November 11, 2020, Vemo Education held a webinar with institutional partner Messiah University, “Targeted Institutional Aid: How One School Increased Enrollment Yield with ISAs.” Sarah Wade, former Messiah employee and Vemo’s current Regional Vice President of Enrollment Management sat down with Laura Miller, Director of Institutional Research at Messiah. Together, they discussed how Messiah and Vemo developed a targeted income share agreement (ISA) program and boosted yield in key student populations. 

The abbreviated webinar transcription below has been edited for clarity and length.

Sarah Wade: Today, we’re going to dig into ISAs in an enrollment use case. An ISA essentially is an agreement between the school and the student that provides that student with some education funding. In exchange, the student agrees to give a fixed percentage of their future income back for a fixed amount of time. 

The use cases are, in some ways, almost endless, but today I want to talk a little bit about an enrollment use case. Messiah’s program started as a retention program. But when I first heard about it, I knew that I wanted to use it for enrollment. 

We were seeing a couple things—one was a decrease in our yield rates. Our enrollment yield rate in the 2015–2016 cycle was 35 percent, but in the 2019–2020 cycle, it went down to 30 percent. That is not uncommon for schools in the Northeast. But the institution wanted to address it.

At the same time that the enrollment yield was going down, our first-year student discount rate stayed pretty much the same. It was 50 percent in 2015, and it was 51.2 percent a few years later. There was a lot of pressure from our board of trustees, as well as our institutional leadership teams, to hold the discount rate as much as possible. However, we knew that there was direct correlation between financial aid and enrollment yield rates. Students would send us emails about how much they wanted to attend, but they’d say that we were just too expensive.

We knew we couldn’t address this by handing out additional $5,000.00 in institutional gift aid toevery student. Instead, we wondered, “Can we use ISAs in an initial student financial aid package to increase enrollment?”

We knew we wanted to increase our yield in targeted segments, and we also wanted a benevolent ISA that would complement existing institutional aid.

Vemo Education acted as a sounding board for us as we went through this process. We talked through how we would measure the ISA program’s success, determine students’ other obligations, and provide adequate consumer protections. 

The ISA amount that we decided on was $5,000 per year, so students would receive a total of $20,000 over their four years. Their income share for one ISA would be 1.5 percent per year, and the maximum number of monthly payments is 90, over a payment window of 150 months. We had a payment cap of 1x, so that students will never pay more than what they’ve been given by the institution. Another protection that we have for students with an ISA is a minimum income threshold. If a student is not earning $2,900.00 per month, then they’re not paying back their ISA until they do.

Laura Miller: We researched a range of factors to identify where we could place ISAs in the financial aid model. Our ultimate goal during all of this research was to identify students who were not already heavily leveraged with loans and students who received a significant amount of institutional aid. 

We decided to focus on out-of-state students in Need Level 3 of the econometric model—the need level of typical middle-income students. They’re receiving significant institutional aid dollars, but they don’t have any federal or state grant aid and are oftentimes highly leveraged with private loans. We also wanted students from Academic Tiers 2 and 3. [Note: Academic tiers in Messiah’s econometric model indicate students’ willingness to pay.] 

We decided to do an AB test where half of the students in the target range would receive an ISA and the other half would not receive an ISA. 

How did it go? The yield for those students that received an ISA was higher than those who did not receive an ISA by four percent. We saw a really significant increase in our out-of-state population—a 21 percent increase in yield for those with ISAs over those who were not offered an ISA. 

Because this worked and we felt comfortable, we decided to expand the program to all Level 3 students. Because we’ve seen a significant increase in yield, we’re also going to be expanding the ISA for out-of-state students even more.