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Trusteeship Magazine

Looking Under the Hood 2.0: How Institutions Are Using the AGB/NACUBO Student Aid Tool

By Don Hossler and David B. Johnson

Reviewing preliminary progress of the Looking Under the Hood project helped to identify the benefits of trustees and senior campus policymakers at four-year institutions having common definitions of key financial-aid terms and access to benchmarking data from other institutions.

More than 1,100 individuals at almost 600 colleges and universities have used the tool, with early results indicating that it has begun to inform institutional grant policy discussions at a number of early adopter schools.

Ongoing communication efforts, and the addition of new data focused on aid receipts’ race/ethnicity and income levels, will allow the tool and metrics to have further positive effects on aid funding and distribution.

The growing cost of campus-based financial aid has become an important part of the conversation on college and university campuses. And when trustees and senior campus policymakers at four-year institutions have common definitions of key financial-aid terms and access to benchmarking data from other institutions, what are the benefits? By reviewing preliminary progress of the Looking Under the Hood project, which aims to provide tools for strategic decision making about institutional financial aid or grant aid and support the work of postsecondary administrators, we intended to find out.

How the Tool Works

Funded by the Robert W. Woodruff Foundation and managed by AGB and the National Association of College and University Business Officers (NACUBO), Looking Under the Hood is an effort intended to address a critical aspect of college and university expenditures— namely, institutional financial aid. AGB and NACUBO proposed to develop a set of common metrics that could better inform the deliberations on institutionalaid policies for colleges and universities. The project produced an analytical tool focused on campus-based financial-aid expenditures, which we wrote about in the March/April 2014 issue of Trusteeship.

Eighteen months later, we believe a continued examination of the tool will help facilitate discussions between college and university presidents, CFOs, and senior enrollment officers (SEOs) and will inform discussions among senior campus leaders and boards of trustees.

We previously wrote that the ability to secure this kind of benchmarking data enables trustees and senior campus administrators to address the following questions:

1. Are institutional-aid policies consistent with the mission and values of our institution?

2. Is institutional aid being delivered to the types of students we most want to see on our campus?

3. Is aid ultimately going to students who succeed (i.e., do students who receive our grants graduate)?

The tool is an interactive website that allows an institution to select a set of peer institutions with which to compare financial-aid expenditures. Since the start of this effort, one important aspect has been the willingness of the College Board to make data available from its Annual Survey of Colleges, rendering it unnecessary to ask institutions to provide more data. Some of the most important benchmarking comparisons that can be made have included the following:

1. Total number of undergraduate institutional grant aid recipients;

2. Percentage of undergraduates who receive institutional aid;

3. Average institutional grant award per recipient;

4. Percentage total institutional grant aid that is funded from endowment, alumni giving, and other external gifts;

5. Institutionally funded grants as a share of tuition and fee revenue;

6. Tuition revenue per FTE (full-time equivalent) undergraduate enrolled;

7. Average institutional grant as a percentage of the total price of attendance;

8. Percentage of total grant recipients receiving need-based awards;

9. Percentage of total grant recipients receiving non-need-based awards; and

10. Percentage of total grant recipients receiving athletics scholarships.

The ability to create peer groups of similar institutions and then compare campus-based financial-aid expenditures with peers helps to answer the question, how are we doing with our aid expenses? Such questions always elicit the rejoinder, compared to what? Looking Under the Hood provides the answer. The ability to compare one’s own campus-aid expenditures with those of other peer groups can add a level of realism to discussions among senior campus policymakers and to meetings of trustees.

How Is the Tool Being Used?

As of March 2015, more than 1,100 unique users representing 595 colleges and universities have accessed the tool; 177 of these users have created comparison groups 620 times; and 141 unique users have used states to create comparison groups 458 times. The centerpiece of the web-based tool is 30 institutional-aid metrics created for this project. The most popular institutional-aid metrics include:

  • Institutional spending on need-based aid per FTE;
  • Institutional spending on non-needbased aid per FTE; and
  • Percentage of institutional aid spent on need-based aid.

Starting this past spring, 10 colleges and universities were invited to serve as early adopters of the web-based tool and institutional-aid metrics. These early adopters brought a small team of senior leaders to Emory University in November 2014 to use the metrics and tool. Some observations:

1. For all participants, the ability to create peer comparisons on a common set of institutional-aid metrics using an interactive tool was described as a significant breakthrough.

