How Institutions Can Use Financial Aid to Drive Student Retention
The perpetual challenges associated with improving student enrollment and retention in higher education are being exacerbated by today’s economic climate. Financial concerns tend to be a top factor in a student’s ability to persist and continue their education, which means that institutions need to prioritize their ability to offer accurate and timely financial aid packages. In doing so, they may improve their odds of increasing the number of students who return year after year, supporting positive student outcomes in the long term, and generating tuition revenue dollars for the sustainability of the institution.
Institutions need to set aside the assumption that all sophomores will return to campus after their first year at college. The National Student Clearinghouse revealed in a study that the average retention rate, or percentage of students who return to the same institution for another second year, was below 62 percent in 2018. The report also revealed that for nine years leading up to 2017, roughly one in every eight students who started college in any fall term transferred to a different institution by the following fall.
Incentivizing Student Return by Way of Financial Aid
Student retention is a critical component in a higher education institution’s survival. Not only does retaining students keep an institution’s student demographic robust and supportive of growth, but it is also generally more cost-effective to retain a student than it is to enroll a new student. There are many reasons for this, including the costs tied into attracting and bringing in prospective students through marketing and recruitment, as opposed to maintaining and nurturing relationships with existing students.
But enrolling and retaining students is no easy task, especially in today’s economy. In many cases, the top reason why students do not remain at an institution beyond their first year is because of finances and the increasing costs associated with getting a higher education. One way to combat this challenge is for institutions to offer financial aid as a means to help returning students address monetary concerns. Financial aid packages should incentivize individuals to continue their education.
Institutions that can make the financial aid process easier, faster, and less daunting will likely experience more success with retaining existing students. Institutions can also personalize financial aid to improve retention rates.
Delivering targeted financial aid strategies to students who have the highest unmet need, or the amount of money that a student is responsible for paying after receiving financial aid, may help institutions experience better retention rates. Often, it is the students with the highest unmet need that do not return to an institution the following year. By identifying financially at-risk students, such as those with high unmet needs, decision-makers may be able to implement intervention strategies via incentives or financial aid counseling, to improve retention.
Incentivizing returning students with rewarding and relevant financial aid packages can also help institutions improve retention and decrease attrition. Students with high GPAs or those who participate in campus activities may be good recipients of unique financial aid offers. Or institutions can reward students who meet with faculty and advisors.
While the approaches can vary, institutions have an opportunity to use financial aid to improve student retention and enrollment. Institutions have large volumes of student data they can use to deliver accurate, relevant financial aid offers, which may help students to see beyond the financial roadblocks that prevent them from returning to campus.
In today’s technology-driven world, higher education institutions must leverage modern financial aid software that can capture data and help design relevant communications around personas and outcomes. Jenzabar Financial Aid can give institutions the means to improve their financial aid strategies to achieve enrollment and retention goals.
