SAGE Scholars Tuition Rewards Program: A Comprehensive Guide
As financial planning and wealth management become increasingly competitive, advisors seek unique ways to differentiate themselves. The SAGE Scholars Tuition Rewards program offers a compelling client perk that can support retention and potentially generate referrals. This article delves into the details of this program, exploring its benefits, limitations, and overall value proposition.
Understanding SAGE Scholars and Tuition Rewards
The "Tuition Rewards" program from SAGE Scholars allows participants to earn "guaranteed minimum scholarships" for family members at over 300 participating private colleges across 45 states. SAGE (short for "Savings And Growth for Education") Scholars itself was formed in 1995 to help improve the affordability of private higher education. The program was created by Dr. James Johnston, a former Director of Admissions and Financial Aid at Wharton.
After 19 years of growth, the program boasts almost 300,000 students enrolled nationwide (including a large contingent as part of the Pennsylvania 529 plan). In 2013, participating students used reward points valued at $33 million with 3,118 applications to member colleges, according to SAGE's data.
How Tuition Rewards Work for Financial Advisors and Clients
Like other forms of "Loyalty Programs," SAGE Tuition Rewards can be earned by financial advisors based on the assets they manage for clients, at an annual rate of 5% of the assets invested. Advisors pay to have access to Tuition Rewards and be able to enroll clients in the program and generate reward points on their behalf. The cost to an advisor is $74.95/month (paid annually gets a 1-month discount so it's only $824.45/year) to participate in the program (with discounts available for firms with multiple advisors).
Once signed up, the advisor provides information on client account balances twice a year (on January and July), such that clients receive their points at a rate of 2.5% twice a year (based on December 31 and June 30 end-of-period balances, respectively) to get their total 5% points accrual. Once clients are set up, SAGE assigns client "ID numbers" so that names don't need to be transmitted on an ongoing basis, to help support client privacy.
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Benefits of Accumulating Tuition Rewards
Because Tuition Reward points can be used for multiple family members, even clients with larger account balances, who may reach the single student maximum quickly (with a $1,000,000 account balance, Tuition Rewards accrue at a rate of $50,000/year!), may find value to continue accruing points that can be distributed to any/many family members (SAGE allows a rather broad family list, including siblings, children, grandchildren, nieces, nephews, aunts, uncles, and cousins). Over the span of just 5 years, a $1,000,000 account balance can rack up points worth a whopping $250,000 of Tuition Rewards to "hand out" to a wide range of family members!
Important Dates and Deadlines
- Clients who enroll don't even need to name their students now, in case they aren't sure, or there isn't an appropriate student to name yet (e.g., the grandchildren haven't been born yet!).
- However, for a student to be eligible, they do ultimately need to be identified by the sponsor to SAGE by August 31st of the year the student begins 11th grade.
- For students who are signed up earlier, the institutions cannot begin to send any college information to the student until he/she reaches 9th grade.
- In addition to identifying students under the program by August 31st of the year the student reaches 11th grade, Tuition Rewards points must be transferred from the client sponsor to an actual account of the student by August 31st of the year that 12th grade begins for that student. At that point, the student can no longer receive/generate any additional points (though the sponsor can continue to accrue more/new points to transfer to other students in the future).
- Students must be in the Tuition Rewards program prior to the start of 11th grade.
- Students cannot earn or receive Tuition Rewards after August 31st of the year that the student begins 12th grade.
- A student’s sponsor (the Tuition Rewards account holder) must submit a student’s statement to any member school he or she applies to at the time of the student’s application to that school.
Redemption and Limitations
Redemption of Tuition Rewards is limited to undergraduate education (not graduate school), beginning with the freshman year. Tuition Rewards must generally be redeemed ratably over 4 years, which means even earning the "maximum" of 1 year of tuition will actually result in a redemption of 1/4th of tuition per year for 4 years; in practice, this leads to a "maximum" annual reward over $10,000/year, as there are currently 14 schools in the SAGE Scholars network with annual tuition in excess of $40,000/year.
The maximum discount from Tuition Rewards that a student can receive is 25% of the cost of tuition at a SAGE member college or university.** The Tuition Reward must be applied evenly over the years of undergraduate education (typically 4 years, but may be 5 years if student is in a co-op program). If the student completes undergraduate education in other than four years, it is up to the participating college to determine how the tuition reduction will be applied per year.
