivers of tuition and the rationale behind tuition increases, along with the willingness of school leaders to curb these costs and find alternative sources of income for their schools. This study combines quantitative analysis using NAIS data and Capstone’s survey data from school heads and CFOs with qualitative interviews from school heads at 13 independent day schools.
Executive Summary
This study found seven key trends related to tuition and financial aid behavior in Independent Day Schools:
- Tuitions continue to rise; financial aid expenses are increasing; and compensation, particularly for administrators, continues to account for the largest percentage of a school’s operating budget.
- School leaders, particularly of larger schools, plan to continue increasing tuition above the rate of inflation.
- School leaders set tuition increases based on the school’s educational program and strategy, not inflation.
- School leaders prioritize the quality of the academic experience when considering how to communicate the school’s value proposition.
- School leaders are cautious about utilizing cost-saving measures that could negatively impact the quality of the educational program.
- Chief financial officers report auxiliary services are not a significant source of operating revenue.
- School leaders do not consider outsourcing or consortia to be cost-saving measures.
Directed to school leaders, the study recommends that independent schools should be mindful of their administrative costs and the impact of those costs on their value proposition; only enact tuition increases that further the key features of their educational program; and monitor the outsized growth of financial aid with respect to tuition revenue. The study also recommends further examining how schools can rely on cost-saving measures and auxiliary revenue sources moving forward.