How to Calculate the Return on a Retention Program

A CFO wants two things from a retention program: how many students it keeps, and what they're worth after aid. Many retention ROI figures fall apart under that test. They use gross tuition instead of net, credit every returning student to the program, and count four years of revenue as if every one of those students will graduate.

What follows is a student retention ROI calculation a budget office can accept, because every input is visible and every assumption can be argued with. The worked example uses invented numbers throughout, labeled as such, and none of them is a Journey result.

The formula in plain terms

Two numbers do most of the work:

• Net return = students retained because of the program × net value of a retained student − the full cost of the program.
• Break-even = the full cost of the program ÷ net value of a retained student. This is the number of students the program has to keep to pay for itself.

Break-even is often the more persuasive of the two. "This program pays for itself if it keeps three students who would otherwise have left", the conclusion of the illustrative example below, is a claim a CFO can test, and a modest one. It also survives arguments about the size of the effect better than any single return figure does.

Start with a baseline you can defend

The baseline is the retention rate you'd expect for these students without the program. Get it wrong and everything after it is wrong too.

• Same population. If the program serves first-generation first-years, the baseline is first-generation first-years, not the whole class.
• Same definition and timing. Fall-to-fall retention measured at the same census date, or fall-to-spring persistence if that's what you're measuring now.
• More than one year. Average the last three years if you can. A single year can be unusually good or bad.
• Or a comparison group this year. Similar students who aren't in the program, chosen before the term starts. Institutional research can help match them.

One trap deserves a sentence of its own. If you choose students because they looked high-risk at one moment, some of them would have improved anyway, simply because a bad moment passed. A comparison group chosen the same way protects you from crediting the program with that.

Count only the students the program kept

Students retained because of the program = (the program group's rate − the baseline rate) × the number of students in the program.

Not every returning student. Most of them would have returned anyway. If 300 students are in the program, the baseline is 71% and the program group retains at 75%, the program gets credit for 4 points, or 12 students, not 225.

With small groups, be honest about chance. In a group of 300, retention can move by a few points from one year to the next for no particular reason. That's why the sensitivity check later in this guide matters, and why break-even makes a better headline than a single return figure.

Value a retained student honestly

Start with what the institution actually receives, then subtract what it actually spends to teach one more student.

Then extend it beyond one term. A student retained into the second year doesn't stay forever. Multiply each later year by the chance they continue, using rates a little below your campus average, since these are students who nearly left. Discount future years at the rate your budget office uses. If your program runs for one term and you're measuring fall-to-spring persistence, the first value is one term's net revenue, not a year's.

One rule on use: this arithmetic makes the case for a program. It should never be used to rank individual students by what they're worth to the budget.

Count every cost

• Program fees. Software, services and anything else on the invoice.
• Staff time. Hours a week for the weekly review, follow-ups and handoffs, at a loaded hourly cost that includes benefits.
• Setup and training. The hours to gather campus details, set up escalation and train staff.
• IT time. Exports, accounts, the security review.
• Added demand on offices. If the program sends 200 more students to tutoring and advising, someone sees them. Give it its own line, even if you value it near zero because those offices have room.

A worked example, with illustrative numbers

Every number in this example is invented to show the arithmetic. Amounts are in dollars. None of them is a Journey result, a Journey price or any campus's real figure.

The program serves 300 first-years. The three-year baseline for similar students is 71% fall-to-fall retention. The program group retains at 75%, so the program is credited with 12 students.

The result, still illustrative: 12 students × 39,847 = 478,164 in value, minus 102,250 in cost, is a net return of 375,914. Break-even is 102,250 ÷ 39,847, or about 2.6 students. The program needs to keep three students who would otherwise have left to pay for itself.

Run a sensitivity check

A single answer invites a single argument. A table of scenarios moves the conversation to which assumptions are reasonable, which is the conversation you want.

Show the losing scenario. It tells the CFO you aren't hiding anything, and it moves the discussion to the decision that matters: whether you're confident the program keeps at least three students, or seven if you only count one year. A one-semester pilot can answer that.

Who supplies each input

A CFO trusts numbers that come from the offices that own them. Ask each office for its line before you do any arithmetic, and name the source on the page.

Keep a time log during the program, even a rough one. Staff time is easy to estimate after the fact and hard to defend that way.

Mistakes that sink a retention ROI case

• Gross tuition. The fastest way to lose a CFO's trust.
• Crediting every returning student to the program. Only the difference from the baseline counts.
• Four full years at face value. Without the chance of leaving later and a discount rate, the number is fiction.
• Leaving out staff time. Every finance office knows staff time costs money.
• Turning one term into a year. A fall result is a fall result until spring census says otherwise.
• Choosing the method after the result. Agree on the method with the budget office and institutional research before the term starts, in writing. Then nobody can say the math was built to fit the answer.

Running the numbers for your campus

Our retention calculator runs a version of this arithmetic on your own inputs, including year-by-year retention and a present-value discount, and shows how many students you'd need to keep to break even. To match the method here, enter your tuition discount rate so it works from net revenue, and leave the recruiting cost at zero unless your campus really backfills lost students. It doesn't subtract the added cost of teaching a retained student, so take that step yourself. Replace every default with your own figures.

Here is one result from our own pilot. Of about 100 high-risk first-years in the University of New Haven pilot, 4 left. The semester before Journey, 50 high-risk first-years did. It compares one semester with the one before, not with a matched group. We don't turn it into a dollar figure here, and you shouldn't accept anyone's dollar figure, ours included, that you can't rebuild from your own net revenue, aid and costs. For a test you can run in a term, see How to Run a One-Semester Student Success Pilot, and for presenting the result, Reporting Student Retention to Your Board.

Before the next budget meeting, fill in the two tables above with your own numbers, send them to the budget office, and ask which line they would change.