Thursday, January 5, 2012

Guest Post: Changing the Culture of Yeshiva Financing

The following post was written by Ely Rosenstock, a parent of a 2 year old living in East Brunswick, NJ.

Changing the Culture of Yeshiva Financing

I think I can speak for all those following the Yeshiva tuition crisis over the past few years that we applaud and are truly grateful for all those working towards improving the situation. Efforts by schools to reduce costs and new models of education like He'atid and charter schools are helping to improve the current delivery and efficiency of education.

There is a big elephant in the room that few are willing to acknowledge. It is possible, regardless of how much cost cutting is implemented, Yeshiva education may be too expensive for the average family to afford. Based on what I've read and the people I've spoken to it seems that donations are covering a significant portion of school costs in all schools and therefore it seems this theory is very likely a reality. What I'd like to do with this blog post is look at some of the current problems we're dealing with and propose a potential solution.

Problem #1: Schools Can't Say No

It's interesting how us as parents treat our schools. Sometimes they're businesses where we demand a certain level of education or we threaten to take our money elsewhere. Sometimes they're community non-profits where we push them to make sacrifices and hurt their product for the betterment of the community. In reality, they're both. 

This position has painted them into a very tight corner. Most schools that I know of do their best to never say no to a student who has been accepted but can't afford the school. This generosity towards the community along with the increasing tuition cost has put tremendous pressure on school boards to find more money to pay for all these kids who need scholarships. On top of that, schools are businesses and must compete for students. Their product is scrutinized daily and they have to try and improve the product while always being asked to cut costs. Schools are stuck and don't have any good options. 

Problem #2: So Many Parents are Playing WIth Other People's Money

Let's say Chaim (fictional character) is on a tight budget and definitely cannot afford more than $15k a year for his child to attend Yeshiva this upcoming year. The choices in his neighborhood are $18k, $20k and $25k (assume he's ok with all the schools hashkafically). Which one will he apply to? Where would he send his kid? He would probably apply to all and try to get his kid into the school that had the best education. Would it bother him that he may need a larger scholarship to get into the $25k school? Probably not. If it's the best education and the school is willing to give it to him, he'd take it. 

So many families need scholarships (I've heard stats that average around 30-50% of students have some sort of scholarship) that the costs of a school aren't taken into account for many because nothing is affordable. The normal economics of commerce don't work in this scenario. Too many people are not considering the extra cost between schools because they know the additional cost they can’t afford will be paid by someone else.

Problem #3: The Current Solutions Focus on Fixing Schools But Not Parents

We're in this mess because we demand a quality of education that we can't pay for. The education aspect is a good thing; Only the best for our children. But none of the proposed solutions focus on changing the culture of parents demanding more for less. Parents, if anything, are the root of this problem and we need a long term solution that will change the way we approach this issue, not kick the can down the road a few years.


Now that I've thoroughly depressed you it's time to look at a proposal/concept that I'm hoping this post could spark a discussion on. Let's look at grades 1-12 as the crux of the tuition crisis. We all see this as a 12 year problem (per child). Speak to a parent who just had their last child finish high school and you'll hear the joy in their voice when discussing tuition. They made it through the 12 years alive. 

What I propose is to stop looking at this as a 12 year problem and start looking at it as a 30-40 year problem. Educating our children is a life long problem and we should attack it as such. This thought process could have minor and major ramifications on the way we approach Yeshiva financing. Here are two scenarios that could come about from this approach:

1) For Young/New Parents: A new financial product is set up that allows parents to put money into a fund when their child is just born (or even before he/she is born) and based on the set monthly fee, this fund pays out a guaranteed amount per grade when their child attends Yeshiva in the future. Instead of people giving money to the parents at a bris, they donate to the fund. Bar mitzvah gifts go towards the fund. The payments and fund can end when the child finishes 12th grade.

This solution would results in parents having a much lower incremental burden when they have to pay for Yeshiva (e.g. if the fund is set to pay out $8k for 1st grade and the actual cost is $12k, the incremental cost for the parents that year is $4k). More importantly the monthly cost from an early age will help parents keep their other purchases in check. Many couples buy houses, cars and other big purchases without thinking about Yeshiva because their kids are too young. With this approach they would purchase houses within their means because a large portion of tuition is already taken into account. 

2) For Parents With School-Age Kids: Find ways to borrow money based on existing assets. Before a school gives out scholarships do they make sure the parents can't take out a home equity loan? Maybe they do, not sure. I just think that before you take even $1 in scholarship money, you should exhaust your options. While most parents don't like the idea of accumulating more debt it makes more sense to have smaller more affordable payments over the long term than a need for scholarships in the short term whereby you don’t have any payments in a few years when your kids finish school.

The most important aspect of this approach is that it will force parents to think with their own money and encourage financial responsibility in our communities (of which we all definitely need). Scholarships should go to those who really need it. Schools should be able to send parents to an organization that exhausts every option before the school gives scholarships. Borrowing should always come before charity. 

If we can change the culture of Yeshiva financing from a 12 year problem to a life long problem we may be able to fix the economics of our current model and give our students the education we desire without being beggars. I look forward to hearing your thoughts.