2. The 30 institutional-aid metrics available through the interactive tool were described as very helpful for comparison purposes with self-identified peers, especially the need- and nonneed- based metrics.

3. Early adopters quickly ran across institutional- aid policy issues that were not addressed by the current set of metrics. They also wanted to know how institutional aid was distributed across different race and ethnic groups, but these breakdowns are not currently available.

4. The issue of state residency also emerged as an important issue for institutional-aid policy discussions. Public institutions may use institutional aid to attract out-of-state students who will pay much higher tuition and fees than in-state students.

5. How colleges and universities are paying for institutional aid emerged as an area of interest that the tool does not currently address. What proportion of institutional aid is funded through endowment income or other dedicated sources, and conversely what proportion of institutional aid is funded through tuition discounting?

6. The issue raised most frequently was that the mission and values of colleges and universities are disconnected from fiscal realities. For many institutions, the underlying business model requires that institutional-aid policy discussions be driven by net tuition revenue targets, which are needed to fund college operations, rather than by campus mission.

A Case Study

Like most institutions, Indiana University Bloomington (IUB) has been grappling with the question of how the campus balances the goals of academic quality, diversity, affordability, and positive net tuition revenue. For most institutions, these simultaneously complementary and competing goals are linked to strategic planning and enrollment planning to achieve the desired campus goals. As institutions and families continue to move beyond the impact of the Great Recession, affordability is at the forefront of many considerations regarding college choice. Managing enrollment and the link to affordability is critical to the fundamental and fiscal health of an institution.

Deciding how institutional aid is used to achieve a university’s strategic purposes is critical in postsecondary education, though historically there have been few commonly accepted metrics for reporting financial-aid expenditures or comparing institutional practices. As IUB embarked on a capital campaign, it wanted to know where new funds might best be used to achieve the strategic goals of reducing the debt burden for financially disadvantaged students admitted to IUB. Using the Looking Under the Hood tool, IUB explored one particular aspect of affordability— the financial aid that was offered to students.

In selecting a customized peer set, it was possible for IUB to compare spending on several variables, including need-based and non-need-based institutional grant aid (often referred to as gift aid because students do not have to pay it back). While exact dollar amounts were not available for comparison, the Looking Under the Hood tool helped IUB determine what percentage of institutional grant aid is need-based versus non-need-based. Although this was just the beginning of the research, these analyses helped IUB make significant advancements in understanding and awareness within the university of approaches to offering students financial aid. The tool served as the catalyst for a new focus on improving financial aid for lowand moderate-income students.

This analysis led to the exploration of the Common Data Set and IPEDS (Integrated Postsecondary Education Data System) reporting regarding financial aid awarded to enrolled undergraduates. This view of publicly available data showed exactly how much each institution in the selected peer set was spending on needbased and non-need-based aid, although it did not break the data down by race or residency. It became clear to the team at IUB that while they were spending more on financial aid than many of their peers, they were also behind some aspirational peers, as well.

Finally, IUB enlisted consultants to conduct peer research on its behalf. This research found that raising funds for institutional financial aid was one of the most important issues faced by selected competitor institutions. Some trustees and campus administrators might wonder why this would concern enrollment managers. It should be noted that according to the College Navigator site, Indiana University has the lowest average net price in the Big Ten. However, in examining its own data, IUB realized there were more than 1,300 entering students in the 2013 cohort who had substantial financial gaps that remained after grant aid and family contributions were applied.

To address affordability, IUB embarked on several initiatives, including a financial literacy education campaign and a two-year tuition freeze for Indiana residents. Nevertheless, given the number of students with financial-aid gaps, and given that Indiana University research shows that students with financial-aid gaps persist at lower rates than those who do not have financial-aid gaps, IUB determined that it needs to focus on filling the gap for these students, even though it is not inexpensive.

Colleges and universities are faced with changing demographics, furthering the need for more financial aid. We are seeing some return to growth in the number of high school graduates, but with a growing number of students over the long-term who are underrepresented in higher education today and may be at risk academically and socioeconomically. Affordability will continue to be an important consideration in choosing a college or university. These changing demographics and the socioeconomic challenges to postsecondary institutions present a pressing array of concerns. Finding appropriate funding to support students with unmet financial need, while also meeting goals such as academic quality, diversity, and net-tuition revenue, continues to be a major challenge for many public and private colleges and universities.

