The Advice Booth: How Much to Charge
Q: What is best practice when it comes to setting tuition?
A: In his book Mind The Gap, Richard Soghoian, head of school at Columbia Grammar and Prep, argues that private school tuition should be set at the actual cost to educate a single child and should exclude both scholarship and capital costs. Scholarship and capital dollars should be raised independently and not tied to tuition. In other words, neither scholarship nor capital costs should be considered operating expenses and should therefore not be included in gross tuition. I am not a CPA but I believe that accountants consider scholarship an offset to revenue and not an actual expense. Simply put, schools should charge a full or gross tuition which reflects the actual cost to educate a child, exclusive of scholarship, capital and other one-time expenses.
I estimate that no more than one third of Jewish day schools engage in this best practice. Approximately one third charge a full tuition which includes some level of scholarship expense. While the actual percentage of tuition going toward scholarship may still be relatively small, many parents erroneously believe their tuition levels are so high because they are subsidizing scholarship families. This fuels parental discontent. Where schools charge a full tuition which includes some level of scholarship, they should disclose this in an annual report and on their website.
Equally surprising, at approximately one third of Jewish day schools the full tuition charge is below the actual cost to educate a student. These schools are subsidizing every student, including the ones whose families could comfortably afford to pay more. Many smaller schools engage in such a practice due principally to their fear that a meaningful increase in tuition will cause existing full-pay families to leave the school. There is scant evidence to support such a claim. Measuring Success has performed thousands of parent surveys at over 100 Jewish day schools and has found that tuition changes, whether up or down, have no discernible impact on enrollment.
Q: What about alternative tuition programs. Are they succeeding in boosting day enrollment?
A: Alternative tuition programs are being widely embraced by the Jewish day school field. More than one third have adopted some type of alternative tuition program. These include indexed or flexible tuition, income cap programs (iCap), and multitiered tuition programs. Some claim to have stabilized retention and/or boosted enrollment. Over the next few months, Prizmah plans to analyze these programs carefully in order to better understand their objectives and test their efficacy. We know that the contextual factors which impact schools and communities must be taken into account before adopting a “one size fits all” approach to tuition. Once we have analyzed the data from these alternative programs and the unique contexts under which they operate, we will share our findings with the field and will publicize approaches that appear to be working.
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