The Business Of Private Education: Small Schools Equal Big Biz

Here in Westchester, education isn’t just education: It’s one of the county’s biggest industries. The schools here—and their nationwide renown—lure countless parents from New York City (and elsewhere) to live in the county. And a growing portion of those parents pay substantial tuition for their children to attend private schools, making that part of the education sector a multimillion-dollar business in the county.

The private school sector is far from monolithic, however. As Walter Johnson, headmaster of the Hackley School in Tarrytown, says, “Independent schools are like going to Europe. From the outside looking in, they sometimes look the same; but inside, they’re as different culturally as one country from another.”

According to New York Department of Education figures for the school year ending in 2014, there were 96 non-public schools in Westchester, serving 23,266 students (K through 12 only). To put things in perspective, consider that Westchester’s public schools had 147,219 K through 12 students last year. The private schools can be divided into four segments: 24 are independent, like Hackley and Rye Country Day; 15 are special education, 19 are non-Catholic religious affiliates, and 38 are Catholic. 

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Since 2001, independent schools have increased enrollment more than three times faster than public schools (+17.6 percent versus +5.2 percent). NYDOE reports that last year there were 5,791 K through 12 students enrolled in independent schools. The largest independent schools have close to 900 students; the smallest have a couple of dozen. Almost all of Westchester’s independent schools operate as nonprofits (although not all), but like all businesses, private schools need to take in more money than they spend. And with some charging upwards of $40,000 in annual tuition, that’s not particularly difficult.

Education: Westchester’s Top 10 Independent Schools

If demand for enrollment is any indication, those pricey tuition costs are apparently not a major concern for the parents who choose to send their children to private schools. For many non-public schools in the county, there are as many as eight applications for each available classroom seat. “There are many markets in the United States where independent education is struggling, mainly because it’s expensive,” Johnson points out. Here, though, he says, “We have a larger number of applicants than ever before. It’s getting to the point where it’s like applying to elite colleges where we have so many talented applicants that it’s painful.” 

For most businesses, having so many potential customers would be an indicator that it’s time to increase capacity. But the situation presents a dilemma for the independent school: If you increase class size to meet demand, you undermine one of your school’s primary advantages—low student-to-teacher ratios. 

Accepting more students isn’t high on Hackley’s list of priorities, and Johnson says that’s a strategic decision. “It’s important to keep our size small because that’s important to our culture.” He observes that when he graduated from White Plains High School, his graduating class was as large as the entire enrollment at Hackley’s Upper School.

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“People seek independent schools for a variety of reasons. Sometimes it’s a family tradition. Others want a smaller school with a rigorous yet personal approach,” says Scott Nelson, headmaster of Rye Country Day School in Rye. A small school means more than just low student-to-teacher ratios. “There are lots of opportunities in the scale of the school,” he notes. “In any given season, half of our high school students are playing on an athletic team. You can write for the student newspaper as a freshman.” On the academic side, he points out, “We don’t drop courses if there are only two students.” Those are among the reasons Rye Country Day this year will accept only 30 students from 240 applicants for the ninth grade.

It’s all part of what Matthew Nespole, head of Rippowam Cisqua School in Bedford, calls the “value proposition” of independent schools. “What makes these schools so dynamic and engaging that people will be willing to pay for them?” he asks. “We provide an educational experience that taps into the inquisitiveness and collaborative spirit of children. We build our program around those tenets and believe that’s our value proposition.” 

Ann Lefever, chair of the board of trustees of The Ursuline School in New Rochelle, says they take a marketing-oriented approach. “One of our challenges is differentiation,” she says. “We’re not trying to be everything to all students. We try to be best at the things we’re good at.” That differentiation comes at least in part from an emphasis on community service by students at the all-girls Catholic school.

Even with more applicants than available seats, the top independent schools are very cognizant of their competition. Since they’re not bound by government school districts, they draw students from a wide area—and compete with schools all over the region. Around half of Rye Country Day’s students come from nearby communities like Harrison, Rye, and Larchmont, according to Nelson. An additional 20 percent of the students come from Connecticut. “That’s grown particularly over the last 10 years,” he observes. “Probably the other 30 percent of our students come from 30 other school districts.” 

Among the competitors are Westchester’s high-achieving public schools. Many parents have moved to specific districts expressly so their kids can go to those public schools. One district, Blind Brook-Rye, launched a marketing campaign two years ago to attract out-of-district students who will pay tuition for the privilege of going to school in Rye Brook. “It’s worked out very well,” says recently resigned Superintendent William Stark. “We don’t say we’re better than an independent school. But we offer an alternative, and our price is highly competitive.” Tuition for out-of-district students is set by the state, but it generally runs slightly more than $20,000 a year. For the coming school year, the Blind Brook-Rye School District budget includes $325,000 for out-of-district tuition, close to the maximum number of new students the district can accept without hiring additional staff.

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Another new competitor is Fusion Academy, a for-profit school that opened in 2013 in White Plains. Founded in California about 25 years ago, Fusion is an accredited college-prep school for grades 6 to 12 that uniquely teaches all classes one teacher to one student on a fully flexible schedule. 

“The content is the same,” explains Head of School Jennifer Walsh-Rurak, Ed.D. “So we are fully aligned with New York State standards, but the way we teach is incredibly different. When you teach one-on-one, you are totally in tune with that child seated in front of you.” The school has 22 “classrooms” in an office park on Westchester Avenue, plus study areas and music, art, and science labs. Currently, the school has about 50 students but expects to grow to 70 with the addition of more space in the coming months. It employs about 30 teachers. Tuition is calculated by the number of courses a student takes, but a full-time schedule costs about $45,000 per year. 

One segment of the private school business not faring very well is Catholic schools, which experienced a substantial decline over the last 15 years, with some 28 schools closing and enrollment falling from 18,215 to 11,945 in the county since 2001. Most recently, Good Counsel Academy High School in White Plains announced it will close in July; its elementary school will relocate to Holy Name of Jesus’ former school in Valhalla.

The other segments of Westchester’s private education market are generally doing very well. The 10 largest independent schools, which account for 4,839 of the 5,791 students in the category, grossed almost $185 million in 2013, according to their 990 federal income tax filings. The net income of the group that year was slightly more than $11 million. 

Meeting competitive challenges, at least financially, shouldn’t be too hard for Westchester’s independent schools. While about 86 percent of total revenue comes from tuition, independent schools also receive substantial support from alumni and other donors through annual appeals, along with income from some pretty substantial endowments. “Hackley is very fortunate in having a community that has a very strong belief in the school,” Headmaster Johnson says. “So our annual fund contributes more than $3 million per year to our operating fund and our endowment income contributes an important piece, too.” 

One of the largest contributions in recent history came to the Hackley School in 2012, when a Monet and two other paintings donated to the school by Ethel Strong Allen were sold at auction for about $50 million. As Johnson points out, “Right now, for Hackley, the question of finance is not our biggest c hallenge. 

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