An Ethical Framework for Financial Aid

This article is republished piece from Net Assets Magazine, with permission (November/December 2020 Issue).

By James R. Palmieri, NBOA

KPS Ethics Workshop for Faculty & Staff, led by Dr. Karen Rezach the Director of The Ethics Institute at Kent Place School

Pressures on the financial aid budget aren’t just financial. Agreeing upon values and sticking to them help make every dollar count — and the school community stronger.

Kent Place School (KPS) is in an enviable position, literally. The preschool-grade 12 girls’ school is located in the metropolitan New York City market — Summit, New Jersey, to be specific — which has a strong appetite for independent schools and many families that can pay for it. The financial aid budget is healthy, thanks to the generosity of parents, alumnae, trustees, foundations and friends, and the school had rebounded financially from the challenges of the Great Recession of 2008. The COVID-19 pandemic has caused disruption but not resulted in enrollment decline. 

Even with these advantages, however, decisions about allocating financial aid can be challenging. To help make the best choices, KPS draws on one of its unique offerings: the Ethics Institute at Kent Place School. I know the institute well, as I worked at KPS in various capacities between 2005 and 2013. I also know the challenges of financial aid decision-making well. Following my time at KPS, I served as a business officer — officially, assistant head of school — at Trinity Hall, a girls’ high school in Tinton Falls, New Jersey, before coming to NBOA. 

Numerous processes and decisions in that role required me to draw on an ethical framework and supporting values, to adhere to the school’s mission, guide my team, and exercise compassion for all involved. The most challenging of all these tasks, the one which required the most attention, research and consideration, was financial aid distribution. 

As a start-up school, Trinity Hall had limited financial resources, and a core set of questions surfaced again and again:

  • How do we adequately ensure confidentiality for the applicant family?
  • How can we fairly assess family expenditures?
  • How do we assess a business owner whose reported income seems unrealistically low given the family’s assets?
  • How do we ensure a level playing field for all applicants?
  • And how can we avoid playing “let’s make a deal” with parents? 

Hence my interest in speaking with my former colleague, Karen Rezach, Ed.D., founding director of the Ethics Institute at Kent Place School, and senior staff at KPS.

A leader in primary and secondary school ethics education, Rezach has been teaching and facilitating ethics workshops for students, parents, faculty, administrators and private organizations for more than ten years. Though academic in nature, Rezach’s guidance of the Ethics Institute transcends curricular and co-curricular programming to inform and enhance the school’s overall operations, including business and enrollment practices and procedures.

Shifting Gears, Setting Guardrails

The financial aid committee at KPS consists of Head of School Jennifer Galambos, Chief Financial Officer Genevieve Madigan, Assistant Head of School for Enrollment and Strategy Julia Wall, and Director of Financial Aid Adrianna DeGazon. KPS uses Tuition Aid Data Services (TADS) to calculate families’ financial need, and Wall confirms board policy is to award grants consistent with the TADS calculation. 

The school’s guiding mantra in aid decisions is this: “If you’re a girl who’s ready to change the world, we believe money shouldn’t stand in your way.” And while the committee does its level best to make that assertion a reality, financial aid budgets are not limitless. 

“For a long time, the goal of financial aid at Kent Place was to positively impact the diversity of the student body. The primary objective was to enroll as many students from different backgrounds and income brackets as possible. But over the past several years, the primary objective has shifted to supporting all existing students in having an equitable core experience.”

– Julia Wall, Assistant Head of School for Enrollment and Strategy
Julia Wall, Assistant Head of School for Enrollment and Strategy

Thus at KPS, like at most other independent schools, financial aid now goes to a range of income brackets, including middle-class families who in the past may not have received aid. Furthermore, the goal is to provide not only tuition assistance, but also resources to cover the complete school experience, including uniforms, transportation, local and global trips, and athletics.

While there has been a shift, the process is still tied closely to the school’s mission,

to offer students of diverse backgrounds, in preschool through grade 12, an academically rigorous curriculum in a caring atmosphere; to encourage them to contribute to and find success in this challenging program; to inspire young women to leadership; and to strengthen moral awareness

– Julia Wall, Assistant Head of School for Enrollment and Strategy

In simpler terms, fairness, care, cooperation and responsibility are the guideposts. 

