Eighty twenty rule

Now would be the time to look back at your applicant data from the last cycle and calculate the percent of applicants that show zero need. It has been my experience over many years and many schools that an 80/20 rule is a good model to follow. Eighty percent have need, twenty percent do not. If you look at your financial aid applicants and see that 30% have zero need you would think something looks broken. If only 10% have zero need, again something seems amiss. But 20%, this posture is deemed appropriate and when schools examine the 20% no need group they feel in alignment with the outcome.

I worked with a school recently whose need/no-need had changed from 80/20 to 60/40 over the course of eight years and merit aid was running rampant through the population. Higher earners were applying for help and the methodology needed review.

As the Data Turns

Sometimes I feel like financial aid is a living entity with a story a mile long. The narrative is inherently data driven and swirls around hidden income, mysterious assets and suspicious cost of living adjustments. Here then is another installment of, “As the Data Turns”!

In our opening episode we find data points driving change in financial aid policies. Over the years, tuition increases have been met with higher income families applying for aid. Under typical methodologies high earners do not qualify for help. But wait! The board of directors is bending to community pressure and asking the administration to meet the perceived needs of this higher income group without increasing the financial aid budget. What’s an admin to do?

We could re-define diversity and perhaps change some full tuition awards into multiple smaller awards for higher earners with need? This would require careful examination of financial aid methodology to determine which data points, when altered, create the desired need outcome. 

Another option is creating more need by methodology and using an Equal Ratio Calculation to calculate awards. This way, the amount of need you create is only important to the percent that one’s need is of the entire group. Your fund controls award amounts. 

Or, as is the case in many independent schools, we could use merit aid to award in higher income groups.

Interested in talking? Please let me know.

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About the author 

Ron Beckman

A thought leader, Ron is Director of Education at Clarity and brings 19 years of experience, with 16.5 of those years as Director of Financial Aid at TADS. Ron is author of the financial aid “Impact Data Report” for schools and is dedicated to using data as a means of helping schools uncover their financial aid story. Ron is a graduate of the University of Minnesota and resides in Maple Grove, Minnesota with his wife Barb, and dog Kibby.

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