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Tuesday, November 24, 2020
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There has been much discussion in recent months (and years) about the “tuition crisis.” As we all know, the cost of yeshiva education in Bergen Country is a massive burden on the community. It is well in excess of $50 million per year for just K-8 across the local schools. Even if there is no “solution” to the tuition crisis, approaches that would help alleviate the overall burden by even a small percentage can have a significant financial impact across the community as a whole.

A group of parents has discussed a proposal for elementary school yeshivas in our community to consider, with a concrete and actionable set of changes intended to help ease the tuition burden as outlined below:

1. New scholarship organization. A new organization (“Scholarship Org.”) would be formed to provide all tuition assistance to children attending participating schools. These schools would not offer any tuition discounts or financial aid. This would create a standardized financial aid process within a single consolidated function, allow school administrators to focus more time on education, and remove any tuition discount negotiations not based on financial need from the enrollment process.

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2. Funding of Scholarship Org. Funding would be achieved through a combination of (1) each participating school sharing a large percentage (e.g., 75-85 percent) of its own fundraising with Scholarship Org., and (2) contributions from non-parent community members. There would be transparency on high level aggregated financial information of the participating schools, including total fundraising (consistent with categories of data required to be publicly filed on Form 990s).

It is impractical to entirely replace the current school fundraising successes through the efforts of a new community-wide organization, and it is therefore critical to maintain the school fundraising functions and create an alignment of interests for schools to continue strong fundraising. While most of a school’s fundraising efforts would be shared with Scholarship Org., the expectation would be that each school would receive more funding from Scholarship Org. than it would be contributing to Scholarship Org., resulting in a net positive for each school from the sharing arrangement. Consequently, the portion of a school’s own fundraising that is retained outside of the sharing arrangement (e.g., 15-25 percent) would provide each school with significant benefits going straight to its bottom line (whereas today almost all of that fundraising is applied to meet financial aid needs).

Significant efforts would be made by Scholarship Org. to actively fundraise from members of the community not already donating materially to schools by focusing on the current portion of charity for education borne by non-parents and highlighting the communal obligation to support those who can’t afford tuition. Scholarship Org. would benefit from a clear fundraising message in that every dollar would be directly utilized for a child who can’t afford tuition. Any success in that effort would serve to address financial support for those in need of assistance from a broader base of the community. This would ease the burden on the subset of the community currently supporting the cost, which subset will shrink over time if fewer parents are able to afford full tuition in the coming years.

3. Scholarship process. Scholarship Org. would offer financial assistance based on standardized and rigorous standards similar to those currently utilized by the schools. The scholarship amount for each child would provide sufficient support for attendance at any participating school, with a sliding scale offered, depending on the school, to align incentives.

There are, of course, benefits to having tuition assistance provided in a manner that takes the cost of a school out of the equation. From a community-wide perspective, however, that is likely to create inefficiencies that place additional costs on an already stretched community. Many parents currently consider school costs as a significant factor in selecting a school. Therefore, the scaling system would be carefully crafted to balance these two important objectives by providing assistance amounts to ensure that children are not “priced out” of a particular school but also include some reasonable level of increased cost to the student to attend a more expensive school in light of that family's financial situation.

4. Headline tuition reduction/increased parent donation expectations. Headline tuition to enroll would be significantly reduced by all participating schools (e.g., by 10-20 percent). The amount of reduced tuition would be replaced by a suggested donation for all families that could have afforded the original tuition cost.

Significant efforts would be made to convey to parents who currently pay full tuition the importance of making the suggested donation and the substantial benefits to the parents of that model through the use of tax deductions to create significant additional cash savings and an effective tuition reduction for the parent body. Increased transparency, coupled with efforts by the schools to mitigate the tuition burden, may also create goodwill with parents who can afford to donate additional amounts. It is worth noting that this model has been successfully implemented elsewhere.

We understand that certain aspects of this proposal have been pursued in the past. This proposal aims to build upon those previous efforts through the combination of different elements that can balance each other and hedge against the risk that any singular element is less successful than desired.

This proposal will certainly raise a number of questions. What about X? How do you address Y? A number of these questions have been considered and can be addressed through limited exceptions that don’t gut the proposed benefits. We’re sure there are other questions that have not yet been considered but that could be addressed through engagement and discussion. Like almost everything in life, there will be tradeoffs. Some aspects would be less than ideal and certain schools or parents will not like every consequence of the change. But those concerns should be thoughtfully weighed against the potential benefits, which can be enormous for our community as a whole.

So what would need to happen to make this work? We believe the following:

1. Engagement by the schools. For this to work, at least a few of the yeshivas would have to be open to a serious dialogue about the potential benefits, how to address concerns with this plan, and consider whether this, or something like it, could be implemented. Preliminary modeling based on Form 990s has been run to estimate the potential benefits to the schools and community based on different variables, but additional information would be required to refine the analysis and determine appropriate percentages for the various aspects of the plan.

2. Advance commitment by donors. Before the schools could ultimately commit to these kinds of changes, they would understandably need reassurance that Scholarship Org. would be able to raise enough funds from the community to fill the gap between the school fundraising that is shared and the amounts needed to provide tuition assistance to those who need it at that school.

To address that point, an advance commitment from some donors would be needed to backstop a portion of the estimated community fundraising needs in the first year. This would allow the schools the ability to commit to the plan and provide a safety net for a proof of concept to get the plan up and running. Raising pledges from donors would be challenging until schools showed a willingness to entertain the idea. Obtaining those commitments would need to occur in parallel with engagement by the schools. There is already some financial backing for this initiative, but more would be needed.

3. Efforts by a small group of volunteers working together with the schools. A small group of leaders would need to be formed to work with the schools to reach consensus and ultimately, to oversee the operations of Scholarship Org.

4.Buy-in from school parents. The parent body would need to accept the new structure, particularly with respect to encouraging the parents who can afford current levels of tuition to make donations to fill the void created by the reduced tuition for those parents. Schools would need to be comfortable that a high enough percentage of those parents who currently pay full tuition would make the suggested donation to ensure that the schools are able to balance their budgets (taking into account other sources of revenues, including the [15-25 percent] of school fundraising that is no longer needed to support financial aid). This should be doable with advance communication given that the change would create significant cash benefits for the large majority of parents currently paying full tuition.

5. Buy-in from other community members. The community members who do not currently contribute to Jewish education costs would, as a group, have to start to view the tuition burden as a communal responsibility, similar to other community-wide organizations. We would not want to suggest how any person should prioritize his or her charitable giving as there are many important and worthy causes. That being said, given the overwhelming view that affordable Jewish education for every Jewish child is a key communal goal, it is fair to ask community members to consider whether it would be appropriate to increase charitable allocations to support tuition assistance in light of the significant communal need.

It is possible that this proposal is too drastic for the schools or community to get behind or is not the right approach for some other reason. The status quo often appears as the safest path, but sometimes hewing too closely to the status quo ultimately turns out to be the riskiest approach for long-term success (or even continued viability). We understand that the school boards and administrations are concerned about the tuition burden and each are seeking different ways to address it. We would ask schools, parents and community leaders to continue to pursue ideas to alleviate the burden on the community. Be open minded. Be creative. Be proactive. Forming a committee that is joined by most or all of the schools to openly discuss these issues might be a worthwhile effort.

The purpose of this article is to further the discussion on this important topic and to gauge whether this is an initiative worth pursuing. If anyone has any ideas, concerns or other thoughts, feel free to reach out to [email protected]

Uri Herzberg is a partner at Debevoise & Plimpton LLP and a member of the firm’s mergers & acquisitions and private equity groups.

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