Regardless of an institution’s size or management model, awarding strategies should reflect and complement the unique context and nature of the institution. For Indiana University Bloomington, the recruitment goals are met in part by awarding and packaging of financial aid in order to minimize financial barriers to enrollment. Can IUB afford to spend more money on financial aid? Can it afford not to do so? A recent Wall Street Journal article pointed out very clearly that a number of institutions are using institutional grant aid to support low- and middle-income students. For some students, this is the difference between enrolling at the institution of their choice and going elsewhere; for others, it is helping them manage their costs and loan amounts more affordably.

Ultimately, as institutions embark on capital campaigns, chief enrollment officers should give the clarion call to close financial-need gaps to increase degree affordability. Closing financial gaps can be an enduring legacy for institutional governing boards and for the students they seek to serve.

Response to the Tool

Whether an institution has a robust research capacity that could have created this information on their own, or the campus is a small college with limited resources, Looking Under the Hood can make comparative benchmarking information on campus-based financialaid expenditures more readily available. As the case study of Indiana University Bloomington rightly suggests, this tool may not answer all of the questions that an individual college or university has about its financial-aid expenditures, but it demonstrates that the comparative benchmarking data provided can give useful information for trustees and campus policymakers. It also shows, like most research efforts, that Looking Under the Hood may lead to additional questions that can provide a more comprehensive understanding of campus-based financial- aid costs.

We are encouraged by the number of users of this tool given the short time span that it has been available. At NACUBO’s last annual meeting, a presentation on Looking Under the Hood had to be moved from a room seating 50 to 60 people to a room seating more than 200, and still there were interested parties standing in the hallway outside. This suggests to us that this tool will have high degrees of saliency for trustees, presidents, provosts, CFOs, and senior enrollment managers. Given the ever-growing costs of tuition discounting, this benchmarking tool can be an invaluable aid for institutions as they attempt to chart their way through a difficult financial environment.

Although we are pleased with Looking Under the Hood, we also have plans for improvement. The College Board is adding additional questions to its institutional survey to capture more of the financial-aid data that the pilot users have requested; some data will not be added, as it would be too difficult for institutions to extract without adding more staff. Nevertheless, questions are being added, and we anticipate that the utility of this new resource for trustees and senior college and university administrators will continue to grow.

Next Steps

Even though the grant period for Looking Under the Hood is ending, the project’s key deliverables—a common set of institutional-aid metrics and a web-based, interactive tool—will be sustained over the long run. Leaders at both AGB and NACUBO have plans to continue disseminating information about the metrics and the online tool at the national and regional conferences of their respective organizations. In addition, staff members are working with the College Board to add supplemental questions to the Annual Survey of Colleges to collect information on institutional-aid expenditures by income, race, and ethnicity so as to populate these metrics with the necessary data. Staff members are also in early discussions to identify sources for institutional aid to add into the metrics. Lastly, AGB intends to incorporate the use of the institutional-aid metrics into its consulting services and board-member training programs. In April 2015, AGB published a white paper by leading student-aid expert Sandy Baum that included guidance and key questions about student aid and enrollment for governing boards to consider.

Other higher education associations have expressed interest in the ongoing dissemination and promotion of the institutional-aid metrics and online tool, most notably the American Association of Collegiate Registrars and Admissions Officers’ Strategic Enrollment Managers group. There also has been interest from state and regional policy associations about accessing the institutional-aid metrics to better understand how colleges and universities use institutional aid. Thus far, staff have not provided these groups with access to the tool, because they do not represent specific institutions; their purpose in accessing these data appears to be for public comparisons or for state and system-wide policy deliberations, which is not aligned with the intent for these institutional-aid metrics to guide specific policy discussions. However, discussions with these state and regional policy associations are ongoing.

The generous support from the Woodruff Foundation has enabled AGB and NACUBO to develop a set of common institutional-aid metrics that can support college and university leaders as they examine their institutional financial-aid programs and use these data to consider policy decisions that might affect enrollment, costs, access, and student success. This grant also allowed project staff to populate the developed metrics with national data and place them in an online benchmarking tool that further enables member institutions to compare aspects of their aid programs with groups of national and self-selected peers.

Early results suggest that the project has been a success. These results also indicate that the tool has begun to inform institutional grant policy discussions at a number of early adopter schools. Ongoing communication efforts, and the addition of new data focused on aid recipients’ race/ethnicity and income levels, will allow the tool and metrics to have further positive effects on aid funding and distribution that are more closely aligned with institutional missions and goals.

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