In this episode, we talk about financial aid leveraging—the common and sometimes controversial practice of using data-driven approaches to inform how schools use institutional funds to manage enrollment and tuition revenue.

Joining us in the conversation is Echo Delta data scientist and consultant, Dr. Jimmy Jung. As a higher ed veteran with over 20 years of experience, Jimmy has successfully led enrollment management at multiple institutions around the country and has consulted internationally in the areas of marketing, program evaluation, data analytics, and student success.

We start by covering the basics of financial aid leveraging—what it is, how it works, and the kinds of data schools use to inform their financial aid models. Then, we dig deeper into the impact of financial aid leveraging, including improving net tuition revenue, controlling discount rates, and how it can help schools uncover hidden insights about their institution and the students they hope to attract.

We wrap up by talking about some of the criticisms of the practice and hear Jimmy’s thoughts on the ethical and responsible use of financial aid leveraging.

This was a fascinating conversation full of essential information for anyone looking to understand more about financial aid leveraging.

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Transcript

Jarrett Smith:

You’re listening to the Higher Ed Marketing Lab. I’m your host, Jarrett Smith.

Welcome to the Higher Ed Marketing Lab. I’m Jarrett Smith. Each episode, it’s my job to engage with some of the brightest minds in higher education and the broader world of marketing to bring you actionable insights that you can use to level up your school’s marketing and enrollment performance. In this episode, we’ll be talking about financial aid leveraging. The common, but sometimes controversial practice of using data-driven approaches to inform how schools award financial aid.

Joining us in the conversation is Echo Delta data scientists and consultant Dr. Jimmy Jung. As a higher ed veteran with over 20 years of experience, Jimmy has successfully led enrollment management at multiple institutions around the country and has consulted internationally in the areas of marketing, program evaluation, data analytics, and student success. We start by covering some of the basics of financial aid leveraging, what it is, how it works, and the kind of data that schools use to inform their financial aid models.

Then we dig deeper into the impact of financial aid leveraging from improving net tuition revenue and controlling discount rates, to showing how it can help schools uncover hidden insights about their institution and the students they hope to attract. We wrap up by talking about some of the criticisms of the practice, and we hear Jimmy’s thoughts on the ethical and responsible use of financial aid leveraging.

This was an interesting conversation full of essential information for anyone looking to understand more about financial aid leveraging. Without further ado, here’s my conversation with Dr. Jimmy Jung.

Jarrett Smith:

Jimmy, welcome to the show.

Jimmy Jung:

Good to be here.

Jarrett Smith:

Jimmy, I would love it if you could just start off by giving us a quick snapshot of your work and expertise in higher ed and financial aid leveraging.

Jimmy Jung:

Definitely will do, Jarrett. Spent the last 20 years working in higher education. The first job I ever had was as an analyst creating these financial aid leveraging models and looking at the impact that it had on institutions, driving of course their revenue model up and impacting students. Allowing students to have a chance to go to college because financial aid leveraging gives additional aid to students. My passion began there. I saw the policy changes that financial aid leveraging can do to help students and institution. Now I’ve been doing it for 20 years for many different institutions.

Jarrett Smith:

Good deal. For those who might not be familiar with the term financial aid leveraging, how do you define that? What do you mean when you say that?

Jimmy Jung:

Financial aid leveraging is a pretty simple concept. Obviously, it gets a little bit more complicated in how an institution applies it, using institutional aid or financial aid strategies to impact enrollment and retention and attracting students. Something as simple as scholarship offer on the website is technically financial aid leveraging because you’re trying to drive some type of student behavior.

Jarrett Smith:

It’s interesting you kind of mentioned that because I know in the past you’ve told me, in a sense everybody has a financial aid leveraging strategy where they’re doing it, whether they realize it or not. Based on that definition, I see how you get there. But when somebody is engaging in the practice, kind of formally, of financial aid leveraging and really trying to use that as a tool to shape a class, can you give me a sense of what kinds of schools are using it? How is it actually done? I also want to preface that by saying, I realize that practices evolved over time and gotten increasingly more sophisticated. I think I just bundled like three questions up in one for you.

