Why Are Independent Schools So Expensive? And Are They Worth It?

by Sarah P. Daignault, National Business Officers Association

Independent school parents often ask their school's business officer: Why is our tuition so high? And, of themselves, they may be asking: Why do I send my child to an independent school when I already pay taxes and could send my child to public school for free?

What Tuition Covers

The answer to the first question can be understood by examining the real cost of providing the type of education our schools have to offer. Let's begin by looking at the expenses an independent school faces.

Salaries and Benefits

Personnel costs account for 70 percent of the expenses of an independent day school. This makes sense because independent schools are people-intensive organizations. What contributes most significantly to the quality of the education provided in our schools is the quality of our teachers. Additionally, a high teacher-student ratio enhances a teacher's ability to teach each student. In fact, these are the two major tenets of an independent school: quality teachers and individual attention.

Over the last fifteen years personnel costs in independent schools have been rising dramatically. This increase comes partly from actual increases in the level of compensation for teachers, but the majority of the increase comes from additions to the school staff. Schools have added new programs and more support staff, such as counselors; learning specialists; teachers of languages beyond French and Spanish; science offerings that go beyond biology, chemistry and physics; community service program administrators; and environmental program specialists.

Addition of these newer positions is exactly what one would expect in an independent school. Parents want a wide array of programs as well as the support necessary to meet the needs of their children. Such offerings include sports and the arts at beginning levels to expose students to these disciplines, as well as at higher levels to support those who want to pursue advanced work.

As tuitions rise, school boards and administrators are wrestling with difficult questions. What is the optimum size of a "small" class? What is the educational impact of having twelve or fifteen or seventeen children in a class? Can we afford to offer advanced placement classes with fewer than ten (or six) children? How do we define productivity in a school? Can the school limit its offerings with an understanding that, in order to add a new program, it must first remove an old one? How these questions are answered directly affects the individual attention a school has to offer its students. And this, after all, is the hallmark of the independent school.

Classroom Supplies

This part of the budget covers science lab supplies, art supplies, soccer balls, chalk, dry erase markers, toner, manipulatives and the like. While independent school classrooms are rich in such resources, classroom supplies are actually a very small part of the costs of our schools.

Administrative Costs

Administration is critical to an independent school's operation. The school secretary who answers the phone and seems to know every child and where he might be found feels like the glue that holds it all together.

This is not an optional expense; administrative tasks need to be done no matter the size of the student body. Each school needs a head of school, a business officer, an admission officer and a development officer. As the size increases the additional support personnel also grow. On a per-student basis, however, this administrative load in a school with 1,500 students is much more cost-effective than the same load in a school of 200 students.

Other administrative costs include property, casualty and liability insurance. Those premiums have become dramatically higher in the last five years because of disasters like 9/11 and Hurricane Katrina. Also, the need for professional services has increased. Legal expenses have grown due to the increasingly litigious nature of the world. Accounting fees are also radically higher as a result of the new focus on transparency in non-profits, brought on in part by the Sarbanes-Oxley legislation for publicly traded companies.

The administrative cost per student points up another major issue for independent school pricing. The scale of independent schools makes them more expensive than their public school counterparts. When spread across an entire public school district, insurance, legal and accounting costs are considerably less expensive per student than those same costs spread across an independent school population. After all, the median size of an independent day school is only 398 students.

Facility Enhancement and Maintenance

Facilities expenses have increased significantly over the last ten years. Independent schools have added computer technology to the infrastructure and to the curriculum. E-mail and voice mail did not exist in the late 80's. Energy costs continue to rise; there is great pressure for our schools to operate in a more sustainable way. This is good for the earth and the future, but more expensive in the short term.

The quality of the facility is also critical. Shabby chic no longer works as a badge of honor for a school. A pressure on the cost structure has been the school's awareness that it must treat its major assets (endowment and facilities) with the stewardship necessary to preserve the capital over time. These assets need to support this generation of students as well as the next. Schools have focused on endowments in this way all along. But it is only recently that they have viewed facilities in the same way. So now a major item in the budget is funding for the renewal and replacement of the plant.

A number of schools have taken advantage of available tax-exempt bond financing. For some this is a way to build the building now and pay for it over time with contributions that are raised in a capital campaign. This strategy not only pays for the building but also increases the size of the endowment - if the funds are raised early in the building project and the bond is held for the full term.

For a school that takes on this type of financing (or more traditional bank financing) to construct facility and does not have a fundraising effort at the same time, there will be carrying costs that need to be paid out of operations. This puts a strain on tuition.

Financial Aid

Financial aid has become a significant factor in the costs of independent schools as they have expanded their mission to include students of all socio-economic levels. As tuitions have risen, so have financial aid awards. Once the tech boom of the 90's ended, there was additional pressure on financial aid to serve more middle class families.

How much aid can a school provide? Usually 10 to 12 percent of the budget devoted to financial aid is sustainable. Schools with higher levels of aid struggle unless there are other sources of revenue specifically for financial aid.

Auxiliary Services: Transportation, Food Service

Auxiliary services often earn revenue that offsets some of the expense. Lunch at the school is often an extra charge, either by semester or by the day. After-school programs for the lower school students also usually have a charge. These charges are priced to cover the direct costs of the program. Transportation, whether there is offsetting revenue or not, is always a cost. This includes all the field trip expenses as well as athletic transportation. It can also include the costs of bringing students to and from school.

How Schools Work to Reduce Tuition

The pressure on a school's board to keep a tuition increase as low as possible - while raising faculty salaries, enhancing the physical plant and providing extensive financial aid - is enormous. As they tackle the annual budget, they know that there are trade-offs that must be made. But there are practices most schools employ to combat the rising costs and try to take the pressure off tuition.

Fundraising

As every independent school parent knows, the school has an Annual Fund. This is an opportunity to give some tax-deductible money to the school. Annual Funds raise money that directly supports the regular program. Depending on the age and size of the school and the sophistication of the development office, Annual Funds can bring in as much as 10 percent of the budget. Also, schools often have a fundraising event to raise money to support the program. These run the gamut from social events for the whole community that raise very little money to auctions that can bring in hundreds of thousands of dollars.

Endowment

When a school's administrators look strategically at their financial operation they realize that one of the most logical ways to support the school and take the pressure off tuition is to have an endowment. If the school is old and started an endowment a long time ago, there can be enough capital to give operations anywhere between 10 to 20 percent of its annual funding. If the school is newer, or is an elementary school, the odds are that it will have only a small endowment at best or that it has just begun the process of building one. The big endowments at independent schools have been built on bequests and land sales. Their size today is a factor of prudent management of investment and spending over generations.

Facility Rental

Quite often a school will try to bring in additional revenue by renting out the facility when it is not in use for the regular program. Most of these rentals bring in some money, but when one looks at the full cost of the rental - staff time to clean and maintain the space, insurance, heat and lights - it often only breaks even. The schools that make real money doing this have one or several staff members devoted exclusively to this project.

Is Independent School Worth the Tuition?

We have seen the considerations that an independent school must make when it establishes its tuition. And now for that second question: Is it really worth it?

Let's look at what an independent school has to offer. Manageable classrooms in which teachers are able to support each child's individual needs. A peer group of children who are eager to learn. An environment in which creativity is nurtured, inside and outside the classroom. Faculty members who have the freedom to design their own curriculum and share their expertise with their students. A physical plant that is well maintained and supports the curriculum. All in all, a community that expects and allows its members - both adults and children - to achieve their best.

It is no wonder that, to many independent school families, tuition seems a small amount to pay for helping their children develop the tools necessary to make lives of their own choosing.