Changes in Post-Covid Tuition Realization: Welcome Development or a Cause for Concern?

By Dr. Harry Bloom, President and Founder-Benchmarking for Good, Inc.

One of the post pandemic trends I have noted during an analysis of independent school trends 2019/20-2022/23 is a decline in the ratio of Net Tuition to Gross Tuition + Fees that is particularly prevalent in several faith-based school market segments. Based on information reported to NAIS’ DASL database, the ratio of Net Tuition to Gross Tuition + Fees for all private day schools declined by about 1% over the period--from 81% to 80%. However, among Episcopalian, Jewish and Catholic day schools, the declines were 9%, 6% and 5% respectively. In contrast, the Quaker school ratio declined precipitously in 2021/22 but then recovered substantially in 2022/23 to end only 1% below its pre pandemic level. Please see Figure 1 below for details.

The Episcopalian school ratio declines were from a lofty 93% base but in contrast, the Jewish day school ratio was 71% pre Covid and sank to 65% in the post Covid environment. Granted, schools submitting data to DASL only represent a fraction of the total body of private schools– but the sample sizes are not insignificant and are diverse in terms of school enrollment and location.

What caused the declines?

Putting aside the generally temporary income reductions for current parents due to to the pandemic’s public/business closings, an optimistic view of the cause of the declining ratios would be that Covid, by showcasing the greater responsiveness of private schools to family and student learning needs, motivated large numbers of public school families to shift to private education. It is possible that a significant proportion of these families had limited means and therefore required significant scholarship funds. From a sustainability standpoint, schools made the calculus that enrolling mission appropriate families was a priority and that securing some incremental tuition was better than no tuition.

This scenario fits for those private school subsegments that gained enrollment (see figure 2 below), but not as well for the Jewish day school segment where post pandemic enrollment for the roughly 100 included schools was slightly lower. Please see Figure 2 below.

The logic also works if the increase in enrollment came from less affluent but mission appropriate families. However, if the declining tuition realization ratios represents relatively affluent families insisting on “deals” in order to maintain their children’s enrollment once the pandemic’s impact had passed– and this is somewhat supported by the fairly sharp 2021/22 to 2022/23 ratio declines among Catholic and Jewish Day School families–then this represents a significant risk factor for school sustainability. It signals a relatively low regard by the newly enrolled families for the schools’ value for tuition as well as a risk that even veteran families who become aware that tuition is negotiable, begin to request discounts.

Two Key Implications for School Leaders

There are a number of important implications from these data for school leaders whose schools have experienced declining tuition realization ratios:

First, that it is vital that they ensure not only that their schools’ value proposition (teaching quality, curriculum quality, co-curricular program quality, and social-emotional programming in relation to tuition) is as strong as possible. Additionally, it is critically important that the schools build awareness of this value by constantly marketing the positive tangible outcomes it delivers for students that justify its tuition level. These can and should include next level preparation outcomes relevant to current students, graduating students, and post graduate students.

Second, it is vitally important that standards of eligibility for tuition discounts be clarified and strictly adhered to in every relevant marketing message and medium and in every interaction with prospective and current families. Families who are convinced that a school’s value for tuition is unimpeachably high will be less likely to take a hard line negotiating “deals,” particularly if schools are willing to say “no” when the deals are not warranted by family circumstances. In the long run, tuition discipline coupled with rigorous value proposition scrutiny and marketing will prove to be a winning strategy.

In Summary

Those schools that have experienced a post-pandemic decline in tuition realization can and should view this as an urgent wake up call to assess relative value for tuition, the effectiveness of its communication and the integrity of standards for offering tuition discounts. In this manner, problems can be turned into learning experiences that will enhance long term school vitality.

Benchmarking for Good’s Mission is to provide customized comparative benchmarking information, training and consulting services to associations of non-profit organizations. Benchmarking involves purposefully and reflectively using comparative data to learn from successful peer organizations.

Our goal is to enable non-profit organizations to better fulfill their missions by using benchmarking to enhance the effectiveness and efficiency of their operational processes and thereby reduce unnecessary costs, increase the productivity of expenditures and investments, and maximize revenues.

Contact Dr. Harry Bloom, President and Founder at harrybloom@benchmarkingforgood.org to learn about our grant programs.

How Faith Based Schools Fared Post Pandemic:What are the Implications for School Leaders?

Covid-19 had a profound impact on the U.S. K-12 educational ecosystem. Due to greater restrictions on in-person learning in public schools, private schools benefited from public school transferees. However, not all private school market segments benefited equally from these enrollment trends, and attrition took its toll to offset new enrollees. Additionally, the pandemic impacted tuition realization and financial resource development, and bottom-line operating margin.

In this post from Benchmarking for Good, we will examine the relative winners post versus pre-pandemic and point out key implications for school leaders.

