by Director of Advancement Rod Boyer
I hear it a lot, and yes, I get it. The financial model in operation at Pike (and virtually all independent schools) is unusual and often mysterious.
Independent schools don’t “need” to charge a tuition that fully covers the cost of educating a child. This is because of the impact that endowments and philanthropy have on the operating budget. While the ratios differ across schools, at Pike, the three supplementary sources of revenue –endowment, annual fundraising, and auxiliary programs/rental income — support approximately 14% of the annual operating budget. This fact means that the full tuition at Pike represents only 86% of the cost to actually educate a child. On an average tuition across all grades of just under $28,000, that difference is about $4,500 per student!
The true cost, however, could be much higher. Imagine, for example, if we factored in the costs associated with physical plant additions (e.g., the arts wing, the Horne building, the library, the theater, and even future projects)? Every child benefits from this infrastructure, but those benefits are not translated into the tuition because the reality is that most of these improvements have been realized through philanthropic support. And that’s just one example.
But should independent schools like Pike charge the full cost of educating a child? The calculus is complicated and raises intriguing questions. We know, for example, that tuitions at independent school rose 167% between 1994 and 2014, while family income in that same span only increased 66%. Can we really bear even more increases? Is there a tipping point? If we price ourselves higher, we will need expanded resources for financial assistance, which means pushing tuitions even higher. Isn’t that a self-defeating cycle?
Should we only accept full-pay families? If we do, how do we justify limiting our applicant pool in the effort to attract the strongest body of students? Secondary schools and colleges don’t forego financial aid for this very reason, so what would make Pike different? Could we fill the school with that approach, and if we didn’t, what aspects of the Pike experience would need to be jettisoned? How do we fulfill our mission of diverse classrooms, particularly along socio-economic lines? And for those independent schools who’ve been forced by circumstances to make a family’s ability to pay the sole criterion for admission (they exist), can they sustain their mission and vision in meaningful ways? Could Pike?
These are questions that Pike leadership reflects on regularly and vigorously.
Ultimately, the financial model of The Pike School is not a business model. It’s never going to be — and probably shouldn’t ever be — based on a “business” model. If it were, our focus would be cutting anything deemed “inessential” from the bottom line; increasing the amount of product we sold (i.e., more students in each class) while simultaneously decreasing the number of employees (read, teachers) who produced it; and charging considerably more for the results of those approaches. No thank you.
Maybe the bottom line is this: if you like Pike, you like what this financial model has created – including the “inefficiencies” it allows for, its pricing peculiarity, the realities of financial assistance, and our regular appeal for philanthropic support. Because ultimately, each of these characteristics is inseparable from the current model and mission of Pike.
And if that’s not enough, remember: even if you’re paying full tuition for it, you’re still not paying full price.
The Pike School is an independent, coed, day school for Pre-K through ninth grade in Andover, Massachusetts. Visit pikeschool.org to learn more about Pike – and visit our blog for more thought leadership. To learn more about admission to The Pike School, visit our Admission page.