There are a few choice truisms we love to repeat here at College Aid Pro™. One such phrase we often deploy is “the sticker price is meaningless.”
That’s an objectively true statement, as the average tuition discount for first-time undergraduates is nearly 54% (and rising).
In other words, colleges really want you to think of them and hear Edward Elgar’s Pomp and Circumstance playing in the background. In reality, all colleges and universities are businesses.
They’ll charge the maximum price in public but cut a deal behind closed doors.
Which brings us to another key point: college ranking should never be used as the definitive measure of an institution’s value. While rankings certainly aren’t meaningless (like sticker prices), their significance is often widely misunderstood.
That’s especially true in light of a new initiative by private equity firms injecting millions of dollars in Historically Black Colleges and Universities (HBCUs).
These PE outfits are not only funding diversity initiatives in an infamously homogenized industry, but they’re proving that a school’s worth should be assessed for its educational opportunities and career prospects, not just its name brand.
Why Field of Study Should Precede Ranking
Marketing is powerful, and colleges know it. After all, that’s why they spend about $730 million a year on ads hyping their program.
That doesn’t necessarily make them malicious (this is America, after all — land of the free, home of the advertisers), but it does make it harder for families to remember why they’re actually sending their child to college in the first place.
Despite the sports teams, the mascots, and the new Starbucks on campus, students are there to learn. They’re there to develop crafts and trades, to study philosophies under faculties, and to graduate with tools that set them up for a lifetime of financial opportunity and personal growth.
That’s why it’s such a big deal that Apollo, Ares, and Oaktree Capital Management are giving $90 million to HBCUs over the next decade (under the unified nonprofit foundation called Alt Finance Corp.).
While fulfilling IDEA (Inclusion, Diversity, Equity and Action) pledges, these PE firms are effectively saying: “we want to attract more diverse talent in our industry. We’re not giving money to the Harvards, Dukes, and Yales of the world — we’re giving them to the schools that actually need it.”
With this infusion of capital, the three PE firms are establishing mentor fellowships, scholarship programs, and a totally virtual institute with a customized curriculum built by the University of Pennsylvania’s Wharton School.
All of these features are designed to create a highway for students to graduate college and immediately launch into the world of private equity.
Alt Finance Corp’s magnanimity also highlights a rather revolutionary gesture. By creating a funnel for students of HBCUs to study finance with intent to work in PE, they are openly communicating a criminally ignored component of college: Outcomes.
According to Ares Chief Executive Michael Arougheti, “It’s not just about attracting diverse talent. You need to retain them and give them a deep sense of belonging and trust.”
Most colleges don’t advertise with the future in view. They focus on the now and “the best four years of your life.”
Michael Arougheti’s focus is clearly on the long-term horizon, which is exactly where families should be looking.
These countercultural private equity firms are setting a high bar. They’re loudly affirming the importance of not merely graduating but graduating with effectively guaranteed career opportunities.
Such outcomes are always more important than a school’s ranking.
They’re also essential to securing a family’s return on education.
What This Means For Advisors
The effects of COVID-19 spared nothing. Even college matriculation rates were way down in 2020.
As with all things, however, there was a silver lining: Americans had a moment to pause and reflect. In particular, this inflection point caused many families to reassess the value of college.
After all, in our pre-pandemic world, many kids would end up inevitably fulfilling one of the three common higher education journeys: attending their parents’ alma mater, going to the local state school, or chasing induction into the Ivy League.
That’s not to point the finger at families. That’s to illustrate that most Americans simply aren’t aware of just how many excellent, affordable, and career-defining schools are available beyond the “usual suspects” colleges.
Today, however, families are stepping back and looking at the collegiate picture anew.
This presents a truly incredible opportunity for advisors to enter the conversation and provide fresh pathways to education planning.
The next time your college-bound client reveals their #1 priority school, ask them one very specific question: “Why do you want to go there?”
If the answer doesn’t include a specific rationale for the specific field of study, the faculty, or the outcomes associated with that program, seize the perfect opportunity to guide the conversation.
Use CAP’s tools to help clients expand their understanding of the college landscape. Get them to take a more horizontal view of their investment.
After all, in a matter of minutes, you can consolidate the essential information of your clients’ school shortlist and quickly show them:
- What colleges expect them to be able to pay
- What graduates earn on a one, five, and ten year basis
- What their monthly student loan payments will be after school
And that’s only the start.
By asking your clients the “why,” you’ll help them expose blindspots and open their eyes to a whole new world of college opportunities.
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