“And You Shall Strengthen Your Brother”: Middle-Income Strategies

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A white paper about school and community-wide efforts in North America to make Jewish day school more affordable to middle-income families. By Charles Cohen

Introduction

This White Paper examines the affordability strategy of targeting “middle-income” families. From Los Angeles to Boston, from Birmingham to Milwaukee, schools and communities have confronted the middle-income challenge. Efforts have been championed by donors, school leadership, and Federation staff. They have been integrated into preexisting financial aid processes, and they have been branded as new, innovative responses to the Great Recession.

From these programs some useful guidelines emerge, framed below with a few key questions. Answering each of these questions will help ensure that your middle-income strategy meets your community’s, schools’, and families’ needs. The examples set by existing programs show us that setting data-informed goals, delineating the middle-income population in your school or community, and investing in an aggressive marketing plan, are all essential components to a successful middle-income strategy.

What is the “middle-income” challenge?

Rising school budgets have caused families to require financial aid who, until recently, did not need it. In the early 1990s, independent school tuition already made up a substantial portion of family budgets: The median independent school tuition was almost 20% of median family income. Today, the burden is even greater: Median tuition is more than 35% of median income.¹ The following chart shows the income decline relative to tuition growth.²

The Great Recession exacerbated the problem by slowing salary growth, for those who were lucky enough to remain employed, even as school expenses continued to rise. That income-tuition disparity has meant that more families need financial aid, and schools have struggled to handle the additional requests. Many of these families are in the middle-income range and are not used to struggling to make ends meet. However, because of the growing tuition burden, they may seek support for the first time. This can be a very difficult mental hurdle; if you are a donor to every other organization with which you are affiliated, it is extremely difficult to turn around and ask for help from your children’s school. Oakland Hebrew Day School Head of School Rabbi Ari Leubitz calls this the “unique psychology of middle-income families.” As a result, middle-income affordability has become a serious concern for Jewish day schools and communities.³

The “barbell effect”⁴—students from higher-income and lower-income families disproportionately represented among the student body, with a paucity of students in the middle- income brackets—is another way to look at this challenge. The barbell effect is problematic in two ways. First, it can be a challenge to your school’s mission if, like other day schools, your school has the goal of enrolling every child who wants a Jewish education. An absence of middle-income families would indicate that some families who would otherwise enroll their children have chosen not to do so, a sign that the school is not achieving its mission.

Second, the barbell effect impacts a school’s health and resilience. Middle-income families are able to afford some or even most of their tuition expense. But if those families do not feel comfortable requesting financial aid, they may transfer their children to a different school, and there is no guarantee that they will be replaced by a family who can pay full tuition. The growing threat of losing middle-income families has been the catalyst for creating financial aid strategies directly targeting those families.

If rising tuition rates are the source of this problem, why not simply cut costs and stop increasing tuition? Schools, like any other business, must meet rising costs if they want to provide an excellent product. They have to pay their employees a living wage and provide benefits. Too much cost-cutting can lead to a decline in perceived value and families deciding to leave the school. This can become a “vicious cycle”:⁵ Attrition lowers aggregate tuition income, leaving less money to spend on educational quality, which leads to a decline in perceived value, and so on. Schools are therefore left with a perennial challenge. They can cap costs, and potentially hurt their perceived value, or continue increasing tuition, and put more pressure on families’ and/or schools’ bottom lines.

What exactly is “middle-income”?

“Middle-income” is not synonymous with “middle-class.” In 2012, the Pew Research Center defined “middle-class” as three-person households with total incomes between $39,418 and $118,255.⁶ By contrast, in 2006, the National Association
of Independent Schools (NAIS) determined that the low-end salary of its “middle-income” parent body was approximately $92,000,⁷ well into the top third of the “middle-class.”

What should you consider when creating a middle-income targeted strategy?

Here are the key questions you should ask as you consider how to address your school or community’s middle-income challenge.

What is your goal?

“Schools should ask, ‘What is our primary purpose for financial aid?’ Define your goals first: with your board, your head of school, the administrators, and faculty.”
—Mark Mitchell, Vice President for School Information Services, National Association of Independent Schools (NAIS)
Communities and schools have used different goals as the basis for choosing a middle-income strategy. Here are examples of how a community and a school used data to set goals for their programs.

