May 2nd, 2009
I have not posted in over a month. I’ve been distracted by, among other things, a school debt restructuring that I will comment on once the transaction closes. However, to be frank, I have become less motivated to continue writing about financial topics, since my perspective seems contrary to conventional wisdom, or at least from what is promoted by other advisors and associations. And, short of stopping everything and writing a book, I am not sure how to add to the dialogue without becoming lost in the noise.
About a month ago, I attended a financial sustainability lecture from a prominent association. There was (I felt) a pointed lack of specificity, aside from the generic conventions applicable from a previous era, but rather more of an uplifting tone that “this too shall pass.” But while I suppose it is human nature to seek the positive in a difficult environment, I also believe it is disingenuous to stare down at the broken glass and exclaim it is half-full.
Independent schools simply must be realistic about the current environment. The educational bubble has burst. Bloomberg had a wonderful article, entitled “Colleges Flunk Economics Test as Harvard Model Destroys Budget,” which can be read here.
As a banker, money manager, and private school parent, I believe there are certain truths that are self-evident:
- The educational dollar is no longer inelastic. Parents (in the aggregate) cannot afford the expense of essentially nineteen years of private education. They cannot be counseled or somehow convinced that tuition loans are anything other than a very short-term solution. Lowering tuition sounds logical, but is a slippery psychological slope. I know several schools who have raised tuition, and increased financial aid as a short-term tactic. Ultimately, educational value must be realized and families who can, pay.
- As such, the top third of private schools have the cache and/or the capitalization to survive the transition. The bottom two-thirds can no longer count on a rising tide. Many will not survive. It is unjust to suggest otherwise.
- Meaningful fundraising from private school parents is different than for other not-for-profit organizations. Parents are already resentful at the tuition we have to pay. Asking for even more money is a much greater challenge that the school must acknowledge and accommodate. Successful fundraising must break the model, become more entrepreneurial. The same whiny nag will not produce the raw dollars.
- Debt is a valuable tool, but one nonetheless crudely applied by commercial and investment bankers who are essentially financial product vendors. The capital markets are resourceful and complex. A financial advisor who is not simply a bond or swap shill can be invaluable. Again, the top one-third of schools have all the options. The others have to be smarter.
- I met with a school with $40 million in debt -and 150 student enrollment. I have met a school so leveraged with variable rate debt, there was a cash-flow crisis if interest rates rose above 2%. And they are looking for an interest rate swap. Harvard’s debt problems are well-publicized, and yet they had 17 debt advisors.
And so, I do not often know where to begin. The paradigm must change, but I am afraid it will only do so when it is too late, when critical options begin to disappear. This blog has quite a few subscribers, but no comments on any of the topics. And without feedback, I am unable to address the questions and topics that most weigh on the minds of independent school stakeholders. And so I ask, if there is any value to this blog, that readers participate.
March 23rd, 2009
Independent schools in Los Angeles are using videos, auctions and home parties to emphasize the message that in these challenging economic times, giving is more important than ever. Article can be read here.
March 11th, 2009
I was invited to an independent school, to tour the new gymnasium and then attend a hosted lunch in which planned giving would be discussed. I didn’t really care about planned giving or the new gym, but it was socially expedient to just go. I don’t recall an actual planned giving discussion, but a donation envelope was placed at every place setting.
At our table, the range of comments among the other parents were, in no particular order:
- I only hear from the school when they need money.
- I’ve been paying tuition from my home equity line of credit.
- There’s a good charter school across town. It’s cheaper to move than pay tuition for three kids.
- I cannot afford to pay for this AND college.
- They nickel and dime us for everything.
- This school gets enough of my money.
- The school will pay for an attorney to draft my will if I leave them a bequest. Yeah, right. I’ll pay for my own attorney.
- The school has an endowment. They don’t need my money.
- They’ll just blow my donation.
- My kid graduates this year. Why do I care?
- I made the mistake of donating a few years ago. Now they pester me every year for a bigger donation.
However unjust, independent schools are not generally perceived to be a particularly sympathetic beneficiary; certainly not among any of the parents I talk to. As such, fundraising without regard, or at least some appreciation, of such donor sentiment would arguable fall flat in the current environment. And yet I get plenty of passive, feel-good requests in the mail. I don’t even look at them. They go right into the garbage.
