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Outsourcing Financial Aid Operations

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This fall has seen unprecedented strain on financial aid offices at many institutions. Financial aid offices at colleges that are experiencing rising enrollment as well as increased percentages of the student population seeking financial aid find themselves facing:

  • High inbound call volume (especially at peak times)
  • Longer lines as students unable to get through by phone visit the office in person
  • A bottleneck in staff time and resources with the verification process, as the US Department of Education is selecting more financial aid reports to be verified

This strain comes at a time of tight budgets, when most financial aid directors are not able to add staff or other resources. Once these bottlenecks begin to result in deterioration of service, this situation makes outsourcing your call center or your verification process an attractive option. But it is critical to outsource to the right contractor and with the right oversight in place.

We turned to Dewey Knight, associate director of financial aid at the University of Mississippi, for his advice on due diligence in outsourcing financial aid operations.

Making the Decision to Outsource

"I am a big believer in outsourcing financial aid functions when that contributes to a better experience for students and parents," Knight advises. "But you have to do it right." In your after-action analysis after each a peak season, as you sort through the problems that occurred and analyze with were systemic and which you can address through your existing resources, there are questions that need to be asked:

  • What are your desired benchmarks for the level of service you need to provide to students?
  • What are the hidden costs of falling below your benchmarks? (for example, though difficult to quantify, your level of customer service may have an impact on yield and retention)
  • Are you able to deliver that level of service for the same expense it would cost you to outsource to a third-party contractor?
  • If you outsource, are you prepared to invest time and resources not only in training their staff but also in monitoring their performance closely?

Selecting a Contractor

"When we outsource the call center," Knight cautions, "we're outsourcing a critical function, and we're also outsourcing our good name. We have spent 162 years building a good name for our institution and how we treat our students and our constituents. The wrong contractor can undo that very quickly. They may be the first impression a prospective student or parent has of your institution, so you want to have your A-Team out there."

It is so important to vet contractors with other institutions; find out what experience other institutions have had. In the RFP for any outsource, require not only that the contractor has worked with like institutions for at least 3 years, but that they provide you with 5-10 specific references.

Dewey Knight, U of Mississippi

"You can't afford to not have the most complete information possible about that contractor," Knight remarks.

Knight also recommends revisiting the marketplace frequently. Some states allow public institutions to go for a period of several years without a bid, but Knight suggests re-evaluating your options in 2-year intervals at the most. More contractors for these services are entering the market, pricing is becoming increasingly competitive, and higher education remains an attractive customer in this market.

Set Specific Metrics in the Contract

"Make sure your contract identified very specific, very tight metrics for quality, benchmarks for the level of service that must be achieved," Knight suggests. For example, if you are outsourcing your call center, you could ensure that the third party has a contractual obligation to meet certain quantitative metrics:

  • An ASA (average seconds to answer) between 5-10 seconds
  • Maximum caller abandon rates (e.g., below 5% in peak, below 2% normally)

If you are outsourcing the verification process, you might set metrics for:

  • Number of days to complete the process
  • Number of follow-ups with students
  • Frequency of follow-up with students

Knight also recommends setting the expectation of a weekly call with the contractor to review performance and debrief.

Manage the "People Side" of the Relationship

Knight emphasizes that it is critical to your success to engage your contractor not just as a service provider but as a partner. For example, if you outsource your call center, you'll see the best results if you treat the staff at the phones -- who will be representing your institution to prospective students, current students, and parents of prospective students -- as members of your team. "Get to know not just the management but also the agents," Knight advises. "Convey how important they are to your operation and how much you value and depend on them. These people will be your institution to your inbound callers. You'll want them to develop a personal connection with your institution, to cultivate passion and pride in what they’re doing. You want them to approach their jobs thinking, 'the University is depending on us.'"

Besides bringing both management and agents to campus periodically, Knight also visits the provider's location twice a year and devotes 3-4 days on site to developing and improving relationships with key personnel at that organization. Beyond these visits, and in part because the University of Mississippi prides itself in a "personal touch," Knight strives to keep those staff engaged. The financial aid office sends them branded t-shirts, buys them pizza, and sends them information about campus events. Especially, make sure those ground-level staff understand your institution's philosophy and your approach to customer service -- what service you want to provide and how you want it to be provided.

"The agents should know who your director of financial aid is," Knight advises. "I know most of them by name, and they know me."

 

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About the Authors

Daniel Fusch, Director of Publications & Research

Daniel provides strategic direction and content for AI’s electronic publication Higher Ed Impact, including market research and interviews with leading subject matter experts on critical issues. Since the publication’s launch in 2009, Daniel has written more than 200 articles on strategic issues ranging from student recruitment and retention to development and capital planning. If you have a question or a comment about this article, feel free to contact Daniel at daniel@academicimpressions.com.