November 5, 2020, Vemo Education hosted a webinar with school partner Houston Baptist University (HBU), “Retention and Revenue: What a 3% Retention Increase Really Means.” In this webinar, Bill Brosseau, co-founder and Vice President of Higher Education at Vemo, and James Steen, Vice President for Enrollment Management at HBU, discussed methods to improve retention using income share agreements (ISAs). The webinar has been summarized below, and a full recording is available here.

Retention is intertwined with a number of other objectives at an institution, like enrollment yield, progression, and graduation. When those metrics are strong, they mutually benefit schools (from a funding and revenue perspective) and students, who position themselves for career success and lifelong learning after graduation.

But not all students make it to graduation. Sometimes that’s a function of varying curriculums. Or external pressures, or even student choices. But by looking outside the box and creating a holistic support system for students, colleges can reduce the number of students who stop out or drop out.

Data analytics can help schools identify at-risk students. Mobile apps can help students keep in touch with their advisors. Outreach programs can encourage stopped-out students to re-enroll. What’s missing from the equation is a financial tool that fixes a student’s temporary financial problem with an appropriate solution. This is especially important, considering the vast majority of students who leave college do so because they can’t afford to pay.

An income share agreement (ISA) is an agreement between a school and a student that provides the student with education funding. In exchange, the student agrees to pay a fixed percentage of his or her future income, up to a maximum amount or number of monthly payments—whichever comes first. Participants only pay when their income is above a monthly minimum income threshold, and their obligation expires after a fixed number of years. 

For students who have exhausted other sources of financial aid, a retention-focused ISA program can help them stay in college. According to Brosseau, “Creating some diversity in the tools that you have to address these retention issues gives you the ability to distribute a far greater amount of money to more students, because you know what the cost-benefit analysis is going to be.”

Houston Baptist University is a private Christian college in Houston, Texas. In 2018, HBU partnered with Vemo Education to design an ISA program to provide “last-mile” funding for juniors and seniors who were at risk of dropping out due to funding gaps.

“We set up our program with a 1x payment cap,” Steen said, “which means we won’t collect a penny more than the amount [students received].” Although the program is still new, HBU is confident its ISA program has already provided essential funding to students who’d have been otherwise unable to continue college and graduate.

When colleges improve their ability to retain students, not only do more students graduate, but also, the colleges themselves see increases in revenue. For HBU, Steen estimates a 1% increase in retention would translate to an extra $350,000 in federal aid capture and student contributions. 

“For us, a 2.5 to 3% bump in retention is $1M more in revenue,” Steen said. “And that’s just in that academic or fiscal year. There are compounding effects to that in years 2 and 3 if, in fact, [students are retained].”

Reflecting on the process of HBU’s ISA program design and implementation, Steen said, “It was definitely a robust process… [But] with the team we partnered with at Vemo, it was very, very doable.”