Boston’s Discover Day School: Using data to prioritize among several strategies

In 2006, anonymous donors gave Combined Jewish Philanthropies (CJP) a $45 million Peerless Excellence Grant “to support a system of excellent and accessible Boston-area Jewish day schools in the context of CJP’s community-wide agenda.”⁸ Part of the Grant went to establish the Initiative for Day School Excellence, a systemic intervention into Boston’s Jewish day schools targeting access and educational quality. To determine the right first steps in addressing affordability, the Initiative’s lay and professional leadership went through a substantial data collection effort beginning in 2007 that included a community needs assessment, focus groups, and information directly from Boston’s day schools. Based on what they learned, CJP decided to focus its affordability strategy on middle-income families. Next, they began work on a campaign to raise $75 million to endow the project.

Unfortunately, when the recession began just one year later, the affordability effort had to be substantially scaled back. The leadership decided to pilot a smaller project—Discover Day School—in 2010.

Discover Day School is an initiative that gives middle-income families 25% of tuition (up to $6,000) for three consecutive years at any of Greater Boston’s 11 elementary/middle schools for their first child attending day school.⁹ Families must choose between the Discover Day School grants and the standard financial aid offered by their school of choice. This allows families to decide which program is right for them.

CJP is currently going through a detailed evaluation of the program. In the two years since Discover Day School was launched, CJP has made some important changes based on the data it has already collected: The grant limit was increased from $4,000 to $6,000 because of rising tuition costs; schools can now set the middle-income limits based on their own parent body; and CJP provides participating schools with a small marketing budget to establish word-of-mouth campaigns to promote Discover Day School.

Community Day School, Pittsburgh, PA (CDS): Listening to parents

CDS did not have excessive attrition in 2008, nor was enrollment out of line with previous years’ numbers. But in exit interviews, Head of School Avi Baran Munro started hearing that more parents were opting out because of cost and that the financial aid they received was not enough to keep them enrolled. These families tended to be in a wide range of income, approximately $50,000 to $275,000. This was broader than just “middle-income” because it also included families with specific financial constraints.

In partnership with a major donor, CDS created the SEED (Supplemental Education Endowment Dollars) Fund—a separate pot of money the school could distribute to families in addition to their standard financial aid gift. According to CFO Bari Weinberger, the SEED Fund fills a portion of the gap between what the tuition assistance committee determines a family can afford and what the family believes it can afford.

Launched in 2009, the SEED Fund has been an essential recruitment and retention tool. The Fund is not considered a separate program, nor is it promoted as such. It has allowed CDS to be more flexible in financial aid discussions, and that has reduced attrition and helped increase kindergarten enrollment. The SEED Fund has helped as many as 35 families afford tuition for 54 students in a single year. In a school with an enrollment of 274 in 2011-12, those students represented almost 20% of the entire student body.

Data collection does not have to be a massive undertaking. Even a series of one-on-one meetings can be a productive research effort if they give you the information you need, like whether your middle-income families are being priced out, or how to address your middle-income challenge. The objective is collecting the right data: information that will allow you to measure the impact of your strategy on your intended market. Determine what you want to accomplish with your financial aid system before considering how to support all of your families, including those in the middle-income range. Setting goals based on the data you collect is critical for structuring your initiative and selling it to prospective donors.

Who are the middle-income families in your school/community?

All middle-income ranges are not identical. They differ from community to community, and even school to school. Defining your middle-income range will allow you to calculate how many families fit your definition and how much it will cost to expand current financial aid to meet their needs. The range also will be framed by your potential market: Are you looking to retain current parents or attract new families? Here are two examples of middle-income definitions and the strategies they produced.

Oakland Hebrew Day School (OHDS): Learning from the field and its own community

OHDS’ board took up the issue of affordability in 2010. Their goal was to maximize retention. This allowed OHDS leadership to focus on current parents—about whom they had substantial demographic and financial data—rather than prospective parents, about whom they knew comparatively little.

