Private School Forecasting and Opportunities

Average annual tuition at private schools in the U.S. is about $11,000 for day students, $40,000 for private boarding schools, and about $7,000 for Catholic K-12 schools. Approximately 15% of U.S. private school’s student population is international students. The largest concentration of private schools are in California, Pennsylvania, Florida, New York and Texas.

While the COVID-19 pandemic brought an exorbitant amount of challenges, providing educational services virtually may open new opportunities to private schools if the results can help both the students and schools.

Private School Forecasting

The Tax Cuts and Jobs Act expanded the allowable uses of 529 plans, whereby $10,000 annually can now be used towards private K-12 tuition expenses. Private K-12 schools in certain states may increase their enrollment by better publicizing this. In addition, education savings accounts (ESAs) can be used for private elementary or secondary tuition or to pay for expenses for private or public school, grades K-12. ESAs allow parents to invest up to $2,000 per year of after-tax money into mutual funds and withdraw proceeds from those investments without having to pay federal taxes.

The following facts could be indicative of what private school budgeting will look like for the next few years:

• The consumer price index for food, an indicator of food costs for private schools, rose 2.0% in November 2019 compared to the same month in 2018.
• The National Association of Independent Schools reports that nearly one-quarter of students at its member institutions received financial aid in 2014-2015, compared to about 15% a decade earlier. The average financial aid grant increased 25% in that time.
• Industry revenue is projected to increase at an annualized rate of 1.0% to $92.3 billion over the next five years to 2025.

Charter School Threat

Charter schools are the largest threat to the industry, especially in urban areas, since there is generally difficulty competing with an alternative that does not charge tuition. Private schools lose one student on average for every three gained by charter schools. Furthermore, as of June 2020, the national unemployment rate is expected to increase in 2020, presenting a potential threat to the industry.

As of June 2020, in 2020, the following percentage estimates of total industry revenue is expected:

• Profit margins, measured as earnings before interest and taxes, 6.4%
• Wages 43.2%
• Depreciation 5.1%
• Rent 3.3%
• Purchases 2.3%
• Marketing 1.8%
• Utilities 0.3%
• Other 37.6%