I’ve been reflecting on two actual conversations I had recently that are extreme but very real examples of how schools find themselves in the unfortunate position of being surprised and flat-footed while staring down a closure—when they didn’t necessarily have to be.
In the first, an executive committee spent 45 minutes telling me their head of school was the problem: weak financial oversight, not enough money raised. When I asked how much cash they had on hand, the room went quiet. It was November, they would likely have to decide by January whether to open in the fall, and no one had planned for what closing would cost.
In the second, a head told me the school could cover payroll through October. Beyond that, its only hope was a grandparent who had quietly filled the gap for years—but was now saying he could no longer continue, even though no one had formally asked him to do so. She had been raising the alarm, but the board wasn’t engaged enough to hear it. I don’t offer these to shame anyone. Both patterns are too common to be about individual failure.
Most boards assume the head is tracking the school’s viability and will raise the alarm if needed, and most heads will. But raising a flag is not the same as the board catching it. A board has to be organized to actually hear bad news––a finance committee with the the appetite to ask hard questions, a chair willing to put a difficult number on the agenda––or the head’s warnings simply dissipate into a room that isn’t set up to act on them. And for heads who are raising the alarm without that structure to catch it, the burden compounds: they’re not just managing the school’s finances, they’re also managing a board that isn’t yet treating the crisis as real.
What the Runway Isn’t
Ask a board weighing financial crisis how much runway their school has, and you’ll usually get an answer measured in the number of months before the checking account hits zero. That’s not the runway. The runway is the number of months before the school no longer has enough cash to close itself down responsibly, which is usually an earlier date and a much scarier one.
The gap between those two dates is filled with a set of very specific, very calculable costs. Most boards have never priced them, because most boards have never been asked to. But if multiyear financial modeling has become standard practice at well-run schools, calculating the cost of closure should be just as routine. A school that knows its closing cost is not expecting to close; it’s a school treating that number as an essential governance metric, as familiar as its tuition-discount rate or its debt-service ratio.
What Actually Goes Into the Number
When a school closes, the obligations don’t end when the last student walks out. In many ways, that’s the beginning of a closure. A reasonably complete closing-cost estimate needs to account for:
Severance and notice. Contracts, employment law, and simple decency all set expectations for how much notice and pay employees are owed. A school with no severance policy still has an obligation to figure out, in advance, what it can and should offer, not decide it under duress when the lawyers of former employees come knocking.
Unemployment costs. Every departing employee is a potential unemployment claim. If your school is self-insured for unemployment—as many are, which board members don’t realize—the school pays those claims directly rather than through a state fund. That can be a genuinely large number for a staff of any size, and it is one of the more overlooked line items. Some states only allow the change between self-insured to state funded insured once a year at a given time, so if you are not looking ahead, you can get caught with no opportunity to convert.
Continuation of health and benefits. COBRA and its equivalents, life and disability conversion options, and the wind-down of retirement plans (which, if they fall under ERISA, come with their own formal termination procedures) all carry costs and process, not just paperwork.
Legal costs. Dissolution of a nonprofit corporation, negotiation with lenders and bondholders, employment counsel, real estate counsel, and litigation from disappointed donors can all carry significant costs. Southern Vermont College’s closure, for instance, ended up in court with donors seeking to void gifts rather than see them folded into an asset sale. Legal fees on a closure are not incidental; they’re a budget line.
Carrying costs on the campus. Boards often treat the campus as the asset that will pay for the rest of the closure. But a campus sale is rarely fast, and it may not generate anything close to the amount the board is counting on. One school carried its closed campus for four years at roughly $1.4 million a year and ultimately sold it for $100,000. Campus real estate built for single-purpose institutional use is genuinely hard to sell. If your plan for funding closure depends on a fast, well-priced campus sale, you don’t have a plan, you have a hope.
Ongoing insurance and liability tail coverage. General liability, directors and officers (D & O) coverage for the board itself, and abuse/molestation tail coverage typically all need to continue well past the last day of school, because claims can surface years later.