Considerations for Advisors
From the sheer dollars and cents perspective, the "leverage" of Tuition Rewards is significant; for an advisor cost of less than $900/year, clients can rapidly accumulate significant Tuition Rewards at a rate of 5%/year of the account balance. At the typical wealth levels and account balances that advisors on an AUM model maintain with clients, Tuition Rewards points could realistically accumulate at the pace of thousands or even tens of thousands of dollars per year! And because of the broad latitude of "family members" to which points can be granted, a senior member of a family (e.g., a retired couple) can potentially assign points down to a wide range of grandchildren, nieces, and nephews (or for younger clients, to use with their own children directly) as points continue to accrue over time. Merely getting - or retaining - one client per year who pays $5,000 of fees recovers the entire cost of the entire program and then some (by a factor of five!)!
Of course, making the Tuition Rewards program available to clients will require a disclosure of the details to clients, including that the student's information will be provided to the educational institutions, and an explanation of the potential conflict of interest (SAGE Scholars has obtained an opinion letter from compliance attorney Tom Giachetti of Stark & Stark affirming that the program can be offered by RIAs to clients with appropriate disclosures). Advisors under a broker-dealer will need the compliance department to accept participation in offering Tuition Rewards to clients as an Outside Business Activity (OBA).
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In addition, it's worth remembering that the points have no liquid or cash-redeemable value (which avoids them being deemed as rebating for compliance purposes), cannot be transferred (except as specifically permitted to student family members under the program), and in many cases may simply replicate the tuition discounts that students may already have been able to receive anyway.
Limitations of Participating Institutions
In addition, the eligible institutions on the SAGE Scholars list are generally not "top tier" schools (which generally don't feel the need to offer discounts to attract students). Thus, notwithstanding that Tuition Rewards may potentially be discounts that could be obtained anyway, and may not be to "top tier" schools, there's arguably still a lot of perceived value in having that tuition discount guaranteed under Tuition Rewards, for at least some schools, rather than simply hope that the discounts are available when the time comes.
Member colleges are not required to accept Tuition Rewards on transfer students. If a student applies, is accepted, or is attending a college that is not participating in this program, but subsequently decides to participate, the college is under no obligation to honor his or her Tuition Rewards. If any college should decide to discontinue participation in this program, it has agreed to honor rewards accumulated for any student prior to the last day of the college’s participation.
Colleges reserve the right to use the tuition reduction as part of, or separate from, any financial aid packages.
Value Proposition and Differentiation
Ultimately, the reality is that many students can already potentially earn merit-based aid and discounts from many schools, but there is little certainty about whether the discounts will really be there when the time comes. From the advisor's perspective, then, offering Tuition Rewards as a form of "loyalty points" for clients can have a high perceived value for clients who wish to stay with the advisor, and be something that potentially generates "buzz" amongst clients to drive additional referrals as well.
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The bottom line, though, is that in a world where financial planners are increasingly struggle to differentiate themselves, a program like SAGE Scholars represents a unique form of client perk not currently available from most advisors. In addition, the nature of the program allowing points to accrue based on assets under management (contact SAGE for other options available to advisors who charge based on retainers rather than AUM), and continue to accrue over time, becomes an appealing "loyalty rewards" program to encourage everything from client retention to client referrals.
Important Considerations and Disclaimers
Tuition Rewards are remitted solely as a reduction to the participating college’s full tuition bill and NOT awarded in cash.
For student specific rewards (such as the Pennsylvania 529 College Savings Program), students will not earn Tuition Rewards after age 17, or after August 31st of the year prior to high school graduation - whichever comes first. Some rewards earned directly by a student, such as certain bonus points, are student specific and cannot be transferred to another student.
If a student does not use his/her Tuition Reduction Reward - for example, if the student selects a non-participating college - most rewards can be refunded back into the Sponsor’s Tuition Rewards account and then transferred to a younger eligible student.
To receive complete information about the SAGE Tuition Rewards program, the program’s financial aid implications, and the benefits of membership, please contact SAGE Scholars Tuition Rewards to request further information.
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