Day School Tuition: If You Lower It, Will They Come?
Source: Avi Chai Foundation
A significant number of Jewish day schools seem to be hearing a voice whispering, “If you lower tuition, they will come.” Convinced that cuts in tuition will drive enrollment and help fill empty seats, individual day schools continue to experiment with a variety of non needs-based price reductions. Most of these programs offer free or heavily reduced tuition for both new and existing families in certain grades. Some offer significant tuition reductions for new families only. The primary objectives of both approaches is the same: fill empty seats and retain existing families. Some schools posit that their net tuition revenue will increase if enough empty seats are filled. Some schools seek a large donor to fund the difference between the old and new (lower) tuition. Many schools assume that their full-paying families will voluntarily contribute, on a tax-deductible basis, the difference between the old and new (lower) tuition.
Having examined many of the non-needs based day school tuition reduction programs across the country, Avi Chai has concluded that very few of the programs have led to meaningful increases in enrollment. Furthermore, in the rare cases where a school or community of schools saw a material increase in enrollment, the lower tuition levels were rarely sustainable beyond a few years. The schools were invariably forced to raise tuition at above average rates in the ensuing years. In addition, schools which presumed a high level of voluntary contributions from full-paying families were usually disappointed in the results. One California Jewish day school reports that in the very first year of its tuition reduction program, full-paying parents have contributed only 40% of the amount that the school projected. Other schools report that even where existing, full-pay families initially contribute as projected, new families do not. They theorize that they lack collective memory and are less inclined to contribute beyond the lower, obligatory tuition levels. The lower tuition becomes, in effect, the new normal.
The varied enrollment gains and the certain financial challenges in sustaining these tuition programs should come as no surprise. Measuring Success’s Sacha Litman has long argued that day school enrollment is driven not by price but rather by perceived value among parents. In other words, schools which have high perceived parental value tend to fill up, regardless of price. Those with low perceived value, simply don’t. In an analysis of enrollment at 200 schools, both Jewish day schools and non-Jewish independent schools, in the years before and after the 2008 recession, no relationship was found between tuition changes and enrollment.
In spite of our doubts regarding non-needs based tuition cuts, we are more optimistic about the potential for increased enrollment from both income cap and flexible or indexed tuition programs. These are needs-based programs which aim to drive day school enrollment by creating a unique tuition level for each eligible family. Under the income cap approach, tuition is “capped” at a certain percentage of a family’s pre-tax income. This percentage typically ranges between 10% and 18%. Income cap programs generally target middle and upper middle income families with multiple children in day school. When executed properly, income cap programs enable families to accurately predict their tuition over a long-term horizon.
Flexible or indexed tuition programs can change the discourse around tuition and can help even the financial playing field. While lower rates of tuition are still offered to all but the wealthiest of families, the term “scholarship” is eschewed in favor of the term “flexible tuition.” Advocates of such an approach argue that accessibility increases when the term “scholarship” is replaced by “flexible tuition” or “indexed tuition.” In addition to AVI CHAI’s own middle income pilot program, two large modern Orthodox day schools, The Maimonides School in Boston and The Moriah School in Englewood, New Jersey, recently announced middle income programs. Both programs are self-funded by the schools and both schools report positive communal response to the programs. It remains to be seen whether the tuition discounts provided under the program will actually lead to improved retention and/or enrollment growth.
Read more at The Avi Chai Foundation Blog.