Board members researched affordability strategies that had been designed to improve retention. They also considered anonymous data from their own families receiving aid (income range of applying families, number of children in each family, etc.). This information allowed OHDS’ leadership to determine which ideas made the most sense for their community and led to a new, multi-tiered financial aid system that provided more options to families, particularly those in OHDS’ middle-income range—$230,000 to $300,000.

OHDS’ financial aid process was renamed Kulanu (“All of Us”). It has three components: 1) standard financial aid (“flexible tuition”); 2) a sibling discount of $500 per student per year for each additional child enrolled after the first child; and 3) the Tuition Accessibility Program (TAP), which provides between $1,800 and $3,000 to families within the designated middle-income range and depending on number of children enrolled at OHDS. In 2011-12, 13 families received TAP grants.

Los Angeles’ Builders of Jewish Education (BJELA): Using multiple data sources to paint a picture of the Jewish day school parent body

The BJELA collaborated with the Jim Joseph Foundation to create the Jim Joseph Foundation High School Affordability Initiative in response to particular environmental challenges: “[T]he exceptionally high cost of living in Los Angeles; the escalating annual Jewish high school tuition fee, which currently is an average $28,989 for these five Los Angeles high schools; and limited financial aid dollars available at the participating five high schools.”¹⁰ The Initiative’s focus was on prospective as well as current families. The goal was to “stabilize and incrementally increase the enrollment of students from middle-income families attending five Jewish high schools.”¹¹ Understanding the broad demographic of prospective families required more information. To define the potential market, BJELA staff took data about average salaries in LA from California’s state budget office and adjusted it using information collected from the LA Jewish community. BJELA then determined how many families might potentially participate in their Initiative. Based on that data, they set the middle-income range at $150,000 to $300,000.

The clear range and online application have made the program easily accessible to prospective families. Already, the Initiative has helped lower tuition for almost 200 students, including 120 new participants in 2011-12. Grants for those families ranged from $2,500 to $13,700.

How much will it cost?

Three components determine the cost of a middle-income strategy: the number of participants; the amount of money they will receive; and your marketing plan. Defining your middle-income range and eligible families was discussed above; this section focuses on how much families should receive and what to consider for your marketing strategy.

How much should families get?

Your criteria depend on your school and community and what you hope to accomplish. The Helen Bader Foundation in Milwaukee, for example, simply wanted to increase financial aid. The Foundation’s grants are limited by the number of applying families and the total funding available—about $500,000.

Other middle-income strategies—those at Golda Och Academy or OHDS, for example— vary the size of their grants by the grade in which students enroll and how many children a family has enrolled in the school. This flexibility helps the schools achieve their objectives of retaining larger families or those transferring children in from other schools.

Depending on their goals, many schools and communities interviewed provided a range of discounts to their respective middle-income families either as grants, tuition discounts, or tuition caps. Whatever you choose, the financial incentive should be sufficient to meet your goals, but not so substantial that full payors end up questioning the value they get for their higher tuition costs.

Sometimes, a small grant can be just as meaningful and impactful as a larger award. For example, one day school CFO says that “if a family takes the time to fill out all of the financial aid paperwork, they feel they must need something. In those situations, we may give them some nominal amount, even if they’re not eligible.” Your goals can help you shape both your financial aid strategy and how you promote it to potential participants.

How important is marketing?

Information about your program must reach your targeted demographic, whether that is a small niche of families or the entire Jewish community. Creating a marketing plan that includes traditional as well as social media, formal advertising as well as your current parents’ social networks, will help ensure that your target population hears about this new opportunity to enroll their children at your school.

Pittsburgh’s Jewish Day School Council created the “First Year Free” initiative in 2011, which provided families with a free year’s tuition if their child transferred to a Jewish day school from a public or non-Jewish private school in grades 3-11. The largest cost was not from the additional 11 students: None of the three schools were at full capacity, and the additional expense of bringing public school students up to speed in Judaic subjects was relatively small. Rather, the biggest part of the budget was taken up by marketing. Two donors gave a total of $50,000 for the Council to promote the project. Those funds were used to hire a consultant who created a comprehensive promotion plan: billboards, a Day School Council website, press releases to Jewish and secular news outlets, etc. These efforts drew community attention to the program and the schools, and increased inquiries and visits to each school. The importance of a strong marketing campaign was reinforced in 2012. That year, the schools chose to run the program again, but did not aggressively promote it. Without a similar marketing push, the schools recruited just four new students through the initiative.

