FastStats 2016: The Rising Cost of Independent School Tuition
Wednesday, February 17, 2016
Posted by: Christina Mimms
By: Jeffrey Mitchell, Head of School, Currey Ingram Academy, Brentwood, TN
Published: February 2016
It is the season that independent schools set their tuition for the next school year. Setting tuition is perhaps the most important enrollment management decision an independent school makes.
It is common knowledge among independent school heads (and parents) that the cost of an independent school education has increased at a significant clip over the past 20 years. In this FastStats, I will assess just how sharply tuition and fees have risen in both NAIS and SAIS schools by comparing actual per student tuition and fee increases versus increases that might be expected due to inflation.
Figure 1 shows the median (per student) gross tuition and fees over the past 20 years for both NAIS (blue lines) and SAIS (red lines) schools. The solid lines represent the actual amounts, and the dashed lines represent a 2.23% increase, the average annual rate of inflation since 1995. What can clearly be seen from the gap between the solid blue line and the dashed blue line and the solid red line and the dashed red line is that actual gross tuition and fee increases in NAIS and SAIS schools have far outstripped what one might expect due to inflation alone. The median gross tuition and fees in 1995 in NAIS schools was $9,419 by 2015. It rose by a factor of 2.5 to $23,722. For SAIS schools the median gross tuition and fees was $6,228 in 1995 and $17,090 in 2015, representing an even larger 2.74 increase. (Although median SAIS tuition and fees remain much less than for the NAIS, as a whole.) If gross tuition and fees had increased in line with inflation (a factor of 1.55), the 2015-2016 median NAIS tuition and fees would be $14,642 and the median SAIS tuition and fees would be $9,681.
Figure 2 shows the median (per student) net tuition and fees over the past 20 years for both NAIS (blue lines) and SAIS (red lines) schools. Figure 2 is similar, but not identical, to Figure 1. The median net tuition and fees in 1995 in NAIS schools was $8,460. By 2015, it rose by a factor of 2.31 to $19,571. For SAIS schools, the median net tuition and fees was $5,912 in 1995 and $14,160 in 2015, representing an increase by a factor of 2.39. It is interesting to note that increases in net tuition and fees are not quite as strong as increases in gross tuition and fees, likely reflecting the increased use of the various forms of tuition reductions, especially from 2005-2010 (as the solid lines in Figure 2 depict). That is, proportionally, more money is being directed towards tuition reductions, such as financial aid and tuition remission.
A question one might ask is whether the largest expense line(s) in most every independent school’s budget (compensation) parallels the increase in tuition and fees. In short, can we gauge whether the hyper-inflationary revenue that has come into our schools via tuition and fees is paralleled by hyper-inflationary compensation increases for our people? That is, where is the beyond-inflation revenue going?
Figure 3 shows solid well-beyond-inflation increases in the per student (read as per contract) median amount an independent school employee is compensated. This represents both salary and benefits.
The median per student compensation in 1995 in NAIS schools was $6,904. By 2015, it rose by a factor of 2.33 to $16,063. For SAIS schools, the median per student compensation was $4,802 in 1995 and $11,545 in 2015, representing a 2.40 increase. The immediate, and seemingly easy, conclusion to be drawn from this analysis is that independent schools have used the enhanced revenue streams in the past 20 years to compensate their employees equally well. I believe a more accurate explanation is more nuanced. For example, does this mean we have increased (beyond inflation ... say by a factor of 2.4) the salaries of our staff, especially our largest staffing category ... teachers?
In a previous FastStats from April 2015 (see Figure 4), it was shown that the median salaries of teachers, after being adjusted for inflation, have seen very modest increases.
Thus, if increases to faculty compensation only explain a small portion of the beyond inflation increases to compensation, what might explain the rest? In a nutshell, this points to a higher volume of employees and a higher volume of employees who have a larger compensation package than the typical teacher. In a previous FastStats on staffing ratios, I demonstrated that among the several staffing categories (i.e., faculty, other instructional, administrative, administrators) typical of independent schools, increases in ratios have occurred in all of them. However, the increases with teacher-to-student ratios have been very modest, whereas the increases with administrative staff to student ratios have been more significant. In short, we have a larger number of administrative people in our schools and also a larger proportion of our collective staffs are administrators who, by the nature of their jobs, tend to be compensated better than faculty and staff. Thus, the per-employee median amount is impacted.
I think the findings of this FastStats reflect competitive responses to the independent school marketplace. For example, the world is “flattening,” and we need to educate our students to be global citizens, thus a position or department is created. The head of school understandably thinks it is wise to enhance communication and the working partnership with parent organizations by creating a liaison officer position. Curricula is our bread and butter, so it makes sense to hire experts as curriculum and accreditation coordinators. Tragic events in the past 20 years make the hiring of security personnel commonplace. Financial aid has become an increasingly important and sensitive issue, thus financial aid specialists are needed. Perhaps most influential of all, with the need to harness and stay on the leading edge of technology, most schools have hired a healthy number of technology personnel.
The take-away from this FastStats is to determine whether and how the data presented and the general statements made about trends for tuition and fees impact the strategic conversations in your school, like the one you just had or are about to have with your Board about setting tuition. For example, has your median tuition and fees increased well beyond inflation? What about net tuition and fees and the impact of tuition deductions? Finally, if your school is typical of most, where are the beyond inflation increases in revenue being directed? Has staffing in high-compensation categories increased? If so, in the “new normal” era, what are the “must-have” positions?