Jimmy Jung:

I’ll try to deconstruct it.

Jarrett Smith:

Okay. Thank you.

Jimmy Jung:

Bring me back to questions or pieces of it that I don’t catch.

Jarrett Smith:

Sure.

Jimmy Jung:

I think the first part was talking about what types of schools should do it. The answer for that is many types of schools are doing it. I think the key difference between a scholarship strategy that is put out there versus financial aid leveraging, I think the key piece is are you using data, right. A lot of times, in the past, scholarship strategy is based on what you hear from the market, “Hey, students that are asking for this,” or, “Hey, our competitors are doing it.” Then institution choose to do it. Financial aid leveraging begins where you’re looking at data and say, “Hey, is this scholarship having an impact? Is there something the data tells us how to structure the scholarships so it has impact on a yield where in students are applying.”

I think that’s the key point between coming up with a scholarship strategy versus the technical term financial aid leveraging, right. I’ve seen financial aid leveraging used at all different types of schools, private, public, small, large, medium, public flagships. Once an institution realize that they have data and they can use this data to look at their aid strategy, they often continue to do so and allows the school to really think about and develop reports to track how students are responding to the financial aid offer or the scholarship packages they’re giving students.

Jarrett Smith:

Right. What I take away from that is really it’s about making data-driven decisions. Kind of digging into the data aspect, for a minute, I mean, what kind of data are we talking about? It’s historical data, so how far back does it need to go?

Jimmy Jung:

Let’s tackle what type of data, because every institution in some way collects data. I mean, it’s impossible not to nowadays because you have these sophisticated student information systems developed by Oracle, Banner, Campus Solutions, just to name a couple. They’re very good at collecting data. Data have become cheaper to collect over time. Storage has become cheaper. Processors are faster. Data analytics has become a thing in the last five years. Institutions are sitting on [inaudible 00:05:57] and institutions collect a lot of data. The data that’s used for financial aid leveraging is no different than the data you use to track students for retention, track when students registers. A demographic data, the characteristics of students at your school is one big one. The admissions’ data, like get which students came or did not come to your school, whether or not they put it in a deposit, whether they melted.

When they applied, when did a financial aid package gets up to them. Finally, some financial aid data, whether or not they apply to the FAFSA, things like whether or not they will offer a scholarship and the loans and the state aid and the federal aid they qualify for are all important data that schools use for leveraging.

Technically speaking, we could go as far back as five to 10 years, depending on how stable you want to look and answering bigger questions of like, which academic program has been attracting students over time, right? Or looking at how effective the different changes in each tragedy were over time. To start up, you need at least two to three years of data. One, anything with data and trends, they’re kind of sometimes spurious, right. One year you’re up maybe 5%, next year, you’re down 5%. You want at least three years of data to solidify any type of strategy you’re putting up there, or at least look at whether or not there’s drastic changes in trend, because if you’re looking at just one or two years of data, the market can change that quickly, right. You don’t want to make big financial decisions on like one or two years worth of data.

Jarrett Smith:

Yeah. When you’re thinking about the data that you’re feeding into a financial aid leveraging model, how do you think about a year like we just had, right? 2020 is anomalous. 2021 could be equally as anomalous. How do you account for a year like that? How do you control for that so it doesn’t just like wildly throw off your model or should it wildly throw off your model? I mean, how do you navigate that I guess is my question.

Jimmy Jung:

Two thoughts. You’re right. I mean, nothing like this has happened before, at least in sort of data tracking history. The best way to go about it, and me and my colleagues in higher education has been talking about this like, “Hey, what kind of financial aid model? How do we offer this?” Based on my experience and what people have been talking about this particular year is that your market doesn’t necessarily shift drastically even in the pandemic. The students who knew about you still know about you and students who want to come to you will come to you. What we take a look at is maybe the economy, right? Higher education generally has a decent sense of how the economies impact a moment, right? One, the freshmen students, the incoming students, we leave them more price sensitive. You’re going to have to guess that some things are happening where the income is lower.

