Retention Matters

The past academic year has been a roller coaster ride for those of us who work at colleges. Increasing costs, the economic meltdown, and high unemployment have many in the higher-education sphere wondering what the future will bring. Indications are that by 2020 some institutions may not be in business.

In the small liberal arts college world (aka privates), the cost of our product is already near the highest in the marketplace, and unfortunately the demographics of potential clients near the lowest. What we can do to improve the odds that our institutions not only survive but thrive in the next 10 years? Solutions seem elusive. But one key means of improving the picture already lies within our grasp. It can be summed up in one word: retention.

Consider the cost of a college degree from the frame of the strategic service concept: "The benefits perceived by the customer against total price in the context of alternatives." While the product is excellent at most small liberal arts colleges, the competitors’ product is also outstanding. Large privates, small and large publics, and community colleges are all good choices today. The problem for many privates is that their price is already out of reach for most Americans, and going in the wrong direction – while many publics charge much less .

The total annual cost at many privates is between $40,000 and $50,000; while tuition costs tend to go up an average of 4 percent a year, the increase barely covers the concomitant increase in fixed expenses (salaries, fuel, inflation, debt depreciation, etc.).

By 2020, then, the total cost for most privates – if current trends continue -- will be $60,000-$70,000 per year. The current average yearly cost at many publics -- $10,000-$20,000 -- should rise by 2020 to about $17,500-$27,500 – still a lot of money for students and families, but clearly a significant price break from the privates.

Many students emerge from college with major debt. It is commonplace for students to graduate from privates with $50,000, $75,000, or over $100,000 in loans. This is not a sustainable model as costs continue to increase. At what price point do families determine that the cost/benefit analysis does not make sense?

The clear challenge is to hold costs in higher education. It may be clear but it is far from simple. To hold or decrease expenses without limiting the product has so far seemed impossible. To increase revenues without raising tuition has been equally daunting.

Institutions need to look within first -- and retention is the place to start.

Out of approximately 2.8 million first-year college students each year, more than 450,000 do not return to the college or university they started with for their second year, according to 2008 statistics. In other words, 25 percent of first-year students do not return to the institution where they began their college career. What other industry do we know that successfully recruits 25 percent new clients each year, plans for an average loss of 25 percent of those new clients, and accepts this as business as usual?

Significant improvement in the retention of current clients is the low-hanging fruit of revenue increases for colleges and universities.

For privates, improving retention rates is one of the best solutions for reducing cost increases and maintaining revenue streams. Though the retention rates on average for privates are better than for large publics, the financial impact of each student lost is greater. A 20 percent attrition rate for a private can mean 100 or more students lost, at $30,000 or more per student. So long as freshman classes have remained sufficiently full, the strategy has been to replace lost students rather than commit more resources to retain them.

First-year students are the key to significant retention improvement, and based on the available data, the first six weeks is the most critical time for a successful transition to the college environment. It is the make-or-break period for many students regarding their academic, social, and emotional engagement with their chosen institution.

Unlike corporate America, which long ago discovered the benefits and return on extensive job-training prior to engagement, many institutions of higher education attempt to teach new students the keys to success after they arrive on campus and while they are fully immersed. The majority of transition education is similar to teaching one to swim while in the deep end.

The call is for privates to redefine the orientation and preparation process for first-semester students, and to commit sufficient resources to preparing their newest clients for success prior to their arrival on campus. Privates can and should shift attitudes and perceptions, by minimizing doubt and uncertainty, and increasing the confidence of entering first-year students. Freshman orientation is a blur of information and indoctrination, compressed into a few days, not a training process for preparing students. Colleges should shift their emphasis toward the months preceding each new academic year, and commit to providing new students with effective college-readiness training. For most colleges this will require utilizing new technologies and resources to reach their cohort in flexible ways, with minimal impact on time, energy, and resources for both the students and the colleges.

The intent is to empower students with information for success, and ultimately to improve retention rates. Pennsylvania's public college system long ago committed to improved retention, including performance indicators and rewards for retention outcomes. In October 2007, Kenn Marshall, chair of the system's board, noted that system universities received a combined $38.7 million in performance funding as a reward for showing improvement in key areas related to student achievement and efficiency.

Traditionally, many in the privates have felt that this is not their role, and have lacked the will to fully commit to efforts for improved retention. They can no longer afford the luxury of that attitude. As 2020 and $70,000 per year costs approach, and institutions look for new revenue streams, it is time for privates to reconsider their strategies to retain more of their current students. Privates may find that significant improvement in the retention of their students is one of the only solutions to cost containment and financial survival.