Down the Rabbit Hole: History of Financial Aid in Independent Schools

Middle School Building, Kent Place School

Kent Place School’s experience with financial aid has unfolded sector wide. Historically financial aid existed to provide the independent school community with “accessibility” for students and families, with more aid going to families making less income, but the financial crisis of 2008 rapidly transitioned schools to focus on “affordability” for all families, when fewer American families became capable – or willing – to pay the tuitions we charge and operate from. The COVID-19 pandemic has exacerbated the trend and will likely have a longstanding impact on our industry. 

In the 2019-20 school year, before the COVID-19 pandemic, private nonprofit colleges and universities on average offered a 52.6% discount rate to first-time, full-year, first-year students, according to the 2019 NACUBO Tuition Discounting Study. Taken together, all undergraduates from these colleges received a 47.6% discount on average. The discounts, which come in the form of grants, fellowships and scholarships, mean these institutions forgo about half the revenue they otherwise would collect if they charged all students the tuition and fee sticker price. The discount rate has increased every year for the past ten years; in 2019, first-time, full-year first-year students had an average 42% discount rate and the rate for all undergraduates was 36.4%. See here for a press release of the study.

While private, nonprofit independent schools do not discount as nearly sharply — the average discount rate in the 2019-20 school year was 17% according to NBOA’s BIIS data collection platform — it is a trend we would do well to watch. See “The Rise and Reinvention of Merit Aid” page in the NBOA November/December 2020 Newsletter.

The shift to prioritizing an “equitable core experience” at Kent Place has required extending the financial aid budget, Wall acknowledged, as well as establishing guardrails to ensure that budget does not balloon beyond the school’s reach. Board policy states that financial aid cannot exceed a pre-determined set percentage of the school’s gross tuition revenue, according to Madigan. “It takes a full board vote to exceed that percentage, and it has to be a very compelling case,” she explained. 

While KPS distributes aid across its divisions — that is, the primary, middle and upper school — it has different parameters for each unit. For preschool, the maximum financial aid available for qualified applicants is 50% of tuition; for kindergarten, it is 80%; for grades 1-5, it is 85% and for grades 6-12 it is 98%. This breakdown accounts for the significant financial commitment the school makes to new families — the younger the student, the longer the period of aid distribution.

Yet even with these tried and tested processes to ensure confidentiality, equality and sustainability, aid decisions are complex, time-consuming determinations that require collaboration, ethics and values-based decision-making.

Create a Safe Space for Discussion

The first thing that parents and teachers can do is to create a safe space in which different opinions are invited, allowed, and welcomed.

Image of KPS Upper School Students from 2017

If everyone in a student meeting seems to share an opinion, for example, I will bring in a differing viewpoint. I might ask if someone believes something different, or sometimes I will voice that different perspective and ask whether anyone agrees with what I have just said.

In general, someone will speak up and in that way I can sometimes create a setting where people become aware of the perspectives of other stakeholders. 

That process sometimes creates a space where people with differing perspectives and beliefs find it safe to speak, and safe to find their own voice. And when that happens, we have the opportunity to teach students to be respectful of one another and to different viewpoints. If we can accomplish that, we can hope that students will gain the courage to speak up, own their beliefs, and not be anonymous. 

Applying the Framework

A core group developed the following framework for ethical decision-making: Rezach, other KPS senior leaders, the KPS Ethics Committee, students and faculty, and key partners, including the Hastings Center, a bioethics research institute, and the Kennedy Institute of Ethics at Georgetown University. 

The Ethics Institutes’ Ethical Decision Making-Method

I grapple with this issue internally all the time: the balance of what is fiscally responsible for the school, and what feels inclusive and equitable for students. And I feel the entire school leadership team should be balancing those two things all the time. It’s not just the job of the business office to that.”

– Julia Wall, Assistant Head of School for Enrollment and Strategy

1. Study and understand the situation.

Consider these questions: What are the issues in the situation that are most relevant for you, or are most pertinent? Are there facts about the issue/situation that you feel are critical to consider? Who are the stakeholders? What perspective might each stakeholder bring to this situation?

Take this example: You are the director of admission and financial aid at an independent school in a highly competitive market. You have just completed the arduous task of assigning your financial aid dollars to the newly accepted ninth-grade class. The following week, the parent of one of your newly accepted financial aid students calls to request more aid. The parent discloses the amount of aid the family received from a competing school and said that if your school could match it, the student would definitely enroll.

2. Identify the values that are involved on all sides.

Values are something (principle, quality, or entity) intrinsically desirable or valuable. What are the values that are involved in the decision?

