A Grown-Up View of Funding Christian Education
By: Dan Krause
Insanity, defined: Operating the same way, but expecting different results.
My elementary education was at Grace Lutheran School , Fargo , ND . Teachers whose names I remember include Del and Bonnie Stohs, and Mrs. Oliphant. All shared one thing in common -- they earned a salary that qualified them for food stamps. My father was on the School Board, and he railed against this pathetic fact.
Nevertheless, we could afford several cross-country trips in a Winnebago camper he bought. When my father died, he left behind a reasonable estate, but the only thing that Grace got was some of his furniture. (To be fair, I'm sure nobody asked him to donate this way, and he did serve Grace as a volunteer for many years.)
Today my old elementary teachers are my heroes.
Now approaching retirement after serving in Lutheran schools their entire lives, I hope Del and Bonnie were able to put something aside. Because of them, my life was immeasurably changed for the better. I'll be able to put away for my retirement because of the Christian values - hard work, curiosity, and honesty - they instilled in me over 35 years ago.
After 17 years of serving Christian schools, what I now know with certainty is the reason we asked teachers like Del and Bonnie to sacrifice - and tens of thousands others like them - was premised on what is essentially a lie: the economics of Christian schools are such that all we can afford to pay is a minimal salary . That's simply not true!
It's time for a grown-up view about how we pay for the cost of Christian education. All around the country, thoughtful Christian school leaders are asking hard questions about tuition rates and student aid.
For example, we regularly have professionals making $150,000+ per year who send their children to our schools. Ask yourself, why exactly should they not pay 100% of the actual cost to educate their child?
The impetus of this article is an off-hand remark by a medical doctor (annual income - over $200,000) who criticized GraceWorks' proposal to raise tuition to 80% the actual cost to educate his children, because this meant that his higher tuition was in fact subsidizing others.
Be real! He too, was being subsidized, 20% of the "hard costs" of the school!
In fact, his subsidy is much more than that. Not only is there the sacrifice of major donors who paid for the facility his children enjoy rent-free, there is the very real ethical problem of teachers who are paid much, much less than a fair and living wage. They too, believe the lie that their low salary is a necessity for the Christian school to work financially.
Explain it to me again. So you make over $200,000 and it's unfair for us to ask you to now pay 80% of the cost to educate your children, instead of the 60% you are accustomed to? You'd rather that we pay most of our teachers less than $25,000 a year, some less than $20,000? Come again . . . how is that fair?
There's a related question I'd like to ask the good doctor. What exactly is the "case for support" for the school to go to donors who make less income than you do, to ask them to provide the 40% you don't pay? Maybe like you, it's a good thing they really don't understand the weird economics of the typical Christian parochial school.
GraceWorks regularly proposes increasing tuition, and offering liberal scholarships -- funded or not -- to families who clearly cannot afford the full cost of this increased tuition. (This requires a fair, objective, confidential financial aid evaluation by an outside group.)
Just one working day before I heard about the good doctor, a Board Member from another Christian school asked me what to do about high-income parents at their school who now refuse to participate in fundraisers #5 and #6 for this school year, on the grounds that they would much rather pay a higher tuition. (The success of these fundraisers was fundamental to the immediate financial future of the school.)
"How can we motivate them to participate?" he asked. I had, and have, no answer. Do you, dear reader?
Here are some questions I'd like to ask every Christian School Board in the country:
(1) Who should we be raising money for: (A) Families who can afford 100% of the cost to educate a child, or (B) Families who cannot?
(1A) In your current system, who are you presently raising money to subsidize - (A) or (B)?
(2) Is the case for support for raising money for "the pot" a stronger or weaker case than raising money for scholarships for those who truly need it?
(2A) What is your present case for support?
(3) Would it be better to offer a moderate tuition rate, that is too low for some, and still too high for others? Or should we offer a higher tuition rate appropriate for some (or most), and tuition assistance that is fair to all the rest?
(3A) Which option does your tuition / tuition assistance policy currently reflect?
(4) Why should teachers be expected to sacrifice far more than the parents of the children they educate?
(5) Why should higher income people participate in a plethora of volunteer-intensive and expensive fundraisers when they simply would like to pay more tuition?
(6) What would Jesus say about the pride of parents who would rather send their child(ren) to a secular public school than fill out a financial aid application? Who has Jesus called us to serve?
(7) In general, why should the expectation of a Christian school be that it is our right as parents to automatically receive a significantly discounted tuition rate that reflects some fraction of the actual costs of educating the child?
For your own situation, here are some questions as you think through the possibility of raising your tuition to a more real amount, while at the same time dramatically expanding your needs-based student aid:
(1) Fundamentally, how long can you keep going charging 60% or less of your actual costs? How many other organizations do you know who can deliberately plan to make less than their costs - and still have long-term financial viability?
(2) Do parents and donors value long-term financial viability?
(Our experience, in survey after survey, the answer is a resounding YES. For schools that have under-enrolled early grades, it could be that many parents simply do not think you are a good long-term bet.)
It may seem more compassionate to keep tuition low, but such a policy inevitably discourages both potential donors and potential parents. Word gets out - this school is having financial problems. You can only fool some of the people, and just some of the time.
(3) In fundraising, what is your better case for support? Will your present case for support - alleviating ongoing deficits in the proverbial "pot" - allow you to significantly increase your annual fund? Will this case for support motivate major donors?
How can we motivate donors to increase their support when those who are readily able are not paying that which they are capable? (Is this an integrity problem?)
Would you agree with the experience of many Christian schools, that it s much easier to raise significant money for student scholarship / student aid for deserving families? Will this be a stronger case for support for your major donors as well?
(4) In marketing, does it really help you to be the "low price leader" in your market?