That’s given. It’s going to be lower. It’s going to disproportionately impact folks, parents, and families. They’re going to be more price sensitive. Discussion becomes, “Do you provide more aid upfront to attract students?” On the other end, the graduate end, is that in times of economic downturn, people are going to retool. Older students that are going to be getting a graduate degree who have been impacted negatively by this pandemic will want to retool. There’re government programs that sort of support that. You expect an expansion of your graduate programs.

Jarrett Smith:

Yeah. That’s an interesting point you bring up there. I came across a little data point the other day saying law school applications and admissions where way up year over year. A perfect example of exactly what you’re talking about, people going back to retool in times like this. Is setting aside sort of the current immediate challenges that we’re all facing and what does that mean for the models in the financial aid leveraging strategy? Just in general, when schools are adopting financial aid leveraging for the first time, what are some of the more common sort of frequent challenges that they tend to encounter as they think about doing that?

Jimmy Jung:

One of the most common one is even though we’ve been collecting data in the student information system, getting the correct data out is always the longest. It’s 90% of the work when you first start financial aid leveraging. Taking out the right data, making sure that the timing of the data is correct to make sure you have the most accurate model and working with financial aid and admissions offices to ask them those questions. “Hey, does this really reflect your admissions of behavior of your students and the financial aid offers are they correct? Is the timing right?” That’s the biggest upfront challenge.

The second piece is less of a technical piece. It’s the sort of campus cultural piece. Financial aid leveraging is not something that an institution goes in to likely because there’s investment, generally an investment of institutional funds. The senior level of the university started to be on board like, “Hey, here’s the risk. We’re offering more aid. We’re expecting this return. This is the model it’s built on. These are the assumptions that we are creating this model for. Getting buy-in from the president, the CFO, and even the VP of marketing, it’s going to be key in terms of a successful leveraging strategy.”

Jarrett Smith:

Mm-hmm (affirmative). There’s so many different types of schools out there and financial aid leveraging can be applied in so many different ways. I know historically financial aid leveraging has been used by private schools. It’s becoming a lot more common in the publics. Can you talk to me a little bit about how the leveraging strategy might change based on some institutional characteristics?

Jimmy Jung:

One of the most interesting part of financial aid leveraging, helping different schools developing financial aid leveraging strategy, especially for me, is that you never know what the data is going to show you. Doing it for over 20 years, there’s no one sort of financial aid leveraging model that fits another one. Our schools are unique. The markets in which they are sort of placed are very unique, right? A financial aid leveraging model shows that, right. Developing these models in the different types of schools, sometimes the same program at one school is not going to yield as good as academic program in another school for many reasons, right. You might not leverage off the same programs. You might not leverage off the same characteristics. Certainly, you have to think about the different rules that exist in terms of leverage strategy.

I think you mentioned public versus private. At a public institution, the leveraging model’s the same, but things you have to keep in mind are particularly different. Different states have different rules about how an institution can use its own aid. For financial aid, got to be sensitive to that. Of course the equity piece, is the model built that it gives everybody a fair chance at the aid of a certain characteristic, right. Of course at a public institution, you have to be politically sensitive about offering aid to out of state and international students. These are some of the additional things to think about in private versus public.

Jarrett Smith:

I want to go back to an interesting point that you made that the data is going to surface things that are unique to that institution that you did not expect. I think that is the value of any type of research that you’re doing, is surfacing something that you did not previously know, shining light on something. When you surface these kinds of insights, I imagine that there are times where the institution is kind of confronted with the truth or a reality that maybe they hadn’t thought of before. Can you talk to maybe some of those things that you’ve observed over the years? Any surprising insights that maybe have come out from any work that you’ve done with the school and kind of the sorts of things they’ve discovered along the way that were a little counterintuitive or unexpected?

