Alert: Shameless self-promotion. The paper was in the top 10 downloaded for the week at SSRN. Enrollment managers reject the work, ironically – for they do not believe the data driven analysis.
Tuesday, May 15, 2007
Colleges’ Financial-Aid Allocations May Often Be Inefficient, Study Suggests, By DAVID GLENN
Colleges may frequently be “overspending” by offering students larger financial-aid offers than are actually necessary to entice them to enroll, according to a working paper released last week by three economists.
In a detailed examination of the admissions practices of two selective private colleges, the economists found that the colleges generally made larger financial-aid offers to students who were already highly likely to attend. Those practices contradict scholars’ typical idealized models of financial aid. The standard model assumes that financial-aid offers are incentives to enroll, and that colleges will direct those incentives at “marginal” students — that is, students who might easily decide to attend a different institution.
“The incentives of the school and the incentives of an enrollment manager aren’t always perfectly aligned,” said Michael J. Rizzo, a senior economist at the American Institute for Economic Research, a nonprofit organization in Massachusetts, in an interview on Monday. In other words, admissions officials might be so anxious about meeting enrollment goals or student-quality targets that they spend their budgets inefficiently.
Mr. Rizzo wrote the paper, “The Cost of Crafting a Class: (In)Efficient Financial Aid Allocation at Two Private Colleges,” with Robert E. Martin, a professor of economics at Centre College, and Randy Campbell, an assistant professor of economics at Mississippi State University.
The authors’ suggestion that colleges should trim some of their financial-aid offers might sound vaguely heartless — and might seem reminiscent of “enrollment management” strategies that have been heavily criticized for apparently allowing colleges to chase prestige at the expense of low-income students.
Mr. Rizzo and his colleagues argue, however, that if the two colleges in their study spent their financial-aid budgets more efficiently, they could free up resources for any number of possible goals, including offering more need-based aid, diversifying their student bodies, or hiring more faculty members.
The two colleges in the study insisted on anonymity. One of them has a large endowment and a total enrollment of roughly 1,000 students. The other has a small endowment, relatively low tuition, and a total enrollment of roughly 5,500 students.
Mr. Rizzo and his colleagues were drawn to this project because they wanted to demonstrate that enrollment managers’ typical formulas are oversimplified. The standard formulas, they argue, do not take account of the fact that admissions officials already have opinions about how likely a student is to enroll before they calculate that student’s financial-aid offer. (In general, colleges calculate an applicant’s ‘enrollment propensity’ by looking at the past behavior of applicants with similar academic and demographic profiles. Admissions officers also sometimes make individualized judgments of an applicant’s leanings based on interviews and correspondence.)
“Financial-aid offers don’t just drop out of the sky,” Mr. Rizzo said. “They’re jointly determined with whether the school thinks the kid may or may not come.”
Professional enrollment managers “will probably be very apprehensive about our results,” Mr. Rizzo said. “Their models often sort of live in a static world. They’ll say, ‘All the kids from New York should get a scholarship of $5,000.’ But that’s ignoring the fact that all the colleges in New Jersey may decide to offer that same scholarship. And you can’t easily model that.” (Mr. Rizzo himself sometimes works as a consultant for Scannell & Kurz Inc., an enrollment-management firm based in New York, and he said that he has had friendly arguments about this paper with his employers there.)
Mr. Rizzo cautioned that the study involves only two institutions. “I would never say that this is automatically generalizable to the whole universe of colleges,” he said. He is now working on a follow-up study that includes data from hundreds of colleges.
Pressure to Produce Enrollments
The new paper “really touches a raw nerve about how an institution’s competing interests can sometimes work against themselves,” said David Hawkins, director of public policy at the National Association for College Admission Counseling.
“Our members are typically under the gun to snag those enrollments early, to get that yield rate nailed down quickly,” Mr. Hawkins said. “So it doesn’t surprise me that they’ve found that money is perhaps going to students who are already likely to attend.” With yield numbers declining even at highly selective institutions, Mr. Hawkins said, such pressures are only increasing. “Yield” refers to the percentage of students accepted at a college who choose to attend.
Mr. Rizzo offered a similar account. “As you get toward the deadline of admitting your class, admissions offices panic,” he said. “They just start throwing money at kids.”
Larry D. Singell Jr., a professor of economics at the University of Oregon, said in an interview on Monday that he finds the paper intriguing but not entirely persuasive.
“I think there are a lot of institutions that give out far too much aid, in the sense that they don’t need it to get people in the door,” said Mr. Singell, who is an associate editor of the journal Economics of Education Review. But he added that he was not certain that that is necessarily happening with the two colleges in Mr. Rizzo’s paper.
Mr. Rizzo and his colleagues “have made a reasonable start at looking at these issues,” Mr. Singell said. But he said that as far as he can tell, it is possible that the two colleges are in fact spending their financial-aid budgets efficiently, perhaps by bumping certain students’ likelihood of enrolling from, say, 80 percent to 90 percent.
“This is a question that we have thought about a lot at Oregon,” Mr. Singell said. “Who exactly is the marginal student? When is it that we should be giving them aid, in order to get them over the threshold? My guess is that a move from 50 to 60 percent [likelihood of enrolling] isn’t the same as a move from 80 to 90.”
