The likelihood that a student will experience stress while enrolled in a higher education institution is high. In fact, an Ohio State study found that 70 percent of students are financially stressed over such things as tuition, living expenses, the job market and student loan debt.1 The State of the Student report shows that two-thirds of students cannot easily afford housing, one-third cannot easily afford food, and almost three-quarters have to work while attending school to make ends meet.2
Unfortunately, this financial stress has a direct impact on the educational institution they attend. Studies show that financially stressed students are more likely to skip class, reduce study time, drop classes and drop out of school altogether.1,3,4
This affects not only the student but also affects the university as a whole. For instance, dropout rates affect university rankings as well as tuition subsidies from state and federal governments.5,6
However, many colleges and universities considering a student financial wellness program don’t know how to calculate the return of investment of a program. Here are six steps to help you decide if the financial wellness program provides you with a positive return on investment.
Step 1: Collect "Before" Data
Although it is possible to use statistics gathered from studies and surveys, the best way to determine the ROI of your financial wellness program is to know how your institution’s numbers change over time. This means you need to gather data before starting the program. Although there are many different measurements to consider, here are a few you may wish to focus on:
Student Absences: The average number of student absences. Depending on the institutional need, this can be done per graduation year, per class, per subject, or per demographic information. Then determine how much absences cost your college by determining the amount of federal and state aid removed from the institution when students fail to meet attendance requirements.
Dropped Classes: The number of dropped classes, once again determining how much a dropped class costs your institution due to the loss of federal and/or state aid.
Students Dropping from Full Time to Part Time: Determine the loss of revenue for the year. You’ll also use this number to predict the number of students unlikely to graduate on time.
Dropout Rate: The current dropout rate by graduation year and/or demographic. Determine how much each dropout costs the institution in lost federal and state aid. Keep in mind that the true cost of a dropout rate should include the cost of a lowered school ranking, but this may be difficult to quantify.
Step 2: Collect Student Data through a Survey
Determining if a student is absent from class due to financial stress or simply lack of motivation can be difficult. That’s why understanding how financially stressed your students feel can help you get a better handle on the ‘why’ behind absences, dropped classes, and dropouts.
Questions to consider include:
- What is your current stress level over finances? This question can be a number scale with each number defined. For instance, no financial stress can be a number 1 and extreme financial stress, defined as “I worry about finances at least once a day and it affects how I live my life, participate in school, and/or my employment” could be a number 5.
- Has financial stress caused any of the following problems for you in the past year? (Mark all that apply) The list of issues could include not saving for emergencies, inability to pay bills, needing to move because of inability to pay rent, taking out a payday or title loan, using credit cards to pay for recurring needs, homelessness, etc
- Do your financial concerns affect your ability to do well at school?
- How often do you postpone doing school work to deal with financial matters?
- How many classes do you skip each semester due to financial worries?
- How likely are you to reduce your course load due to financial stress?
- How likely are you to drop out of school due to financial worries?
Step 3: Roll Out Financial Wellness Program
Once you have the initial data, it is time to roll out the program. Be sure to communicate the existence of the program and provide incentives for participation. Those programs with strong rollouts always show a better ROI.
Step 4: Collect "After" Data
You’ll need to know the difference between the before and after data to calculate an ROI.
- Data collection: Be sure to collect “after” data for all areas in which you collected “before” data.
- Determine student usage: Many financial wellness programs provide this data.
- Conduct an ‘after’ survey: Give students a survey with the same questions to see if financial stress and the effects of this stress have decreased. You may also wish to take this opportunity to get student input concerning the program, which components were most helpful and compelling, and what components they wish the program contained.
Step 5: Make Calculations
Once you have all the before and after data, it is time to crunch the numbers.
Student Absences: [Before absences x the cost of absences] minus [After absences x the cost of absences] x approximately 33 percent, which reflects the number of students who drop classes and/or reduce to part time. No statistics are currently available for the true number of absences due to financial stress.
Dropped Classes: [Before dropped classes x the cost of dropped classes] minus [After dropped classes x the cost of dropped classes] x 34.2 percent, which is the percentage of dropped classes due to financial stress.
Students Dropping from Full Time to Part Time: [Before number of students dropping to part time x lost tuition] minus [After number of students dropping to part time x lost tuition] x 34.2 percent (dropped classes lead to part time enrollment).6 Based on data from the National Center for Education Statistics, after 8 years, 29.2 percent of students at 4-year institutions and 42.1 percent of students at 2-year institutions will not complete a degree.7
Dropout Rate: [Before dropout rate x cost per dropout] minus [After dropout rate x cost per dropout] x 50 percent, which is the number of dropouts due to financial reasons.4
Step 6: Calculate Your Student Financial Program ROI
To calculate the ROI, you will add up all the savings experienced in Step 5. Then you will divide the savings by the cost of the financial wellness program x 100 (to get a percent).
For example, if you saved $800,000 on a program that cost you $65,000, your ROI would be 800,000/65,000 x 100 = 1,231 percent. This means that for every dollar you spent on a financial wellness program, your institution gained $12.31.
Go here for more information on college financial literacy program pricing.
To see examples of how iGrad’s Financial Wellness program saves money for your school, check out our demo video here.