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With the increasing competitiveness of admittance to major universities, private and public, along with diminishing confidence in public education, Americans over the past three decades have turned to private schools to prepare their children for the college admissions race.
Because their educational missions impose on them a moral obligation to serve a public broader than the financially comfortable and because their tax-exempt status imposes on them a nominal legal obligation to do so, private schools have, as this New York Times op-ed explains, faced increasing challenges in finding the funds needed to meet their public service obligations. Until now, these have been met through fund- raising. But, as this essay suggests, there may be other ways of meeting the gap between tuition dollars and the costs of operating institutions.
“Is Private School Not Expensive Enough?” By R. Scott Asen. New York Times.
August 24, 2012. Any parent of a private-school child will tell you that tuitions are painfully high — and getting worse every year. Many New York City schools are approaching the $40,000 mark. And it’s not just New York: charges at many private secondary boarding schools are now touching $50,000. Outrageous, many say.
But I would argue that, if anything, charges may be too low. At least for some of the customers.
Virtually every private-school parent has heard about “the gap” — the difference between tuition dollars received by the school and the actual costs of operating the institution. This information is usually delivered by the development (read fund-raising) office, along with a heartfelt plea to help plug that gap with a donation.
Fund-raising activity has become central to the life of these schools. Annual fund drives routinely run into the low millions of dollars for schools of fewer than 500 students. And endowments in the hundreds of millions of dollars are common at the more prestigious secondary boarding schools.
But the development model is beginning to fray. Cost growth has consistently outstripped revenue growth year after year, for decades. At private day schools today, tuition receipts often cover only 70 to 80 percent of costs, while at boarding schools it is not unusual for tuition to cover 50 percent or less of actual costs.
This brings us to a troubling conclusion: To the extent that any family with the wherewithal is paying less than the full cost of the product it is buying through combined tuition payments and donations, that family is effectively being subsidized by other current and past donors. Not only is this ethically unsupportable, but ultimately, it is also financially unworkable.
My proposal: Supplement the traditional development model with a new pricing model.