Unless they opt for a substantial, multi-pronged campaign like the one in Pittsburgh, community organizations—federations, local or national foundations—that attempt middle-income affordability initiatives may struggle to reach their intended audience. Community organizations often do not have direct access to aid recipients in the same way that schools do. But many have found effective ways to promote their efforts. Some direct prospective parents to an online calculator (Boston’s Discover Day School, BJELA’s Jim Joseph Foundation High School Affordability Initiative), while others use schools as conduits to promote their initiatives (Milwaukee’s Helen Bader Foundation).

Whether your middle-income program is for one school or several, your marketing plan should allow parents to easily access information about it. That will minimize confusion and encourage more people to use the program.

How should your middle-income-targeted initiative fit into your financial aid system?

Again, it depends on what your goals are. Many community and school leaders interviewed for this White Paper noted the burden placed on families by the scholarship process. They said that it can be invasive, humiliating, and complicated. Several middle-income strategies were crafted with those challenges in mind. Some of these programs allowed families to disclose less personal financial information in exchange for smaller grants or tuition discounts. Others were almost completely removed from a school’s general financial aid process.

Middle-income-only programs

Distinct programs concentrating on middle-income families to the exclusion of lower-income families, like those in Los Angeles, Boston, and Oakland, have some advantages. They can be more easily sold to donors as separate, innovative projects. Also, communities investing in multi-school efforts can more easily track their investment and the program’s impact if each school creates a separate budget line and list of outcomes for the initiative. Middle- income-focused programs also can be an effective way to keep scholarship costs down. A school can offer more families aid if they distribute smaller amounts. In fact, some Jewish day school experts have recommended that schools focus primarily on middle-income families.¹²

Mark Mitchell has seen independent schools implement middle-income-targeted programs. He writes that “in the past three years, as the percentage of enrolled students receiving need-based aid has increased (a combination of a weak economy and the income/tuition growth disparity), the average grant has decreased.”¹³

As schools pay more attention to middle-income families, though, lower-income families may not receive enough aid to allow them to remain enrolled. So instead of creating middle- income-focused strategies, Mitchell has seen schools succeed in retaining more families when they use the middle-income challenge as a catalyst for re-imagining their entire financial aid process.

Some Jewish day schools are trying to do just that. In addition to the CDS example above, Golda Och Academy in West Orange, New Jersey, also has transformed its financial aid process—from dollars distributed all the way down to the terminology used. Head of School Dr. Joyce Raynor says that they changed their system because “we want people to feel like they’re ‘real people’ saving for retirement or other Jewish experiences. We want families to live full Jewish lives.”

The challenge is that concerns about dignity and the wherewithal to “live full Jewish lives” affect every family applying for financial aid. Schools reshaping their financial aid process for one group of families have an opportunity to help their entire parent body.

Integrated programs

Independent-school experts generally are not in favor of initiatives exclusively focused on the middle-income population. Both Marc Levinson at Mid South Independent School Business Officers and Mark Mitchell at NAIS say that schools should opt for integrated financial aid strategies. Levinson says that independent schools exclusively targeting middle- income families have not had the same success as more comprehensive strategies. Mitchell also warns against a limited approach, particularly if higher income levels also correspond to less disclosure. “Families with higher incomes generally have more complex financial situations,” he says.

BJELA’s experience is illustrative: While its Initiative was meant to reach more middle-income students over time, general financial aid has grown faster than anticipated because of the Great Recession. Despite helping middle-income families, then, the Initiative has relieved less of the financial aid burden than expected on participating schools, because they have had to spend more on grants to lower-income families.