Jimmy Jung:

Definitely. I’ll talk about my most recent example. This particular institution wanted to create a financial aid leveraging strategy to attract more freshmen students. In looking at that, we found out they’re doing extremely well in attracting freshmen student. A financial aid leveraging strategy is going to change how they attract freshmen students, right? That tool isn’t for me. Instead, it was one of their graduate programs, which they thought was doing extremely well in terms of leveraging strategy that would have worked better if there’s a change in financial aid strategy. For this institution brought into context like benchmarking, right?

They didn’t think outside of the institution. What is the standard historical yield for a public institution for their freshman class? When they took a look at that, they were like, “Hey, this is a core strength. We’re going to keep an eye on this and work on these graduate programs,” which they could gain a larger market share or more revenue from. That’s something they never considered just because they had this assumption that and what they’re hearing is, “Hey, let’s work on the freshman class.” That gave them more to think about. That gave them options to focus their institutional resources to do something that will have a bigger impact.

Jarrett Smith:

When we talk about leveraging, it’s obviously a very technical topic, but when you’re engaging in that sort of initiative, ideally, you’re going to have stakeholders from a lot of different areas around the school. You’re going to have financial aid at the table, obviously enrollment at the table. Even your institutional leadership marketing maybe at the table. As you engage in financial aid leveraging, does it have the potential to change the way those departments interact? Have you kind of seen it alter the way that those departments work together?

Jimmy Jung:

Oh, absolutely. Best cases of financial aid leveraging works when you get a lot of different departments working hand in hand. Of course the biggest two departments, admissions and financial aid. In traditional terms, admissions generally thinks it’s just as recruitment. Once we got the students to apply and admit it, we’ll hand it off to financial aid and financial aid offices think, “Okay, until they’re admitted or deposited, I’m not going to think about giving them a financial aid offer.” Leveraging works best when these two departments sort of collaborate with each other. “Hey, we’re going to meet the students. They’re going to get a financial aid offer,” but then it goes back to the admissions to maybe engage with the students and ask them the questions. “Hey, did you get a financial aid offer? Do you have any questions? How do you feel about it, right?”

To get the market sort of feedback, right. Because sometimes you make that phone call and it’s like, “Hey, a different institution offered me more and I love to come here, but your offer is less than this other institution.” You bring that feedback back to financial aid to see if there’s anything additional that they could do about it. That type of financial aid leveraging allows for a more market feedback if admissions and financial aid talk to each other. One more piece, which is the insights that you bring back when you’re doing financial aid leveraging changes marketing, right? The institution I just gave an example, for freshmen, we’re actually doing really well. We don’t need additional financial leveraging strategy there. It’s the graduate programs and marketing we’ll switch the focus from marketing potential freshmen students to these graduate programs. That type of feedback loop allows an institution to pivot their resources and allow different departments to really begin communicating and working together to achieve the institutional goals.

Jarrett Smith:

Yeah. That’s a really interesting point, Jimmy. It makes me think that especially so many schools are trying to be smarter and more data-driven about how they approach marketing. This is an interesting source of information and insight. I’m wondering if you can dig in a little more on the sort of broader impact that financial aid leveraging can have though. I mean, it’s certainly an important tool for driving net revenue, but it’s not only an exclusively about maximizing net tuition revenue, is that right?

Jimmy Jung:

Absolutely. That’s where I think financial aid leveraging gets a bad rap. Yes, I think maybe most important outcome, depending on who you’re talking about, who you’re talking with, is the net tuition revenue. It’s a data process, right. How with a lot of variables essentially provides a market demand study. Another way to look at it, it’s a market demand study that allows you to put financial aid on top of it to shift the behavior of students, right? The market piece cannot be discounted because that’s where you get the insights. That’s where an institution learns most about itself and its students it attracts, right? Like the topic we just talked about, how does it drive business process changes between departments. Those insights allows you to look at certain market segments and how they’re doing, right. Because a lot of times those are sometimes more important than the financial aid leveraging part, right?