If you are judged on the tuition number alone, many prospective parents may assume there are quality issues with your program, or they are in for a lot of fundraisers.
When a prospective parent calls you, consider a more sophisticated way to answer the inevitable tuition question: "Our tuition is comparable to other Christian schools in the area, lower than some, higher than others. However, we have a firm board goal and procedure that no child - from a motivated, qualified family - is denied admission for reasons of finance. When you come and visit with our Principal, we will be glad to explain how this works."
Think about it. The real reasons parents enroll in your school have much more to do with other factors than your current tuition rate. The crux of the matter is whether a prospective parent visits your school -- and what happens during that visit. The point of that first phone call with a prospective parent is to arrange this visit.
A "no child denied admission for reasons of finance" policy provides a systemic, caring, and ministry-minded answer to the "What's your tuition?" question. If we are serious about improving our long-term enrollment prospects, we have to invade the market of people who are presently paying nothing for a less than adequate education at a public school. Your student aid policy provides hope for these parents, enough hope for them to at least darken your door.
(6) My dad would ask - "Is it better to make some money - or no money?" Most of us would agree that, to a limit, some money is better than no money. The limit, of course, is class size. We recommend that every school carefully understand its fixed and variable costs, and from that information, adopt class size limits, which may vary by grade level and availability of teacher aides. This information will also help you determine how many need to be enrolled, and how many on the waiting list in order to split a class.
It is important to remember that the cost to educate a child does vary depending on your enrollment size - often the higher the enrollment, the lower the cost because fixed costs are divided between more students. A higher enrollment closes the gap between tuition and actual costs.
Note that your financial aid / tuition policy does not determine who you accept into your school - that's a separate decision. A lower income family may or may not qualify for enrollment according to other admissions criteria you adopt.
You can also require families to pay a minimum amount, regardless of their financial situation. Your financial aid policy can be a goal, not a guarantee. You can determine how student aid will be given that is unfunded - in essence a discount (although never call it that.) Likewise, you should make clear to all student aid recipients that all available sources of tuition payment (relatives, church) must be pursued.
Here are some examples of how this policy can work out with different parameters.
Example #1
Tuition rate (per child): $3,900
Minimum floor parents must pay: $975
Tuition assistance that must be funded: $975
Amount of student aid that would be unfunded in the worse case scenario: $1950 per student.
Comment: Tuition assistance is offered on a first come, first served basis, $950 at time. In this case, every child in the school will mean at least $1,900 (50%) dollars of revenue. Keep in mind that 50%+ are paying more tuition, plus you have 10 - 15% more students overall. Because you have more students, the actual cost to educate a child is reduced by 5% - 10%, depending upon how many aides and teachers must be added.
Example #2
Tuition rate (per child): $3,900
Minimum floor parents must pay: $975
Actual amount this particular family is able to pay per financial assessment analysis: $1,500
Tuition assistance that must be funded: $525
Amount of student aid school is willing to allow unfunded: $1950.
Comment: This is the same tuition assistance policy, but points out that the funded scholarship portion is reduced by the amount parents pay. This student can be enrolled in the school at a cost to the scholarship fund of $525, compared to $975 in Example #1.
Note that the balance of scholarship funding can be awarded to various parents on the first day of school - it does not just "sit" in some untouchable fund.
Example #3
Tuition rate (per child): $3,900
Minimum floor parents must pay: $1,300
Tuition Assistance that must be funded: $1,300
Amount of student aid school is willing to allow unfunded: $1,300.
Comment: In this different procedure, two-thirds ($2,600) of the actual tuition must be funded. On the surface this seems like a better policy for the school, but it does require more scholarship fundraising. It carries the risk that more families will be turned away from the school because tuition assistance funds have run dry. It also might be more difficult for some lower-income families to pay the additional $400. Those who can afford the higher tuition will do so.
Example #4
Tuition rate (per child): $3,900
Minimum floor parents must pay: $1,300
Tuition assistance that must be funded: $1,300
Actual amount this particular family is able to pay per financial needs assessment: $3,800
Actual amount the Tuition Assistance fund pays: $0. (none).
Amount of (unfunded) student aid awarded to the family: $100.
Comment: Note that as in Example #2, the school's tuition assistance fund pays the net between $2,600 and whatever parents are required to pay -- $1,300 is the minimum, but the assessment could come back at $1,800, $2,000, or whatever. In Example 4 if this amount is higher than the $2,600, or the $1,950 in Examples #1 and #2, then parents simply pay it, and the tuition assistance fund is not impacted at all.
Of course, the goal is to raise enough money for tuition assistance that no unfunded student aid is given. With fundraising efforts focused on student aid, you have a stronger case for support, and more opportunity to be creative in your fundraising efforts.
Concluding Thoughts
Perhaps the most eye-opening questions you can ask your parents on a confidential survey are:
(1) What is your current household income?
(2) To what extent tuition is a factor in their decision to enroll?
(3) Would you prefer a philosophy of higher tuition and less fundraisers, or vice versa?
GraceWorks' experience is that Principals and Administrators consistently under-estimate how much their parents really make. This is a selective perception problem, because the well-to-do among us are not apt to go to a Principal and suggest a price increase might be helpful.
Instead, Principals hear from the lower and middle income people who struggle to make ends meet - and assume that is the situation for practically all.
In the end, you have to ask yourself which is the more fair policy - subsidizing the cost of education for those who can afford to pay, or subsidizing the cost of education for those who cannot?
Realize it or not, like it or not, we do answer that question by how we structure tuition and student aid policies.
Dan Krause is the president of GraceWorks Ministries. He has an extensive fundraising and marketing background with Christian schools, churches and ministries.
