Competition for college-bound students is fierce. In Demographics and the Demand for Higher Education, Nathan Grawe estimates a 15% decline in college-going students between 2025 and 2029.
No longer will schools be able to send 500 students with past due balances to collections and easily recruit 500 more to replace them. To maintain enrollment and revenue, schools will soon need to focus efforts on both the front end (recruitment and enrollment) and even more so on the back end (retention).
Sending Students to Collections is Costly
When a student falls behind on payments, your first instinct is to attempt to recover the money you’re owed and suspend services those dollars usually cover to that student – even if you know you may eventually write off the balance as a tax deduction, in a worst-case scenario. The reality is, this approach could pose a great long-term cost to your institution.
There are three main ways you lose money when you send a student to collections:
- Loss of the past due amount owed: While this can be a substantial sum, it’s often as low as just a few hundred dollars. However, the loss of potential dollars doesn’t end there.
- Loss of future tuition dollars: If a student can’t continue their education because of a past due balance, the school misses out on the rest of the tuition dollars they would have received until graduation – potentially tens of thousands of dollars.
- Incurred cost of recruiting new students: Most schools spend an average of $2,000-4,000 to recruit the new student that would replace the one that dropped out due to delinquency.
Retaining High-Value Students Through Analytics
So how can a school’s business office use analytics to aid in retention? One way is to cross-reference past-due balances with other factors that might affect a student’s likelihood to stay enrolled. This might include:
- Their past due balance and payment history
- Grades/academic performance
- Demographics and location
- Extracurricular involvement
- Good student citizenship (ex. a lack of disciplinary history in their dorm)
Passing this information to the enrollment office can help them prioritize and put together financial aid packages for the students with lower past due balances and a high likelihood to stay enrolled.
While doing all this cross-referencing manually can be a laborious and time-consuming process, it’s one that can pay dividends in the long term. Technology partners like ECSI are actively developing ways to automate these analytics and share them via customizable dashboards. A prime example of this is ECSI’s RecoverySelect Score Card - a newly-rolled-out tool providing schools with a snapshot of how their accounts are performing and what money is coming back to them. Tools such as these will ultimately take much of the burden of the business office.
Applying Analytics Proactively
Analytics can also help the enrollment office prevent students from ever entering into past-due status. If the school observes a pattern of past due accounts from students with similar backgrounds – for example, from the same high school – they can offer a slightly better financial aid package to those students from the start. That additional upfront investment will ultimately save the business and enrollment offices the eventual headache of having to collect on past-due balances to begin with.
Taking a Closer Look at the Numbers
The idea of providing more financial aid to students as a revenue generation tool sounds counterintuitive, but the math speaks for itself. Consider this example:
A school’s tuition rate is $15,000 per semester. They currently have 10 students who are each holding a past due balance of around $1,000. Upon looking closer at the specific situations of those 10 students, the school learns that 8 of them have excellent grades and are making good academic progress toward graduation.
If the school can find a way to give those 10 students just an extra $1,000 in their financial aid packages, it will only cost the school a total of $8,000. The tuition they gain from these students staying enrolled for the next semester is $120,000.
That’s a net $112,000 in saved revenue just in one semester.