by Tim Williams, SCSBC Director of Finance ◊
This is the time of year when school boards should be setting their tuition fees for the upcoming 2013-14 school year. How much should Christian schools charge for tuition? Why are some schools able to charge higher fees than other schools? Some schools have high tuition rates and waiting lists. Other schools have low tuition rates and lots of empty seats. What explains this phenomenon?
Basic economics explains that you can charge a higher price when demand is high and supply is low. However, the economics of Christian education is a little more complex since our public and distributed learning (DL) schools offer a different product for no tuition cost. Some school districts have safe and excellent public schools with new facilities and a variety of academic, vocational, and fine arts choices. Not only do these schools offer no-cost tuition but their product is perceived to be superior by some families. Some Christian schools are faced with competition from other Christian schools in the same city. These schools find themselves competing for a limited number of Christian families willing and able to pay tuition.
Since competition is a reality, there is significant economic pressure on schools to keep tuition rates low. Many Christian school communities hold to a core value that they must keep Christian education affordable for everyone. Perhaps the wiser response is not setting a low tuition for everyone, but the provision of a robust tuition assistance program for those low income families who simply cannot afford a Christian education.
When Christian schools keep tuition fees unrealistically low for everyone, a downward spiral begins: programs get cut, staff salaries and benefits are reduced, buildings are not properly maintained, donors are asked to fund operating deficits, and the value of the Christian education product being offered is further eroded. This in turn forces tuition to be cut even further with the hope that it will attract new families.
Here are several strategies Christian schools are using in dealing with their current situation:
Some schools try to fill available seats following the logic that it is better to get some Block Grant money with zero tuition than not have the seat filled at all. This creates a slippery slope and may lead to some dissatisfaction from full tuition paying families.
Some schools fill seats with international students that may or may not be mission appropriate.
Some schools relax their admission policies to allow non-Christian families to attend their independent school.
Some schools increase their tuition and differentiate their product offering, marketing their loving and safe Christian environment, integration of biblical worldview in the curriculum, higher FSA (Foundation Skills Assessment), and Fraser Institute scores, missions trip opportunities, service learning options, music program, student leadership emphasis, industrial arts program, and many other exciting distinctives.
The demand curve for Christian education is relatively inelastic. Elasticity of demand is a simple economic concept. Fuel, for example, has an inelastic demand curve – even though the price of gas goes up, few people quit driving. Although families from all income levels have a strong commitment and priority towards Christian education, I would argue that Christian education has a kinked demand curve, whereby it is more elastic for families with low discretionary income, and more inelastic for families with higher discretionary income. Tuition increases can cause real hardship for some families who may have to leave the school if even a small increase in tuition occurs. Therefore, tuition increase decisions must go hand in hand with fair and compassionate tuition assistance policies.
Many Christian schools understand that once children and their parents have started school and feel loved and embraced by the Christian school community, the elasticity of their individual demand curve becomes more inelastic. In marketing terms, your customer (parent) becomes stickier (more committed) and will be unlikely to move when faced with modest annual tuition fees increases. Understanding this principle, many schools have introduced a lower tuition fee for first time families.
Understanding the demand curve for Christian education in your city, the consequences of unrealistically low tuition fees, and the importance of robust tuition assistance polices will greatly help your board determine the tuition strategy for your school.