There is an entire fundraising industry, of established strategies and tactics, that I do not always understand. I have a much simpler benchmark: me. I am as typical a potential donor as anyone. A worthy fundraising tactic is one I might personally (as a donor) respond to, versus tactics that I routinely ignore or which annoy me. In other words, common sense.
March 9th, 2009
Families facing higher taxes and declines in investments and home values are balking at the costs of small private schools, which can reach $50,000 a year. While attending an Ivy League school, such as Harvard University in Cambridge, may be worth the cost for families that don’t qualify for financial aid, the next level of elite schools may not carry the same value in a sour economy, educators and parents said in interviews today and last week.
Bloomberg article can be read here.
March 4th, 2009
The New York Times
There have been a number of bubbles over the past decade that we now know about. Unfortunately, we are also about to find out if there was an education bubble.
Fueled by endowment gains and tuition increases, universities in recent years have gone on a building, faculty and program expansion spree. I have personally seen it in the law school realm. Instead of the historical 12-credit loads, the norm over the past few years in law schools has trended towards nine to ten credits. This allowed for more research, but also meant that the faculty needed to expand to continue offering the same course levels. Salaries also rose as law schools and other areas of universities competed for top talent.
But the same forces buffeting the general economy are affecting the university.
Yale recently froze all faculty salaries for employees paid more than $75,000, and Harvard froze all faculty salaries at its arts and sciences school. The big private, elite universities appear to be particularly at risk. To understand why, let’s take a look at the Harvard endowment.
Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the legal aspects of mergers, private equity and corporate governance. A former corporate attorney at Shearman & Sterling, he is a professor at the University of Connecticut School of Law. His columns are available at The Deal Professor blog.As of June 30, 2008, this endowment stood at $36.9 billion, and last year, it paid out $1.6 billion to Harvard. The Harvard endowment has grown at a torrid pace in recent years — it was just $22.6 billion in 2004 — fueled by portfolio gains and especially a 28 percent, 10-year return on its private equity portfolio. That compares to a total portfolio five-year return of 17.6 percent as of June 30.
But like everyone else, the endowment was hit by the downturn. It has not announced definitive 2008 results, but Harvard has said that it expects returns to be down by about 30 percent. I think the situation is much worse than that. In 2007, approximately $5.16 billion of Harvard’s total portfolio was in private equity, and by my estimate, a total of $11.2 billion, or 26 percent, in all kinds of illiquid assets (the others being real estate and land). Here, this figure is for all of the general investment assets managed by Harvard. That figure was $43 billion as of June 30, 2008, with the bulk being the $36.9 billion endowment.
The 2007 figures and allocations for the entire $43 billion portfolio are disclosed in the endowment’s 2007-2008 year-end report.
Calculating the losses in year-end 2008, I estimate that Harvard’s total private equity portfolio declined 40 percent to around $3 billion. I assign such a figure because I mark-it-to-market — and right now, these illiquid assets are hard to sell and even harder to price. In the long run, these investments may pan out, but for the short term, these private equity assets are at best mispriced.
Applying these calculations through the total endowment as of this date should give about $25.5 billion split with 23 percent to 24 percent in illiquid assets, or about $6 billion. For these purposes I have assumed that all of Harvard’s hedge fund holdings ($8.3 billion as of June 30, 2008) are liquid. This is unlikely because of the many hedge funds that have imposed lock-downs on capital withdrawal. And my aggregate number here is in line with the 30 percent decline Harvard has stated it thinks should occur.
This is where the problem lies. Harvard pays out its endowment on a three-year basis. So for the next three years, I estimate it will still pay out on average about $1.5 billion. This may actually be low, as Harvard seeks to keep spending stable and help out colleges, such as the Harvard Divinity School, that rely heavily on the endowment.