Here are things that we could change or focus on without investing a lot of money to yield students. Here are some process you change. Do we want to work on that first before we invest a lot of money in to the leveraging part? What doesn’t get told is the times when you look at leveraging. Maybe the financial aid doesn’t get applied yet. It’s the marketing changes that come first because you get very good data about how certain academic programs are doing. They get very good data about whether or not you’re attracting enough students that you want to attract, right? Definitely the process itself is worth going through because it’s a market demand study. The market demand study then sort of flows into this, can that market be impacted by financial aid, right? If the answer’s yes, the outcome is a net tuition revenue, right?

Jarrett Smith:

I do want to talk at least a little bit about some of the criticisms financial aid leveraging has received over the years. For instance, there are those that would say the practice can put certain groups of students at a disadvantage. It could ultimately hurt diversity and access. Obviously that would run counter to the mission of so many schools. How do you think about that? How do you help the schools you work with navigate those issues?

Jimmy Jung:

That’s a great question. A couple of thoughts on it. The first thought is financial aid leveraging is a tool. It’s statistical analysis that tells an institution more about SAF. That’s a way of self reflection, [inaudible 00:19:55] if I was philosophical. It will allow institutions to really take a hard look at what students are looking for in their institution. The results of it is a choice, right? If anything, that’s a tool, whether or not it’s your iPhone or your car, how you choose to use it is going to be key, right? Financial aid leveraging is a big part of that. But the reason I fell in love with financial aid leveraging as a driver to benefit institutions and students at the first institution where I learned this is the president of that institution took a look at the leveraging model and he said, “Jimmy, how do we help inner city, low income students? Because it doesn’t look like our model’s doing enough.”

He made a choice and it was the mission of that school to provide opportunities for these students. He says, “We need to invest more. Your model is telling us that we need to invest more.” He made a choice to do that. But that was only possible because the model showed that these students wasn’t benefiting as much as it should. Financial aid leveraging is a choice, an institutional choice. If you don’t think the model is telling you that it’s gearing towards your mission, you can make these policy decisions to make it so it aligns with your mission.

Jarrett Smith:

That’s such a great point, Jimmy. What I hear you saying is the model is essentially values agnostic. It’s a spreadsheet. It’s a machine learning model. It’s a whatever fancy software package you want to run on it. But at the end of the day, it’s up to the humans running the model to decide how to use it and what they’re going to optimize for.

Jimmy Jung:

It gives institution leadership choices, right? I think that’s a very good thing in terms of planning in terms of making decisions about where your institution is headed and whether or not you’re aligning to your missions of values.

Jarrett Smith:

Well, Jimmy, thank you so much for sharing all of these, your experience and insights about financial aid leveraging over the years. Before we go, I’m wondering if you could just give any sort of parting advice for folks that might be listening to this and considering whether financial aid leveraging might be right for their school. Any advice you might give them?

Jimmy Jung:

Well, if you’re an institution that are looking to become more data-driven, to think about how financial aid is impacting your enrollment more deeply, potentially, right? From a data perspective, from market perspective, then doing the financial aid leveraging process is something that you want to do. It’s a choice, right? First, it’s a market demand study. Taking a look at which students are you attracting and how they are choosing your institution and then leading on the financial aid to see how that has impacted your enrollment in the past. There’re potentially thinking about policies that you might want to change looking into the future. Obviously, I’m a big proponent of financial aid leveraging, especially for institutions taking a data-driven look at themselves, thinking about what we could do to help institutions and students enroll.

Jarrett Smith:

Excellent. Thank you for your time today, Jimmy. I really appreciate it.

Jimmy Jung:

Okay. Thank you, Jarret. Great to be talking to you about this stuff.

Jarrett Smith:

The Higher Ed Marketing Lab is produced by Echo Delta, a full service enrollment marketing agency for colleges and universities of all sizes. To see some of the work we’ve done and how we’ve helped schools just like yours, visit echodelta.co. If you enjoyed this podcast, please subscribe and leave a review on Apple Podcasts. As always, if you have a comment, question, suggestion, or episode idea, feel free to drop us a line at podcast@echodelta.co.