Private Schools Feel the Pinch Amid Recession

Private Schools Feel the Pinch Amid Recession
Mary Pilon
Tuesday January 27, 2009, 2:11 am EST

Trinity Episcopal School survived Hurricane Ike last fall. But then another storm hit -- the economy.
The Galveston, Texas, school, where tuition is between $5,000 and $8,000 a year, has seen its enrollment drop 12%, says , the head of the school. Many parents of its students were among the 3,000 workers laid off by the area's largest employer, the University of Texas Medical Branch. At the end of 2008, the school's endowment was $800,000, down about 20% from July.
The school has ramped up donation efforts through its Web site, and held car washes and bake sales. It stopped using substitute teachers -- other staff members now step in when a teacher is out sick. "Our school will survive, but it will take years to recover," Mr. Dearman says.
Trinity Episcopal School is one of many kindergarten-through-12th-grade private schools caught in the middle of an economic tempest: anemic endowments, dwindling donations, financially strapped parents slashing tuition from the family budget, and an exodus to suburbs with more appealing public schools where costs are lower.
"The discourse has shifting from sustainability to survivability," says , a spokeswoman for the National Association of Independent Schools.
The association also has seen more applications from families seeking financial aid. The association processed 146,000 of the School and Service for Financial Aid forms for the 2007-2008 academic year, up from 140,000 the year before. It anticipates the number will climb as parents begin to receive their letters of commitment for the 2009-2010 school year in coming weeks.
Parents also are donating less to private schools. of Sherman Oaks, Calif., pays $34,000 in tuition to send her 7-year-old and 10-year-old to the Wesley School in North Hollywood. She sees that expense as "a non-negotiable part of the family budget."
Not so for her charitable contributions to the school. Ms. Gottlieb, concerned about the general outlook of the economy, has cut her donations this year to just a fifth of what she gave last year. "It's not because I believe in the school less; it's just what we could afford to do. And I know others are doing the same," says Ms. Gottlieb, whose husband is a movie-industry executive.
To help with the tuition bill, the Gottlieb family has scaled down vacations, opting for camping trips. She ditched her larger car for one that guzzles less gasoline. Ms. Gottlieb started to do her own gardening and handiwork around the house and plans to re-enter the work force.
Schools are feeling the squeeze in their budgets. Many are opting for pot-luck dinners for staff and PTA meetings in lieu of catered events. More endowment mailers are being sent out electronically rather than on paper.
At Phoenix Country Day School, where annual tuition ranges from about $16,000 to $21,000, "airplane portions" of pretzels have replaced muffins and cookies at staff meetings. Seven of the school's administrative employees have moved into a new office: a "1960s-era former locker room made of corrugated metal and located in the maintenance area," says , a spokeswoman for the school.
The Phoenix Country Day School's endowment, like many other portfolios, fell about 30%, to $13 million from $17 million, says , the head of school. "Independent schools are challenged at a time like this," he says. "That will make us be very thoughtful on how we spend it."
Even though the school has been pounded by a grim local housing market and job losses, Mr. Campbell refuses to cut programs. The school has curbed some routine spending, and Mr. Campbell has pulled in staff members one by one to assess their talents. "I discovered a potential softball coach in the administration," Mr. Campbell says. "I had no idea."
Private schools in areas particularly hard hit by the economic downturn are also facing changes. Some children of recently laid-off Wall Street employees in the New York City area and those in the auto-making hub Detroit have been pulled from schools or reneged on contracts for the 2009-2010 school year.
Cornerstone Schools in Detroit doesn't have an endowment, but relies heavily on corporate and individual donations to subsidize the $3,500 tuition. "Some parents can't afford that," says , the founding chairman and CEO of the schools. In 2007-2008, the school raised $7 million in fund-raising events, Mr. Durant says. This year, he estimates donations will be down about 30%.
Mr. Durant is looking into corporate donors outside of the Detroit area and possible "hybrid" programs with other schools to help alleviate costs.
"Nobody likes to have to deal with these difficult circumstances," he says.
And as if those challenges weren't enough, some private schools were hit by 's alleged Ponzi scheme. Ramaz School in New York City lost $6 million through Madoff investments, according to a letter sent to students and parents. The administrators at SAR Academy in Riverdale, N.Y., also sent out a letter, notifying families that a third of its $3.7 million endowment was lost through Madoff investments.
One option for many families is schlepping to the suburbs, where the public schools are often more highly rated than in cities. Montgomery County School District, which serves Washington, D.C., suburbs Bethesda, Rockville and Silver Spring, Md., has seen an "unexpected" spike in public-school enrollment this year, according to , operations manager with the school district. This year, it received 1,500 new students and anticipates an additional 1,300 for 2009-2010, for a total of 139,000 students. Many of the new students previously attended private schools, Mr. Cram says.
Some parents are opting for loans to help fill the financial-aid gap, says Ms. McGovern of the National Association of Independent Schools. She's also hearing stories of grandparents stepping in to help pay tuition bills.
The future remains uncertain, even for those who are able to pay for private school. The daughter of receives almost $8,630 in scholarships to cover the cost of her education at Cristo Rey High School in Sacramento, Calif. But it will be difficult for the family to pay the tuition for a younger son, who hopes to attend the Catholic school next year as a freshman. Ms. Aviles says she prefers the private school, concerned about gang violence in public schools nearby.
To supplement its scholarship fund, Cristo Rey has ramped up its grant-writing efforts to reach a one-year fund-raising goal of $1.5 million by the end of June. "We still have a long ways to go," says , an administrator at Cristo Ray.
In September, the home the Aviles bought in 1997 went into foreclosure. Since then, Ms. Aviles has found work part-time cleaning hotel rooms and her husband is putting in overtime as a plumber. They struggle to keep up with the $55-a-month tuition payments.
"The economic situation is hard," she says. "But we want the best for our kids."
Write to Mary Pilon at mary.pilon@wsj.com