Serving over enrollment strategy at a seminary that receives a significant portion of its budget from our denomination, and that support is partially tied to enrollment. Given the broader trends, I don’t think we can assume that stream will hold steady forever, and your focus on cash flow rather than some other metrics is helpful.
In our context, that model sometimes nudges us toward chasing the denominations definitions of FTE because its funding uses a very specific, somewhat idiosyncratic FTE formula. Sometimes decisions are made that may increase FTE but not necessarily cash flow. Also stronger consideration into the effects of declining denominational funding.
Sounds very interesting. I've wondered about schools with these affiliations and how the revenue gets determined between the denomination and the school...
This funding model is nothing I'm familiar with and I can appreciate that it could be challenging. The first law of microeconomics says that you don't maximize profit until the marginal cost equals the marginal revenue. I actually lived by that rule in my business during the first half of my career. But there's a flip side to that law that is more relevant to higher education. If the marginal cost exceeds the marginal revenue, there is also an end point. But unlike profit maximization in the first instance, this one is not so good. No idea which direction the reimbursement formula is taking you. Just a thought as to how the discussion might be framed.
Great thinking by Shulman. Question - if they're down by, say, 50 tuition-paying students per year, are those like "dead seats" on an airplane? That is, there is near zero marginal cost if you fill them? (Just a little fuel and a few pretzels).
The study assumes "all things being equal" for the purpose of isolating the financial impact if schools do nothing to mitigate future risk or stand by and "wait 'til next year" when the number of first time matriculants starts to decline - as it will for many schools. The study is being updated as fiscal year 2025 financial statements are published and a central point of inquiry will be whether, in fact, at risk schools are taking action. But in terms of marginal costs that are automatically not incurred when enrollments go down? Few and minor if any. Indeed, if school attempts to maintain head count by discounting more heavily - as so many are doing - that has the same effect as a decline in enrollment and without whatever marginal savings there might be. So, on balance? A push - at best.
Meaning if they fill certain #s of seats with less than full-pay students would that be beneficial bc it wouldn't appreciably add costs but it would bring in marginally more revenue?
If discounting brings in more students than you would otherwise have, it will certainly improve cash flow assuming little or no marginal cost. It won't necessarily make cash flow positive. But it would be improved - unless the discount is given to all students, including those who would have attended anyway. Trends in discount rates in relation to incoming and overall enrollments over the past 3 years will be something to look at closely when all the FY 2025 financial statements are in for the 44 schools in a few months.
I feel this dilemma ties directly to Jobs To Be Done and K-12 focus. We have lived a primary school model of College For All for far too long and as is noted by specialists, it is not reality. From this article it appears that Colleges overbuilt thinking that someday all would attend and complete college. The number who actually graduate is a meaningful number when doing this analysis. Maybe that model applies to 25% of HS graduates while 80% of HS budgets are focused on that path leaving the majority unprepared to leave high school with any marketable skills at all, and if attempting college with the false belief that they are prepared and based on their demeanor never finish bound by debt due to the ROI never materializing.
Serving over enrollment strategy at a seminary that receives a significant portion of its budget from our denomination, and that support is partially tied to enrollment. Given the broader trends, I don’t think we can assume that stream will hold steady forever, and your focus on cash flow rather than some other metrics is helpful.
In our context, that model sometimes nudges us toward chasing the denominations definitions of FTE because its funding uses a very specific, somewhat idiosyncratic FTE formula. Sometimes decisions are made that may increase FTE but not necessarily cash flow. Also stronger consideration into the effects of declining denominational funding.
Lots to think about, helpful.
Sounds very interesting. I've wondered about schools with these affiliations and how the revenue gets determined between the denomination and the school...
Obviously other denominations may do it differently but it does drive some of the decision making
This funding model is nothing I'm familiar with and I can appreciate that it could be challenging. The first law of microeconomics says that you don't maximize profit until the marginal cost equals the marginal revenue. I actually lived by that rule in my business during the first half of my career. But there's a flip side to that law that is more relevant to higher education. If the marginal cost exceeds the marginal revenue, there is also an end point. But unlike profit maximization in the first instance, this one is not so good. No idea which direction the reimbursement formula is taking you. Just a thought as to how the discussion might be framed.
Helpful, thanks!
Great thinking by Shulman. Question - if they're down by, say, 50 tuition-paying students per year, are those like "dead seats" on an airplane? That is, there is near zero marginal cost if you fill them? (Just a little fuel and a few pretzels).
The study assumes "all things being equal" for the purpose of isolating the financial impact if schools do nothing to mitigate future risk or stand by and "wait 'til next year" when the number of first time matriculants starts to decline - as it will for many schools. The study is being updated as fiscal year 2025 financial statements are published and a central point of inquiry will be whether, in fact, at risk schools are taking action. But in terms of marginal costs that are automatically not incurred when enrollments go down? Few and minor if any. Indeed, if school attempts to maintain head count by discounting more heavily - as so many are doing - that has the same effect as a decline in enrollment and without whatever marginal savings there might be. So, on balance? A push - at best.
Meaning if they fill certain #s of seats with less than full-pay students would that be beneficial bc it wouldn't appreciably add costs but it would bring in marginally more revenue?
If discounting brings in more students than you would otherwise have, it will certainly improve cash flow assuming little or no marginal cost. It won't necessarily make cash flow positive. But it would be improved - unless the discount is given to all students, including those who would have attended anyway. Trends in discount rates in relation to incoming and overall enrollments over the past 3 years will be something to look at closely when all the FY 2025 financial statements are in for the 44 schools in a few months.
I feel this dilemma ties directly to Jobs To Be Done and K-12 focus. We have lived a primary school model of College For All for far too long and as is noted by specialists, it is not reality. From this article it appears that Colleges overbuilt thinking that someday all would attend and complete college. The number who actually graduate is a meaningful number when doing this analysis. Maybe that model applies to 25% of HS graduates while 80% of HS budgets are focused on that path leaving the majority unprepared to leave high school with any marketable skills at all, and if attempting college with the false belief that they are prepared and based on their demeanor never finish bound by debt due to the ROI never materializing.