Financial Aid Part 1: Determining Policies, Procedures, & the Boards Role

Finance

Mar 5

Written By

BY SUSAN LAIR, Phd - CONSULTANT, Executive Coach

"To give away money is an easy matter and in any man's power. But to decide to whom to give it, how large and when, and for what purpose and how, is neither in every man's power nor an easy matter. Hence, such excellence is rare, praiseworthy, and noble."
- Aristotle

Let's be clear. The primary responsibility for financing a student's private school education rests with the child's parents. Further, there is a fundamental difference between financial needs and lifestyle choices. Schools must recognize the distinction between the two and make informed decisions regarding financial aid. Still, private school financial assistance ensures mission-aligned students have access to a quality education regardless of their economic circumstances. A clear and consistent Financial Aid Program can assist schools in fulfilling their mission and improving financial sustainability.

SO, WHAT IS THE PURPOSE OF FINANCIAL AID?

Mission and Values: Most private schools' missions and values center around providing a quality education to a diverse student population. Offering financial aid aligns with these values by providing opportunities for mission-aligned students who might otherwise be unable to afford tuition.

Maximize Revenue: Schools function best when enrollment is close to capacity. By providing financial aid to need-based students, schools receive revenue for otherwise empty seats. A well-managed financial aid program strengthens marketing, provides avenues for engaging donors, enhances grant proposal acceptances, and maximizes the amount of tuition paid by the greatest number of students.

Diversity and Inclusivity: Most private schools strive to create diverse and inclusive learning environments. Financial aid programs help attract students from different socioeconomic backgrounds, enriching the student body with various perspectives and experiences.

Long-term Benefits: Financial aid can provide long-term benefits for the school and society as a whole—the school benefits by maintaining enrollment near capacity, engaging donors in a worthy cause, and capturing revenue otherwise left behind. Students who receive a private school education through financial aid are better equipped to succeed academically and professionally.

BOARD RESPONSIBILITIES

Overall, the Board's responsibility regarding financial aid is to ensure that the school provides accessible and equitable student opportunities while maintaining the school's economic sustainability and integrity.

Policy Creation and Oversight: The Board creates and oversees the school's financial aid policies. This includes determining eligibility criteria, award procedures, and budget allocations for the financial aid program.
Budget Approval: The Board approves the school's overall operating and capital budgets, including funds allocated for financial aid. Most importantly, the Board ensures the source of the budget that supports the financial aid program.
Funding Sources: Boards often participate in fundraising efforts to support financial aid programs. These efforts include donor engagement, grant applications, and other fundraising efforts to increase the financial resources available for aid.
Accreditation Compliance and Legal Obligations: The Board ensures that the school's financial aid policies comply with accreditation standards and relevant laws and regulations. They also oversee the adherence to ethical standards in the program's administration.
Review and Evaluation: The Board is responsible for periodic review of the financial aid program to ensure its effectiveness and alignment with the school's mission and goals. They may evaluate the impact of financial aid on enrollment, diversity, and student outcomes.
Transparency and Accountability: The Board ensures transparency of the financial aid program by assuring communication of policies and procedures to the school community, including school families, faculty, and staff. They also hold the school's administration accountable for the fair and equitable distribution of the funds allocated to financial aid.

QUESTIONS THE BOARD SHOULD ASK

How should the total amount allocated to financial aid be determined?
What are the financial aid budget sources, and how will the line item be maintained?
How will the total allocated amount provide financial aid to current and newly enrolled students?
How should the financial aid budget change with tuition increases?
At what age or grade should the school’s financial aid begin?
What are the financial aid program's stated goals?
How does the Board impact the enrollment of mission-aligned, need-based students?
What are the financial aid program's stated policies and procedures? Will there be a maximum award?
Have accepted new students been unable to enroll because they could not afford the school?
In what ways should financial aid enhance a diverse socioeconomic student body?
In what ways does the presence of faculty children enhance the school?
What mechanisms are in place that assure the Board that awards are calculated fairly and consistently?

POLICIES AND PROCEDURES AREAS TO CONSIDER

When developing financial aid policies and procedures, several factors should be considered.

Eligibility Criteria: Clearly define the criteria that determine eligibility, such as family size, household income, household expenditures, verification such as Internal Revenue documents, cost of living for a particular geographic area, and exceptional circumstances.
Application Process: The application process should be accessible to all families seeking financial support. This may include an online application portal, required documents (tax returns), and deadlines for submission.
Privacy and Confidentiality: Financial aid policies should include a mechanism that safeguards the confidentiality of applicants and sensitive financial information provided by families. Ensure compliance with relevant privacy laws such as the Family Educational Rights and Privacy Act, FERPA.
Financial Need Assessment: Care should be taken to ensure a fair and objective process for assessing financial needs based on the information provided in the application and knowledge gleaned from public information or lifestyle choices. Most schools use a third-party assessment service, such as SSS and FAST, to calculate needs.
Award Determination: Establish clear guidelines for awarding financial aid based on demonstrated need. Determine procedures for budgetary constraints, divorced families, single parents, unemployed parents, faculty parents, multiple children in a family, etc.
Communication and Transparency: Care should be taken to provide policies and procedures and ways to ask questions and seek assistance about the financial aid program to current and prospective families through the school's website, admissions materials, handbooks, newsletters, and other forms of communication.
Appeals Process: Determine a formal appeals process with clear guidelines and timelines for submission to appeal financial aid decisions in cases of extenuating circumstances or errors in the application process.
Renewal Process: Determine annual procedures for renewing financial aid awards, including eligibility requirements, application process, and criteria for awards.
Lawful Compliance: Ensure compliance with relevant laws and regulations governing financial aid, such as non-discrimination and tax regulations. Include Financial Aid in the Board's Record Retention and Destruction Policy. Maintain accurate records of the process used and the award given.

Committee Selection, Training, and Support: Provide parameters for selection, training, and support of the Financial Aid Committee and any school staff involved in the financial aid process, including the admissions and business offices and administrative staff, to ensure privacy, confidentiality, and knowledge of policies, procedures, and best practices.