Our analysis is based on NAIS’ admirable DASL system. While not perfect it provides the broadest perspective on the private school universe and its subsegments. Our metrics will reflect the results for the median school in each category. It is our hope that more schools will choose to provide data to enrich our understanding of key school dynamics and trends.

Executive Summary

As can be seen below, the pandemic was an overall plus for All Day Schools with gains in enrollment, attrition, net tuition growth, and annual giving and minor reductions in tuition realization and operating surplus. Catholic schools gained in enrollment related areas but suffered in terms of tuition realization and net operating surplus. Episcopal schools gained in most areas but net tuition realization declined from its industry leading 93% level and this impacted operating margin. Quaker schools had modest enrollment gains but gained major ground in attrition reduction and enhanced their operating margin. Jewish day schools had the biggest gains in net operating surplus but the weakest performance in enrollment and attrition and the second biggest decline in net tuition realization.

Key Takeaways

As the educational landscape shifts to more of a business as usual mode in a weakening economic environment, it will be vital for private schools to focus on student retention in order to maintain gains from public school families by increasing perceived value relative to tuition as well as implement conscious, disciplined retention management protocols.

The other key related imperative emerging from this analysis is the need for those school segments with relatively weak net tuition realization to focus on constantly delivering high value relative to tuition and also communicating that value to arrest a troubling decline in net tuition realization. Over the long haul, parents that perceive they are getting exceptional value for their tuition dollars will be likely to stretch their financial capabilities in order to pay it.

Benchmarking for Good

Mission

Provide customized comparative benchmarking information, training, and consulting services to non-profit organizations. Benchmarking involves purposefully and reflectively using comparative data to learn from successful peer organizations.

Our goal is to enable non-profit organizations to better fulfill their missions by using benchmarking to enhance the effectiveness and efficiency of their operational processes and thereby reduce unnecessary costs, increase the productivity of expenditures and investments, and maximize revenues.

How We Work with Nonprofits

Benchmarking for Good invites nonprofit organizations that have a desire to put benchmarking to work for their organizations to submit a grant proposal outlining their goals and ability to support a Benchmarking for Good project. We offer a range of benchmarking related services including analysis, opportunity definition, and implementation planning consultation.

Please contact Dr. Harry Bloom at harrybloom@benchmarkingforgood.org to arrange an introductory discussion.

When is Being Different Not a Virtue for Nonprofit Organizations? The Importance of Benchmarking

0ften standing out from the crowd can be a positive thing. It can connote self confidence and commitment to not being mediocre.

But when it comes to managing a nonprofit, sometimes being proud of being different can indicate an unwillingness to question past practices, a “not invented here” mode of thinking, and an unwillingness to reflect. In these instances, benchmarking information that compares one institution’s performance to that of respected peer institutions can help nonprofit leaders determine if being different is justified or not.

I will cite an illustrative story related to independent day schools.

I was meeting with a veteran Head of School at a well respected day school in Northern New Jersey, sharing a report that indicated how this school’s key performance ratios compared to those of peer institutions.

We got to the page showing the Preschool student-to-teacher ratio for this school compared to that of local and national peers. It indicated that this school had a much lower student to teacher ratio than any of its peers. The Head of School’s reaction was joyful. They said, “That is great to see. That is who we are and where we want to be!” The grin turned to chagrin when I then shared, “That is fine but just know that this cost your school an incremental $300k last year.” The Head of School reflected and said, “Well maybe we don’t want to be quite that different!”

The Three Key Questions Involved in Useful Nonprofit Benchmarking

Benchmarking relative to respected, similar peers, provides an external perspective for the nonprofit leader to understand how their resource generation, expenditures, and program results compare to those of others and where they seem to not be as effective. There may be very valid strategic and tactical reasons for deviation, but it is healthy to know about these deviations and question whether they are actually beneficial versus simply assuming “we are different” and don’t need to probe and understand the following about those differences:

1. What is the magnitude of our differences?

2. Why are we different? Is there a valid reason? A positive return on investment or in mission achievement?

3. How would we go about improving our performance should we want to do so?

Nonprofit organizations that are reflective and data driven utilize benchmarking to know the answers to these questions in relationship to all key sources of revenue and expenditure. They have a well thought out, data validated reason for how they generate revenues, how they design staffing structures, how they compensate, how they purchase goods and services– and are thereby able to maximize their value propositions and ensure their financial vitality.

Benchmarking for Good, Inc., is a 501(c)(3) nonprofit organization whose mission it is to assist nonprofits via Grant Programs to design and conduct tailored Benchmarking Programs. These programs help nonprofits ensure they are being fact driven and intentional about how they go about their work.

Contact Dr. Harry Bloom at harrybloom@benchmarkingforgood.org to learn more about our Grant Programs.