Enrollment Leaders – If You Aren’t Considering Retention, You’re Doing it Wrong

Scholarships play a vital role in attracting talented students to universities, but their impact extends far beyond enrollment numbers and new net student revenue. For universities, considering student retention when optimizing scholarships is not just about ensuring a stable student population; it's about fostering a supportive environment that promotes student success, enhancing institutional reputation, and ultimately boosting long-term revenue. In this article, we partnered with CFO Colleague to explore why student retention should be a key consideration in scholarship optimization strategies and how it can impact various aspects of a university's operations and reputation.

1. Long-Term Revenue Impact

Over and over, we hear from university leaders that they are stuck in a cycle of increasing scholarships, essentially paying to enroll new students. They are seeing diminishing returns on this investment where offering larger scholarships have less of an impact on enrollment each year. Especially when tuition rates are increased at an unsustainable rate longer-term. It is time for a new approach and a more holistic view.

How should we define return on investment (ROI) when setting new student scholarship strategies, particularly over the whole lifecycle of a student?

The most tangible metric of ROI is each student’s net tuition revenue over the four to five years it takes them to graduate. I.e. how much money it takes to both enroll and retain the most students over the longest period of time. When students persist and complete their degrees, they contribute to the university's revenue stream for a longer period. This seems obvious, but most admissions and enrollment offices only assess first year net revenue per student when making scholarship strategy decisions. Let alone considering housing policies and what revenue will be maintained when students live off campus.

According to a study by the Association of Public and Land-grant Universities, each percentage point increase in student retention can lead to a significant increase in tuition revenue over the long term. This is particularly important in today's higher education landscape, where universities face financial pressures due to declining enrollment and increased competition.

2. Early Student Success

The out-of-pocket cost to students is typically the top predictor of student enrollment. A lower out-of-pocket cost for a given student typically indicates a higher likelihood of enrolling. Though this relationship is rarely linear and there are always price ranges to optimize awards and increase enrollment and net revenue per student.

Unfortunately, when left unchecked, this concept can go in the opposite direction as well. When offering broader or larger value scholarships to more students and reducing the student’s out-of-pocket cost, enrollment yield rates may increase, but this may attract more academically underprepared students. The personal risk to students as well as the financial risk to the university has the potential to get out of hand quickly. When making scholarship decisions, the impact to individual student success and whether the university has the resources to support potentially academically underprepared students should be evaluated. A well-optimized scholarship program should consider not only initial enrollment but also retention, resulting in higher graduation rates, which is a key indicator of institutional success and quality.

3. Graduation Rates and Late Departure Students

There is a huge gap in research around why students drop out later in their academic career. Our research at SightLine revealed that as students get closer to graduation, financial factors have a more significant impact on drop-out risk. Collaboration between student success teams and the financial aid office may be an important piece of the puzzle to reducing late departures and ultimately increasing graduation rates.

Research published in the Journal of Student Financial Aid suggests that scholarships aimed at retention efforts, such as scholarships tied to academic performance or progress towards degree completion, can have a particularly positive impact on student outcomes. These findings underscore the importance of aligning scholarship strategies with retention goals to maximize their effectiveness.

4. University Public Perception and Value

Student retention is closely tied to a university's public perception and value. High retention rates signal to prospective students, parents, and the community at large that the university is committed to student success and provides a supportive environment for learning.

Additionally, retained students are more likely to become engaged alumni who contribute back to their alma mater through donations and support. A positive experience during their student years, facilitated in part by well-considered scholarship programs, can lead to a stronger affinity for the university, translating into increased donations and long-term financial support.

This positive perception can enhance the university's reputation and attractiveness to future students, creating a cycle of continued enrollment and retention success. This is a worthwhile investment!

Considering student retention when optimizing scholarships is crucial for universities looking to enhance long-term net revenue, student success, and public perception. By strategically allocating scholarship funds to not only attract but also retain students, universities can create a more stable and successful learning environment that benefits both students and the institution as a whole. Investing in student retention is not just about numbers; it's about investing in the future of the university and its students. Universities should partner with predictive analytics and enrollment providers that understand this big picture and can deliver innovative solutions to make it a reality.