Case study, continued: The situation presents several values to consider. Is the parent being authentic — did the other school truly offer that large of an award? Is the parent being honest — if we increase the award, will the student enroll? Is the award from the other school trustworthy — what are its processes for assessing need? Will increasing the award be unfair to other families in the process? Is the greater responsibility of the school to conduct a consistent process or to hit the enrollment target? How do we show empathy towards this family understanding the financial commitment at stake? And is compassion or equality more important to my school? 

3. Identify the ethical dilemma – right versus right.

Ethics is the branch of philosophy dealing with values relating to human conduct. Ethical dilemmas do not have clear “right” versus “wrong” answers; instead, an ethical dilemma presents a situation where there can be more than one “right” answer. For every “right” answer, there is usually another equally compelling “right” answer that must be considered. 

Case study, continued: While this student was not one of your top candidates, she was well-regarded by the admissions committee and the school could really use the student to make its target enrollment and net tuition revenue goals. The family’s financial aid report stated that you have already awarded this family 100% of their calculated need. The goals of consistency and sustainability seem to be at odds. 

4. Identify the values that influence your position.

Which values rises to the top in a given situation or dilemma? Base your position on that value.

Case study, continued: For this enrollment leader, three values rose to the top: 1) Trustworthiness and transparency. The school followed a process that allowed for a fair and accurate assessment of the family’s application. That allows for clear communication about why school will not alter its determination. 2) Integrity. This director felt accountable for stewarding the school’s financial aid budget responsibly and adhering to the policies and processes to distribute aid accordingly. 3) Equality. Most families, even when they receive aid, are asked to stretch to pay for the education and services our schools provide. The other families in the process would prefer to pay less, too. 

5. Respectively communicate a decision that demonstrates your ability to apply the facts, identify values that inform your position, and find support from outside sources.

When you reach a decision, articulate it in such a way that you express an understanding for the complexity of the issue as well as respect for the varying perspectives and stakeholders involved. Communicate the values identified to help formulate the basis for your decision.

The Whole Community

MS Students Walking Out of the CFI Building at KPS

What students learn from lessons in ethical decision-making, the entire school administration can apply too. “What is critical to the process is that students do not simply ‘react’ to an issue,” explained Rezach. Instead, they need to “do a deep analysis of a situation to deliver an informed decision.” In the case of financial aid, school leaders will not simply react to demanding families or enrollment pressures but rather carefully formulate decisions they can stand by and clearly articulate. 

Thus the EIKPS ethical decision-making method, if adopted widely, can support school community and culture building. When norms and expectations are identified and communicated, transparency increases and confusion decreases. Rezach offers school leadership the following suggestions seeking to bolster ethical decision-making:

Be clear about your school’s values and discuss how values are reflected in policies and decisions. Present them forthrightly so that all constituents and outside community members know what your school stands for and what can be expected from the school. An interesting exercise is to poll your constituency groups and ask them, “What do you consider to be the school’s top 3 values?” This will tell you whether or not you are being clear enough.

Be clear about department priorities. The business office, admissions, development and other departments need not be working in silos but rather under one mission and vision. Department priorities include personnel policies and expectations, as well as product or output, including financial aid distribution. A department’s priorities must align with the school’s values.

Use case studies to target areas that need attention. It can sometimes be hard to discuss ethical dilemmas that are happening in real time at the school, or even to identify what the values are that guide decisions when confronted with all too real situations. Tackling a case study through tabletop discussion exercises is a great way to encourage discussion. Participants will likely discover the values that truly are important to not only them as individuals, but also to the community. See sidebar for an additional example. 

Encourage focused, values-based decisions. Utilize the ethical decision-making model for every dilemma or difficult situation in your school, and decisions will be consistently values-based and ones that everyone can live with — not necessarily agree with, but respect and accept. When your decisions are based on your values, you become an ethical community.

Leadership drives the bus in many of these decisions. Leadership from the top — the board, the head, the chief financial officer and the entire administration is crucial. It’s about more than getting it done, but rather what school leadership will commit to. What commitments are you going to make?

“Have a north star. Having a clear mission and objectives makes it much clearer. Otherwise, it is scary to put a stake in the ground.”

– Dr. Karen Rezach, Director of the Ethics Institute at Kent Place School

Special Thanks to the National Business Officers Association for allowing us to reproduce this article on our website that was originally published in the Net Assets Newsletter (November/December 2020 Issue).