Measure of Grace: A Different Approach to Tuition and Persistence

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With their new “Measure of Grace” initiative, Grace College is working to keep their undergraduate degrees affordable and incentivize student persistence and completion. A few years ago, the college began offering the option to complete all of their bachelor’s degrees as three-year degrees. Now, with “Measure of Grace,” the college is:

  • Reducing the Fall 2015 tuition rate by 9% (compared to Fall 2014)
  • Committing that, starting in Fall 2015, students who remain continuously enrolled will never see their tuition increase above the tuition rate of their first term
  • Offering continuously enrolled students further reductions in tuition (a reduction $500 in the sophomore year, an additional $500 in the junior year, and $500 more in the senior year)
  • Providing free textbook rental (excluding consumable workbooks), with textbooks delivered to the students’ dorm rooms (at an estimated cost of $1200/year in textbooks, this would save each student an estimated $4,800 over the course of a four-year degree)

“We could have just reduced tuition to increase our competitiveness and increase enrollment,” Cindy Sisson, Grace College’s vice president of enrollment, notes, “but we also wanted to reward students for persisting. In fact, the students who came in last fall will get the $500 reduction this coming fall, and the free textbook rentals.”

Grace College already has a tradition of high persistence, with 81% freshman-to-sophomore retention in 2014, reflecting recent gains from their three-year degree initiative.

A Closer Look at Grace College’s Tuition Model

We asked Cindy Sisson about the economics of the new tuition model. She suggests that while there is definitely a cost involved in these tuition reductions, Grace College hopes this will be offset by:

  • Gains in net tuition revenue due to increased retention rate
  • Increased new student enrollment, as both the three-year degree initiative and the “Measure of Grace” initiative place the institution in a more competitive position in its marketplace

At Academic Impressions, what strikes us about Grace College’s model is that (a) it allows the institution to better serve its mission in keeping a faith-based, private education affordable for students, (b) it is a risk, a calculated and creative risk—and intelligent risk-taking is increasingly going to becoming vital to those institutions that will thrive in the twenty-first century; and (c) Grace College appears to have developed their new tuition model with some rigorous and disciplined financial planning and predictive modeling.

Grace College has been researching possibilities for their new tuition model since 2009, and the budget modeling needed was elaborate. They approached the initiative with the readiness to take a risk, but devoted the time needed to do it right. “I had to look at models that compared our best estimate of the final cost to students in a given year to our best estimate of the final cost to students at competing institutions in that future year,” Sisson recalls. “We hadn’t really had to do that before.”

Will it Work?

Rather than adjust the discount rate, Grace College has opted to keep their published financial aid unchanged, and they have not made any resource trade-offs in terms of personnel; they are counting on the new model leading to increased yield and increased retention. The idea is that a strong financial aid package and locked-in tuition with annual rebates will make Grace College even more attractive to prospective students.

It’s not just a shot in the dark; Grace College has been seeing a rise in application, yield, and persistence numbers since implementing their three-year degree option. Now they are hopeful that “Measure of Grace” will accelerate those increases.

Looking ahead to Fall 2015, Sisson notes that the applications are up 16%, the acceptance pool is up 12%, and the deposits are up almost 25%. Anecdotally, Sisson is hearing an extremely positive feedback from prospective students and an unprecedented number of calls from parents wanting to hear more.

Strengthening the Enrollment Management and Finance Partnership

The other thing that is a little rare about Grace College’s approach to planning their new tuition initiative is the extent of partnership required between enrollment management and the CFO. At Academic Impressions, when we ran our 2013 survey of chief enrollment officers – with over 200 responding to the survey from a diversity of institutions – we found that CFOs and enrollment managers who work closely together to calculate net tuition revenue remain a rarity. You can read the findings from that survey in our free report From Enrollment to Net Tuition Revenue: Where CEMs and CFOs Need to Focus.

Reflecting on the past several years of research and planning, Sisson notes, “The close work this modeling required, the collaboration between me and our vice president of finance, looking closely at enrollment and financial aid projections, absolutely strengthened our relationship.”

Looking Ahead

Grace College’s blend of the art of risk-taking with the science of careful budgeting is appealing. They are a college that we recommend watching closely, and we’re intrigued to see whether their model proves successful.

What conversations need to be happening at your institution? Are you looking at alternative tuition models? Are you looking to manage your discount rate?