However, if you do the numbers calculating a zero percent return on liquid assets (stocks, etc.), a negative five percent return on illiquid ones (private equity, etc.), and an annual donation rate of $500 million, you get the following allocation:
2010 2011 2012 Liquid assets (in millions) $16,972 $14,472 $11,972 Illiquid assets 7,229 8,368 9,449 Total 24,202 22,840 21,422 % illiquid 29.87% 36.64% 44.11%If you change the returns to five percent for liquid assets and zero for illiquid ones, you get the following:
2010 2011 2012 Liquid assets (in millions) $17,946 $16,343 $14,661 Illiquid assets 7,531 9,031 10,531 Total 25,477 25,374 25,191 % illiquid 29.56% 35.59% 41.80%In either case, illiquid assets rise to approximately 41 percent to 44 percent of the endowment. This is the general point of these numbers: Even as you adjust them, Harvard is about to go from an asset illiquidity level of 26 percent (and a target level of 31 percent) to a much higher level.
The reason the illiquid part grows is future investment commitments by the endowment to private equity and real estate partnerships. The 2007-2008 report did not disclose these commitments, but the 2006-2007 report stated they were $8.17 billion through 2017. Assuming that this commitment stayed the same or went down by no more than $1 billion in 2008 (Harvard last year said they were going to grow the portfolio), Harvard is going to have to follow through on about $7 billion to $8 billion in commitments in the coming years.
In the numbers above, I estimated that Harvard has to cough up about $1.5 billion a year over the next three years on these commitments. The reason was aptly stated by Blackstone Group Chief Executive Stephen A. Schwarzman last Friday, as he referred to the buyout firm’s large supply of “dry powder.” This powder is uncommitted funds, and private equity hopes to use these funds to take advantage of distressed opportunities. Moreover, funds are not flowing back from private equity firms, as they are holding their portfolio companies for the long run.
So, my numbers are rough, very rough estimates — but the problem is apparent. In the short term, unless it boosts its liquid returns, Harvard is going to have to raise a lot in donations or eat up its liquid assets to fund university obligations and its private equity commitments. This results in a spiraling decline in Harvard’s liquid assets as each year they go lower to meet these needs and more and more assets become tied up in private equity. This assumes the markets stay where they are in the next three years — there are scenarios where liquid assets do worse (like yesterday), or better, of course.
This is likely why Harvard recently sold $1.5 billion in debt, and unsuccessfully tried to sell $1.5 billion of its private equity portfolio. It needs to cover short-term funding obligations rather than liquidate illiquid assets at fire-sale prices. In essence, Harvard is more like a hedge fund than ever — trading for short-term gain with the same risks involved.
Other universities may be in worse positions. Duke, for example, sold $500 million in bonds, and Princeton $1.5 billion. Again, the reason appears to be to fund liquidity.
The result is twofold. First, private equity may not have as much dry powder as people believe. Private equity investors, known as limited parters, or LPs, are likely to strongly resist meeting all of their commitments. This may lead to a renegotiation of some funds as private equity seeks to accommodate their clients.
Private equity was historically viewed as the savior to higher education, but it now may mean its trouble.
Second, there is education itself. To paraphrase “Top Gun,” “their mouths were writing checks their brains couldn’t cash.” Universities expanded rapidly during the past few years on the basis of endowment growth. But not only is that growth gone and endowments fallen, the numbers may be far worse because of how much these entities depend on private equity.
In the long term, this should all rebalance and dry powder gains may compensate, but as Keynes said, “in the long run, we are all dead.” The Yale model assumes that endowments have perpetual life, but they also have short-term funding commitments.
Universities and endowments are surely hoping the situation is not as bad as the above might suggest. The likely result is pain at the university and for faculty, as many of these institutions go through their own “deleveraging.”
March 3rd, 2009
Article on Bloomberg can be read here. This is why you should not do an interest rate swap. Note: when investors are clamoring for your bonds, it means the underwriters dumped the bonds on the market, the financial advisor was asleep, and the interest rate was too high.
February 25th, 2009
By John Hechinger
The Wall Street Journal
Colleges and universities led by Stanford, Harvard and Columbia raised a record $31.6 billion in fiscal year 2008, but their fund-raising outlook has darkened amid the economic crisis.
A survey of 1,052 institutions conducted by the nonprofit Council for Aid to Education shows college fund raising rose 6.2% last year. But that predated the sharp stock-market decline that began last September because most academic fiscal years end June 30. Fund raising in academia is highly sensitive to stock prices because many donors, for tax reasons, give appreciated stock instead of cash.
