Tuition-Driven or Endowment-Driven?

After about 15 years working in the independent education industry, I learned perhaps the most important axiom in understanding strategy and planning.  In North American education, there are two prevailing educational models:  privately funded and publicly funded education.  And, among the privately funded models, there are still two prevailing models:  tuition-driven and endowment-driven.  Sounds simple, right?  Sure, but the implications of this final distinction are very important.

Remember that old real estate axiom:  "location, location, location"?  It turns out that endowment is to demand as location is to real estate.  The impact of large resources on the entire context of the enrollment management picture is significant.  Think of it this way:

 

  • Endowment-Driven = Selection-Centered:  Private institutions that enjoy large endowments are less reliant on tuition revenue, tend to generate large amounts of demand (applications, visits), and are naturally selective in their admission program. 
  • Tuition-Driven = Demand-Generation Centered: Private institutions that are 80% or more tuition dependent tend to rely heavily on the ability to self-manufacture demand (applications, visits) and are naturally less selective in their admission program.

 

Does this matter?  Absolutely.  Job #1 for any tuition-driven institution of learning is to generate interest. The real endowment at any tuition-driven school or college is demand that is sustainable.  And, if this is the case, all critical marketing and enrollment management functions have to be viewed from this vantage point.  An interesting example?  Image the dean of admission at an Ivy League school trying to make their enrollment goals at the modest local liberal arts college down the road.  They would have a tough time only because that is not their world.

I hope this axiom provides some interesting clarity.  While it is not universal, and there are certainly exceptions to the rule, I think it serves as a great guideline in terms of assessing the strategic context of any private school.  I hope you do, too!