Financial Aid Leveraging Comes to Baylor
Now that Baylor officials had vanquished the fundamentalist threat and overturned the dancing ban, they turned their attention to changing how the university recruited students. Like many colleges seeking to raise their stature by rising up the U.S. News rankings, Baylor in 1997 hired the private enrollment management consulting firm Noel Levitz to help bring the university’s student recruiting practices into the modern era.1
Up to this point, Baylor had not been particularly strategic in seeking prospective students. Students applied, and the admissions office picked out the best applicants. All applicants received a similar amount of attention from admissions officers. Stan Madden, who became the admissions director shortly before the university turned to Noel Levitz, told The Chronicle of Higher Education that previously the admissions office pretty much “just mail[ed] everything out and hope[d] for the best.”2
The consultants’ first task was to create a predictive analytics system that would help Baylor identify “red-hot” prospects: the best students who were likely to enroll, if pursued.3 The system would rank prospective students, using data that the university had collected about them. Top scores went to high-achieving students from affluent families who had exhibited interest in the school by visiting the campus more than once and who lived in communities that had sent a lot of students to Baylor. The university’s admissions staff would then focus predominantly on wooing these students.4
In the course of their work, the consultants concluded that Baylor was not using its institutional financial aid effectively to attract top prospects. The university already awarded some non-need-based aid to try to bring in better students. However, the biggest merit aid awards were going to students who appealed their aid packages and asked the university to match aid offers from other colleges. The result was that “Baylor ‘had given away the farm’ to some mediocre students who were adept at negotiating with the financial aid office, while stronger students ended up with less-generous offers and chose to attend college elsewhere,” The Chronicle reported.5
Instead, the consultants suggested that Baylor use financial aid leveraging to boost its net revenue and rankings.6 Enrollment managers use financial aid leveraging to determine the precise price points that it will take to enroll different groups of students without spending a dollar more than needed. At selective colleges, the largest discounts go to the students they want the most: typically, the best applicants, and those who otherwise can pay full freight and help boost the institutional bottom line.
In his book The Debt Trap, The Wall Street Journal’s Josh Mitchell explains the role that the enrollment management companies play in financial aid leveraging:
Firms like Ruffalo Noel Levitz helps schools determine how much to discount for each student to make as much money as possible overall. The firms use hundreds of variables—including race, home address, SAT scores, parental education level, and wealth, and even how many times the student visited campus during recruiting—to gauge each student’s “price sensitivity.” That phrase refers to how much his or her family might be willing and able to pay. The firms study the behavior of the past three years of freshman classes and then suggest, down to the dollar, what the school should charge students of different characteristics.7
Working with Noel Levitz, Baylor began to leverage its aid and was pleased with the initial results. Enrollments were up, incoming students’ SAT scores were on the rise, and so was net revenue. The amount of aid that Baylor was offering “may not be as much as students want,” Madden, Baylor’s then-admissions director, told The Chronicle. “But it’s often enough to get them here.”8
In adopting financial aid leveraging, Baylor increased the amount of non-need-based aid it was awarding. In 2000, the university gave out about $13 million to non-needy students, the thirty-first highest among selective colleges that year in terms of merit aid. About one-third of first-year students received an average non-need-based aid award of $5,500 each.9
Citations
- Gose, “Colleges Turn to Consultants,” source.
- Gose, “Colleges Turn to Consultants,” source.
- Gose, “Colleges Turn to Consultants,” source.
- Gose, “Colleges Turn to Consultants,” source.
- Gose, “Colleges Turn to Consultants,” source.
- Gose, “Colleges Turn to Consultants,” source.
- Josh Mitchell, The Debt Trap: How Student Loans Became a National Catastrophe (Simon & Schuster, 2021), 179.
- Gose, “Colleges Turn to Consultants,” source.
- Data on Baylor’s yearly spending on non-need-based aid and on the share of freshmen receiving these awards comes from an annual survey that the college guidebook publisher Peterson’s conducts of colleges and universities. New America licensed data from Peterson’s “Undergraduate Financial Aid and Undergraduate Databases,” 2024.