Ann E. Kaplan, who directs the study, said she has spoken with about 20 institutions recently and all indicated difficulty in fund raising this year, saying they “hit a wall” in January. Ms. Kaplan said she wouldn’t be surprised if the current year ended up being worse than fiscal 1975, when contributions fell 3.6%, the biggest drop in half a century. Institutions have already reported to researchers that some multiyear donations have been renegotiated to give philanthropists more time to honor their pledges.
The recent numbers suggest another challenge for higher education, as even the wealthiest schools are suffering painful budget cuts after steep losses in their endowments.
Any decline in giving would follow a decade of dazzling generosity to colleges. Over the past 10 years, contributions to colleges have risen at a 5.7% annual clip.
Still, the survey demonstrated a sharp divide among the haves and have-nots in higher education. The top 20 institutions received 27% of all gifts, with many smaller colleges showing declines in giving. Ms. Kaplan said the wealthiest colleges tended to benefit from successful billion-dollar-plus capital campaigns. But since the money in such efforts tends to flow into endowments, where it is invested, she noted that much was likely lost in the market downturn of recent months.
For the fourth straight year, Stanford University, which has long benefited from its ties to Silicon Valley, topped the annual fund-raising list, receiving $785 million in its 2008 fiscal year, ended in August. Stanford was followed by Harvard’s nearly $651 million, Columbia’s $495 million and Yale’s $487 million.
Lisa Lapin, a Stanford spokeswoman, said the university is in the midst of a five-year, $4.3 billion fund-raising campaign, which ends in 2011. The Palo Alto, Calif., institution’s big haul represents a decline from 2007 and from 2006, when it raised $911.6 million, a record for any college in a single year. Ms. Lapin said the school has “seen some slowdown in philanthropic support during the past several months, possibly due to the constraints on the economy and the current level of financial uncertainty.”
In line with other wealthy schools, Stanford has said its endowment, which stood at $17.2 billion on Aug. 31, is expected to decline 20% to 30% this year. The university is planning steep cuts to its $3.5 billion budget over the next two years and has already had scattered layoffs and suspended some major capital projects. Ms. Lapin said income from the endowment makes up 28% of Stanford’s budget, while annual donations comprise only 5%, so “any changes in giving would have little impact on the university’s operating budget.”
February 10th, 2009
Our tax laws confer a tremendous advantage to those organizations with tax-exempt status: the ability to fund-raise. And yet the industry, in practice and application, is appallingly crude and rudimentary, self-absorbed and tone deaf, reducing intelligent stakeholders into groveling supplicants.
A fundraising infrastructure is important not only for fundraising, but as the foundation for board committees and endowment funds. Fundraising should be developed like an investment proposition to a venture capitalist; instead it is often conducted like a spoiled child nagging his mother.
Ok, I’ve made my point. But I have been in enough board meetings in which fundraising was the primary topic, the results were consistently disappointing, and yet there was insufficient critical thinking to advance the discussion and start doing what works.
This is the first in a series of posts on fundraising. It is the popular topic, now that endowment balances have fallen and the debt markets have become inhospitable. The primary objective, at least initially, is a change in perspective. As such, I will reprint a few of my older posts, and approach the topic in different directions. Perhaps one of the stories will ring true enough to act as a catalyst for change.
The Dream of the White Knight
I was a substantial contributor to my children’s private school. So much so that my name is displayed prominently on a wall in their main building, among a select group of other major donors. The headmaster was receptive to my invitation to lunch.
I asked about the direction of the school. The headmaster talked about the funding needs of future projects, and the desire to create an endowment fund. I talked about planned giving and the value of a charitable remainder trust for owners of appreciated real estate.
The headmaster nodded approvingly.
I volunteered to organize a planned giving marketing program. The school was located in an affluent area, and many of the parents and patrons had the kind of tax problems that planned giving vehicles could directly address.
The headmaster’s attention wandered.
This marketing program would demand a degree of commitment from the headmaster and the staff. I explained that the participation of the board of directors was crucial, and that I was happy to prepare a presentation. The headmaster said:
“Can’t you just write another check?”
No, I could not. I never wrote another check to that school again.
Many independent schools flourish because of sound planning and a cultivated depth and breadth of support. Many more fail to reach their potential because they lack very basic financial planning principles and procedures.
