A Very 2025 Tale of Three Schools

The First School

“We have the wind at our back,” is a line in the request for proposals for a strategic plan to envision what comes next for a thriving preK-12 school in a Southeastern U.S. state. After two decades of steady growth, the 1,600-student powerhouse has few significant competitors, apart from a few much smaller schools that serve very specific subpopulations of students and families. After purchasing a 100-acre parcel several miles from the existing 65-acre campus with cash and expecting continued population growth in the area, the head and board want to strategize on how to keep a strong competitor—possibly for-profit—from entering the market. They also want to collectively consider how they can leverage their debt-free balance sheet and growing enrollment demand to “reimagine what school can be.”

The Second School

After several years in a row of operating the school on an ever larger share of the next year’s tuition revenue, this school finds itself hovering at the edge of an abyss. During the 2008-09 economic downturn, the school depleted its reserves to maintain enrollment by offering discounts, hoping that once the economy improved, families would resume paying full tuition. This did not happen! Maintaining enrollment by net tuition discounting created a market-leading level of socio-economic diversity among student families, but it did so by creating a market-leading and unsustainable level of unfunded financial aid.

After a decade of relying on reserves and gradually depleting the meager endowment, the school received a lifeline through two pandemic-era PPP loans, which were eventually forgiven. However, by 2022, the PPP funds were exhausted, and with reserves and unrestricted endowment depleted, the board began using a portion of each next year’s tuition to cover operating costs for the current year. By 2025, this approach hit a wall when the school’s bank refused to extend its line of credit, which was typically used to operate until tuition payments were received. To buy itself time to restructure, the school sold its only remaining asset, the campus, to a developer, who will allow the school to occupy the site rent-free for a year. The proceeds from the cash sale are intended to cover operating expenses for that year, as well as the costs associated with relocating to a new site. 

The Third School

After reaching a peak pre-K through grade 6 enrollment of 206 students in 1989, a slow-moving downward demographic trend in the area brought enrollment to 168 by 2024. New forecasts in early 2025 suggest the slide in the number of school-age children is leveling off, but the signs point toward population stability rather than a growth trend for the foreseeable future. After repeatedly adjusting operations to bring expenses in line with revenue, down to 175 students, the head and finance committee of the board have been unable to cut further without touching the school’s proverbial third rail: its 2-teachers-in-every-classroom model. As a result, and despite a bump in funds raised through the annual campaign, reserves have been drawn upon to cover each of the past three years while maintaining the school’s signature classroom experience.

The board agrees they shouldn't wait too long to act but is sharply divided on what to do. Some trustees believe this is the new normal for enrollment and are prepared to adjust the teaching model to accommodate a school budget of 160-170 students. A few others think that families are out there, if only the school had a more charismatic leader and a stronger admissions strategy. Still, other board members want to stay the course as long as possible, hoping that the number of school-age children in the area begins to grow and enrollment can once again approach 200.

 These subtly disguised descriptions of schools reaching out to us for help in recent weeks reveal the wide range of situations facing the private, independent school sector. For some, advantages like geography and market conditions mean that the wind is truly at their backs, while for others, the wolf is already well past the door. Many schools resemble the third example: still operating, but with a present and future that look very different from their past.

The present moment is both the best and worst of times for independent schools, simultaneously. Should the first school ride with the wind? What about the third school; how can its board embrace being smaller than they wish? Does the second school face a wind-down scenario? What would you suggest?