Of the community and school efforts researched, Helen Bader Foundation and CDS’s programs stood out as truly integrated:

• While funds come from separate budget lines (and in the case of the Helen Bader Foundation, entirely different organizations), they are not promoted as separate programs.
• There is one application process for everyone, regardless of income level.
• Every applicant is required to provide the same financial documents and information.

Your leadership may feel that a separate program is necessary, given your goals or the severity of your middle-income challenge. Here is an example of a school with a distinct middle-income tier that used a separate program as a catalyst to change its entire financial aid process.

Golda Och Academy: “Flexible” tuition and GO Grants

Golda Och Academy has two separate scholarship tracks: GO Grants, with set amounts of financial aid that vary among different grades, and its standard financial aid process. As a useful model of transparency for prospective parents, Golda Och adapted a chart from the Solomon Schechter Day School in Boston that reflects the different options available to families depending on their income and the number of children they have enrolled in the school:

“Flex tuition” is Golda Och’s terminology for financial aid. Many independent schools and universities have switched to similar language: “Index tuition” and “sliding scale” are other examples. These replace “aid” and “scholarship” language, which can put off middle-income families. On one hand, the chart is a way for the school to transparently present financial aid information to parents. That can go a long way to easing any anxiety lower- and middle-income parents may have about accessing that aid. That clarity, though, may not be as well-received by higher-income families, as some families are explicitly “not eligible” for financial aid.

This speaks to a particular challenge of helping middle-income and even higher-income families, one pointed out by Macy Kisilinsky, board president of Hillel Academy in Pitts- burgh. According to Kisilinsky, Hillel Academy does not limit financial aid to families below a certain reported income. First, he says, “some income, particularly for entrepreneurs, isn’t going to appear as adjusted gross income on a tax return.” Second, each family faces different circumstances. A family with a substantial income also may have sizable debt obligations or other expenses. A chart, or a system with well-defined parameters, may not work for everyone. Schools must balance the desire for clarity with the need for flexibility.

Summary

• Set goals based on data collected about your parent body. Whether your information comes from parent surveys, national census information, focus groups, or dozens of one-on-one meetings, it will be essential as a basis for setting any goals to take on the middle-income challenge.
• Determine what you mean by “middle-income.” Whether you use a definition that fits across multiple schools or is specific to one school, defining the problem will help you choose a solution and set a budget.
• Create an aggressive marketing plan. This will encourage the targeted population to learn about your financial aid process and help you highlight your school’s success.
• Even if you want to create a strategy that is only available to middle-income families, it is worthwhile to reexamine your entire financial aid process and improve it for everyone.

Middle-income-targeted strategies can be an effective tool to combat the barbell effect and help families who are asking for support for the first time. They can attract more middle-income families and help retain those families in your school. If you broaden your goals, what starts as a targeted initiative may transform your entire financial aid process to benefit all of your families.

¹ Mitchell, “Financial Aid Outlook,” NAIS TrendBook (2011-12).
² Batiste & McGovern, “The Equity and Justice Outlook: Socioeconomic Diversity,” NAIS Trendbook (2012-13).
³ Perla, “Middle Income Day School Affordability: A Case Study,” AVICHAI Foundation (May 2012).
⁴ Mitchell, “Demystifying “The Barbell Effect”: Financial Aid and the Middle Class,” NAIS (May 2006).
⁵ Litman, “Secrets of the Virtuous Cycle for Jewish Day Schools,” Measuring Success (Session given atPEJE and Jewish Day School Conference March 3, 2011).
⁶ Statistics from “The Lost Decade of the Middle Class: Fewer, Poorer, Gloomier,” Pew Research Center, (August 2012).
⁷ Mitchell, “Is the Middle-Class Squeeze for Real?” Independent School (Winter 2006).
⁸ Kardos, “Initiative for Day School Excellence,” (January 2007).
⁹ See the Appendix for more information on the middle-income programs listed in the White Paper.
¹⁰ Edwards and Prum Hess, “Middle Income Day School Affordability out on the Western Frontier,” eJewish Philanthropy (December 2011).
¹¹ “Jim Joseph Foundation High School Affordability Initiative Theory of Change,” Evaluation and Training Institute (2009).

Appendix

Download this White Paper as a PDF.