In my experience (as both advisor and board member), the greatest impediment to financial planning is The Dream of the White Knight: that wealthy donor who appears on our doorstep, enthralled with the sheer goodness of the mission, and solves our financial burdens, with few strings attached.
The Dream is a common “virus” among not-for-profit organizations. White knights are certainly an integral component of not-for-profit funding. Sometimes, thought, our White Knight wants collateral and a 14% investment return.
The danger of the The Dream is when it evolves into the predominant form of financial planning. It is intoxicating because it suggests that the otherwise messy aspects of finance, such as soliciting a diversified base of new donors or making debt service payments, can be tidily sidestepped.
And of course, The Dream is kept alive because every now and then a major donor does indeed appear.
Ultimately, the cost of The Dream is a complacent, financially fragile organization that does not develop the discipline and foraging skills necessary for long-term financial management.
February 2nd, 2009
A Harvard Business Review article, “Managers and Leaders: Are They Different?” distinguishes between managers who embrace procedure, compromise, consensus, and a passive attitude toward goals arising from necessities rather than desires; from leaders who adopt a personal and active attitude toward goals, develop fresh approaches to long-standing problems and open issues to new options.
Another HBR article I read in graduate school (and for the life of me, I cannot find the title) discusses the application of situational management: a more autocratic “leadership” style for organizations in a transitional environment, versus a democratic, consensus style during relative equilibrium.
In my opinion, the single greatest impediment for many, if not most, independent schools will be the need to dynamically adapt in a new world order, from within the traditional not-for-profit culture of procedure, consensus, and, well, resistance to change. But it does not take a Harvard Business Review study to address problems and solutions that are more easily approached with common sense.
Anyone genuinely interested in serving on a not-for-profit board does so for one reason: a desire to contribute. To work with a like-minded group toward a common vision. To achieve definable goals. To accomplish something.
And what are the universal complaints? Getting nothing done. Wasting time. Being constantly pestered to write checks. No purpose.
Symptoms of dysfunction
- The prima donna board. In the corporate world, board membership is based on expertise, relationships, or some specific attribute that directly contributes to the management of the organization.
In contrast, the assembly of most not-for-profit boards is somewhat random: a friend of a friend, a lawyer/stockbroker/accountant/ banker (who often join to network for their own business), and anyone who looks like they can write a check. Absent a discrete board structure, too often such members individually contribute little, but nonetheless gum up the collaborative decision-making process by adding one more voice to accommodate.
More is not the merrier, more can be less, much less. It is better to leave a seat unfilled and work with a smaller board, than to invite someone who will not provide tangible value.
- Power struggles. Leadership is most effective when originated within a strong headmaster (executive director, or whatever the principal executive is called). Or, said differently, I have never met a strong school with a weak headmaster. It is a difficult role. The headmaster is the standard bearer; and must engage and develop the board to mutually work toward achieving concrete objectives. Without a distinct and shared sense of purpose, the headmaster is usually eaten alive by the board.
- Too many decisions made collectively. A productive board is a structured board, divided into sub-committees, each with its own mandate, objectives, and timetable. An unstructured board is managerially sloppy; prone to paralysis by analysis, passing the buck, and ultimately dumping on the staff.
- The board ends up writing all the checks. There should be no such thing as a non-fundraising board. However, fundraising is a systematic process, and something is wrong if the board (and their friends) are routinely pressed for the preponderance of contributions. A common flaw is the stockbroker board member who heads up planned giving, but no one wants to point out that good old Charlie hasn’t originated a gift in five years.
- Over-reliance on board consultants. A board development consultant is generally someone who asks the board a lot of questions, and then delivers a report outlining everything the board just told him. They will not provide leadership.
January 27th, 2009
The Wall Street Journal
by Mary Pilon
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 David Dearman, 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 Myra McGovern, 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. Jessica Gottlieb 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.”
Financial Fallout
How some private schools in the U.S. have been hit by the recession:
- Significant losses to endowment portfolios and decreases in charitable contributions.
- Reports that more parents are seeking financial aid.
- Evidence that some parents are moving their kids to public schools.
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 Joan Risley, 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 Geoff Campbell, 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 Clark Durant, 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 Bernard Madoff’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 Chris Cram, 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 Marisol Aviles 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 Joan Evans, 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.”