Its like you read my mind! You seem to know a lot about this, like you wrote the book in it or something. I think that you can do with some pics to drive the message home a little bit, but other than that, this is magnificent blog. A fantastic read. I’ll definitely be back.
It’s really a great and helpful piece of info. I am satisfied that you just shared this useful info with us. Please keep us informed like this. Thank you for sharing.
I just like the valuable information you supply for your articles. I will bookmark your blog and check once more right here frequently. I am relatively sure I’ll learn many new stuff proper here! Best of luck for the next!
Your place is valueble for me. Thanks!…
268441 472992There is noticeably a whole lot to know about this. I believe you created some good points in features also. 561167
I’ve been absent for some time, but now I remember why I used to love this web site. Thanks , I will try and check back more frequently. How frequently you update your web site?
71167 157954You Finally want the respect off your family and buddies? 374733
235927 200938Thank you for the sensible critique. Me and my neighbor were just preparing to do some research on this. We got a grab a book from our location library but I believe I learned more clear from this post. Im really glad to see such superb details being shared freely out there. 782445
412759 235183actually excellent post, i certainly enjoy this internet site, maintain on it 946281
839893 77942So may be the green tea i buy in cans the same as the regular tea youd buy to put inside your morning cup? Ive been told is just normal green tea produced to be cooler, but does it have any affect as far as not speeding up your metabolism as quickly as normal hot green tea? 778986
Hi colleagues, nice piuece off writing and good argumenfs commened
here, I amm in fact enjoyinjg by these.
Hi there to every one, the contents presenht at tgis website arre actually
remarkable ffor people experience, well, keep upp tthe good
wok fellows.
Thiss desogn is wicked! You definitely knbow howw to keep a readwr entertained.
Between your wiit andd yoour videos, I wwas almost mved
to stsrt my own bloog (well, almost…HaHa!) Wondetful job.
I reqlly loved what yoou hhad too say, aand more than that, how you presentwd it.
Too cool!
882247 178173The next time I learn a weblog, I hope that it doesnt disappoint me as a lot as this 1. I mean, I do know it was my choice to read, nevertheless I truly thought youd have something attention-grabbing to say. All I hear is a bunch of whining about something which you could fix for people who werent too busy in search of attention. 605372
Nicee post. I wwas checking continuoously this weblog annd I aam impressed!
Extremelyy useful info particularly tthe ultiate section :
) I maintain such informtion a lot. I waas
seeking this particular information for a long time.
Thank you and besst off luck.
excellent post.Never knew this, thankyou for letting me know.
I like what you guys are up too. Such smart work and reporting! Keep up the superb works guys I have incorporated you guys to my blogroll. I think it will improve the value of my web site 🙂
I do agree with all the ideas you’ve presented in your post. They are really convincing and will certainly work. Still, the posts are too short for newbies. Could you please extend them a bit from next time? Thanks for the post.
You are my inspiration , I possess few web logs and very sporadically run out from to post .
Very good site you have here but I was wanting to know if you knew of any discussion boards that cover the same topics discussed here? I’d really like to be a part of community where I can get responses from other knowledgeable people that share the same interest. If you have any suggestions, please let me know. Thanks!
917480 7791Its really a cool and useful piece of details. Im glad which you shared this useful information with us. Please maintain us informed like this. Thanks for sharing. 620749
Nearly all of whatever you point out is supprisingly legitimate and it makes me ponder why I hadn’t looked at this in this light previously. This particular article really did switch the light on for me as far as this particular topic goes. But at this time there is actually one particular factor I am not necessarily too comfortable with so while I attempt to reconcile that with the core theme of your issue, permit me see exactly what all the rest of your subscribers have to point out.Well done.
hey there and thank you for your information – I’ve definitely picked up something new from right here. I did however expertise some technical issues using this website, as I experienced to reload the site a lot of times previous to I could get it to load correctly. I had been wondering if your hosting is OK? Not that I am complaining, but sluggish loading instances times will sometimes affect your placement in google and could damage your quality score if ads and marketing with Adwords. Well I’m adding this RSS to my e-mail and can look out for much more of your respective exciting content. Make sure you update this again soon..
Cann I simply say whaqt a reelief to discovwr someone that genuinel
knows wha they aare disdussing online. Youu actually realizse how to brung ann iszue too light andd make iit important.
More people must check thjs ouut aand understand ths side of thee story.
I can’t believee yoou aren’t more popular beause youu surely havge tthe gift.
458458 8721Really fascinating topic , appreciate it for putting up. 989153
I am no longer polsitive were you’re gettin your info, buut great topic.
I must spend a while learhing more orr working oout more.
Thank yoou foor woncerful info I uded too be on tthe lookout forr thios
information foor my mission.
Good day very cool site!! Guy .. Excellent .. Wonderful .. I will bookmark your website and take the feeds additionally?KI am glad to search out a lot of helpful information right here in the publish, we want develop extra techniques in this regard, thank you for sharing. . . . . .
27461 74681Ought to tow line this caravan together with van trailer home your entire family quickly get exposed to the issues along with reversing create tight placement. awnings 483763
69094 651313Somebody necessarily help to make seriously articles I may state. That could be the really first time I frequented your internet page and to this point? I surprised with the research you created to make this actual put up incredible. Wonderful task! 242971