Records retention and archiving. Someone has to be legally responsible for transcripts and student records, which means you need a plan, a custodian, and a budget line, not a box in someone’s basement.
Tuition refunds or proration, if the school closes mid-year, plus the reputational and legal exposure of however that’s handled.
None of this is unusual. Most of it can be researched and estimated in advance, drawing on the experience of schools and colleges that have already closed. The number a school arrives at won’t be exact, but a serious estimate—even a rough one, built once and updated annually — turns “we might have to close” from an abstraction into a plan with a price tag and a date by which decisions need to be made.
The Magical Thinking Problem
Once a board starts looking honestly at a shortfall, the instinct is almost always to generate options rather than test them. A donor might come through. We could sell the back acreage. We’re talking to three lenders about refinancing. Each of these can be true and still not be a plan, because none of them has been stress-tested against the only question that matters: What would have to be true for this to actually close the gap in time? I call this the WWHTBT test.
How much would the donor need to give, and by when? If it’s a piece of land, how much is it actually worth, who is the buyer, and how long do land sales like this typically take in your market because the answer is almost never “quickly,” and a land sale under time pressure is a going-out-of-business sale, not a strategic transaction. If it’s refinancing, what did the lender actually say last week, not 18 months ago?
Boards in genuine distress often keep three or four threads like these alive simultaneously, each one giving false comfort without ever clearly answering the WWHTBT test. A single donor, a possible land sale, and stalled refinancing conversations are not three paths to solvency. They’re one board avoiding a harder conversation by staying busy.
What Closing Well Actually Looks Like
The runway calculation matters because it forces the second question. Once a board knows how much time it genuinely has, it can spend that time on the things that make a closure responsible rather than simply survivable. Concretely, that means:
Giving families real lead time. A closure announced in June, after most other schools have already filled their classes, forces families into whatever seats are left rather than giving them a real choice. A board that knows its runway a year out––or at least months out––can announce early enough for families to go through a somewhat normal admissions process elsewhere.
Negotiating placement for your students. Schools may be able to arrange direct teach-out or placement agreements with one or several receiving schools, effectively negotiating enrollment, and sometimes tuition assistance, on behalf of the whole community rather than leaving every family to fend for itself in April.
Giving faculty a real hiring cycle. Independent school hiring is concentrated in January through March; a board that waits until spring to face facts or announce has effectively taken that cycle away from every teacher on staff. Faculty deserve enough runway to search for their next position on the field’s timeline, not the timeline created by the board’s delay.
Making room to mourn and to celebrate. A school is a community’s institution as much as it’s a business, and a closure without any deliberate space to grieve it—or to honor what it was—leaves people carrying that loss alone. A final assembly, an alumni gathering, a public way of marking the school’s history isn’t sentimentality. It’s part of what closing with integrity looks like, and it requires thoughtful planning.
None of this is possible without the runway to plan for it. That’s the real cost of magical thinking and delay: it doesn’t just threaten solvency, it forecloses the kind of ending that lets families, faculty, and the wider community leave with dignity instead of whiplash.
The Number Gives You Options
Knowing your real runway is not a pessimistic move. It’s the move that creates leverage. A board that knows precisely how much time and money it has can approach a merger conversation, a shared-services arrangement, a right-sizing of programs, or a capital campaign from a position of strategic choice rather than from the position of a school that is out of options and negotiating under pressure. Every one of those alternate futures—merger, restructuring, partnership, a hard pivot in mission or model—is easier to pursue before the runway runs out.
The schools most likely to find their way to a good outcome, closure or otherwise, are the ones willing to do the work in advance: calculate the number, update it annually alongside the long-range financial model, and treat it as exactly what it is—one more figure a well-governed school simply knows. Not a prophecy. Just the truth, priced out, so that when the moment to decide arrives, the board is choosing from strength instead of discovering that the choice has already been made for them.