Middle Income Affordability Programs: A Promising Frontier in Day School Affordability
by Dan Perla
If you ask a large group of parents whose children attend a Jewish day school to name the most pressing school issue on their mind, they will almost certainly utter the same word – AFFORDABILITY. Simply put, for a large group of parents, a day school education in the U.S. and Canada has become unaffordable. The average day school tuition nationally is approximately $14,000 and has increased at a 3%-6% percent annualized rate over the past decade. By comparison, wage growth over the same period of time (particularly the last 3-4 years) has been virtually flat. So for many families it really is more costly to send a child to day school than it was five or ten years ago. While the quality of a Jewish day school education is arguably better than at any time in recent history, an increasing number of middle and upper middle income families are exploring lower cost day school options. Some are even dropping out of day schools altogether in favor of charter schools or other public schools.
To combat this alarming trend, a number of communities and individual schools around North America have created donor-funded middle income affordability programs. These programs take a number of forms but typically offer reduced tuitions or tuition grants to families earning between $100,000 and $300,000 a year. Day schools in Boston, Los Angeles, Montreal and the Metrowest region of New Jersey all employ some type of middle income affordability program. Through Boston’s Combined Jewish Philanthropies (CJP), first time elementary age students who come from middle income families receive a $6,000 tuition voucher for up to three years of schooling. At the Hebrew Academy of Morris County (N.J), families earning between $120,000 and $200,000 pay their tuition based on a sliding scale. One day school in Philadelphia offers a middle income program called ‘Helping Hands’. Through this program, large families receive a 10% tuition discount provided they are paying at least 10% of their pre-tax income toward tuition. This means that a family is eligible for reduced tuition even if they earn hundreds of thousands of dollars per year.
All these programs are donor supported. Why would donors want to subsidize families making six figure incomes? The answer is simple. It makes good business sense. Losing middle and upper middle income families or failing to attract new ones has several negative consequences. Keeping seats filled and growing enrollment almost always leads to a positive economic outcome. Why? Because the marginal cost of adding a child to a class with an empty seat (which, in fact, is typically the case) is close to zero. So offering a family with three children a 30% or 40% reduction on their full tuition (through a middle income affordability program) still brings in a large amount of incremental dollars with little or no incremental cost. In fact, it is a well-established tenet of day school finance that stable or increasing enrollment almost always leads to greater long term financial sustainability.
There is another benefit to funding middle and upper middle income families – maintaining and growing enrollment increases socialization opportunities for students. It also ensures that a school reflects economic diversity among its families, as opposed to only rich and poor.
As compelling as these affordability programs are at this moment, they would seem to have even greater potential – the potential to enable middle income families to become full tuition payers. This could happen if more day schools were willing to freeze tuition rates for an extended period of time or agree to limit them to just 1% or 2% annually. In this manner, wage growth might, over an extended period time, exceed tuition growth. This would serve to reverse the decade long trend discussed earlier and could lead to financial sustainability.
The devil, of course, is in the details. Most day schools are faced with escalating costs including salaries and medical expenses. It would be difficult for many of them to hold annual tuition increases to just 1% or 2%, especially if they hope to increase teacher salaries by more than 1% or 2%. To wit, there is no guarantee that wages will grow any faster over the next ten years than they did over the prior ten. So more creative thinking is needed to figure out ways to reverse the tuition growth vs. wage growth conundrum. Still, there is no doubt that middle income affordability programs provide a key component to ensuring the financial future of day schools. In that sense, they really can be called a promising frontier in day school affordability.
Dan Perla is Program Officer of Day School Finance at The AVI CHAI Foundation.
cross-posted to The Avi Chai Foundation Blog.