Why Private Schools and Colleges are Closing

Palm Valley School in Rancho Mirage, California is the latest reminder that private school closures are rarely sudden, even when the final announcement feels abrupt. As of Saturday morning’s news, Palm Valley will close permanently after hoped-for funding did not come through. The school was more than 70 years old, and by most accounts, a fixture in the Coachella Valley marketplace. For ISA, this one lands close to home. Palm Valley was an ISA client six years ago. Like many institutions now facing hard decisions, its story is not just about one missed philanthropic gift, one weak enrollment season, or one budget gap. It is about conditions that have been building for years. 

And Palm Valley is not an isolated K–12 story. Recent reporting about Westminster University in Salt Lake City, formerly Westminster College, points to the same set of pressures now facing small private colleges. Westminster is not closing, and its leadership has publicly pushed back on the suggestion that its position is as dire as some headlines implied. But the fact that a 150-year-old private institution in a growing metropolitan market is part of this conversation at all should get the attention of anyone who leads, governs, funds, or advises private education. Westminster was also an ISA client, through a strategic planning engagement three cycles ago, which makes the signal even more familiar.

The private education sector is not collapsing. That is not the point. But the market is changing faster than many schools and colleges are willing to admit, and the institutions most at risk are not simply the smallest, oldest, or least resourced. They are the institutions that have underdeveloped capacity in three areas that now matter more than ever.

They are misaligned with the market. They are governed without enough strategic altitude. And they are operating with financial models that have already shown, time and time again, that they are not sustainable.

These are not isolated problems. They are connected. And unless schools and colleges address them together, more closures, mergers, reductions, and emergency restructurings are coming.

Market Misalignment

For years, education leaders have talked about enrollment as though it is primarily an admissions problem. Better tours. Better marketing. Better open houses. Better follow-up. Better yield events. Better messaging. All of those things matter, but they are not enough when the underlying market is shrinking, shifting, or asking for something different.

The demographic story has been visible for years. Declining birth rates, changing household patterns, regional population movement, affordability pressure, skepticism about value, and new educational alternatives have all been pointing in the same direction. In higher education, the pressure is even more direct. There are already millions fewer college students than there were in 2010, and the decline in the number of 18-year-olds is projected to continue for years. The percentage of high school graduates going directly to college has also fallen meaningfully over the last decade.

That does not mean every school or college is doomed. It means the old assumption that demand will eventually return is no longer a strategy.

Private schools and colleges have to ask harder questions. Who are we for now? What problem do we solve for families and students today? Why would a family stretch financially to choose this school over every other option available to them? Why would a student choose this college when price, career outcomes, flexibility, location, and perceived return on investment are all under scrutiny?

The question is not whether the institution has a mission. Most do. The question is whether that mission still has a clear market.

Too many schools are still selling tradition to a market asking for clarity. Too many colleges are still selling the full residential experience to students and families asking for value, flexibility, career connection, and confidence. Too many institutions are assuming that affection for the brand is the same thing as current demand.

Product-market fit in private education is not about chasing trends. It is about understanding the real job families and students are hiring the institution to do. Schools and colleges that cannot answer that question with precision are going to struggle, no matter how beloved they once were.

Governance Drift

Boards have one of the most important jobs in the life of a school or college, and one of the most misunderstood.

The board’s work is not to run the institution day to day. It is also not to sit so far above the institution that it only sees audited financials, committee reports, presidential updates, and polite dashboards. The work of governance requires the right hover height. High enough to see the horizon. Close enough to understand the terrain.

Many private school and college boards have been underdeveloped for the moment they are now facing. They are made up of good people, generous people, accomplished people, and loyal people. But loyalty is not the same as strategic fluency. And good intentions are not a substitute for market intelligence.

A board that is not paying attention to the macro trends facing private education is not governing. It is reacting.

The right board conversation is not only, “How did we do against budget this year?” It is, “What are the next five years telling us?”

It is not only, “How many inquiries, applications, or deposits did we generate?” It is, “Is the market still asking for the institution we are offering?”

It is not only, “Can we raise more money?” It is, “Are we funding transformation, or are we simply buying time?”

This is where hover height matters. Too low, and the board gets pulled into operations. Too high, and the board misses the signals that matter. The future-ready board knows how to stay strategic without becoming detached. It understands enrollment, affordability, demographics, tuition elasticity, discount rates, staffing models, debt, deferred maintenance, academic and program relevance, student outcomes, and competitive positioning.

That is the level of governance private education needs now.

Financial Fragility

Most closures do not begin with a crisis. They begin with a pattern.

A few years of flat enrollment. A few years of tuition discounting creeping upward. A few years of compensation lagging behind the market. A few years of deferred maintenance. A few years of one-time gifts covering recurring expenses. A few years of optimistic enrollment assumptions baked into the budget. A few years of programs that continue because they have always existed, not because they are mission-critical, market-relevant, or financially coherent.

Then suddenly the institution is “in crisis.”

But it was not sudden. The model was speaking the whole time.

The truth is that many private schools and colleges are operating with financial models designed for a different era. They depend on annual tuition increases that families and students are increasingly unable or unwilling to absorb. They depend on enrollment growth in markets where the number of students is declining. They depend on philanthropy to fill operating gaps rather than fund strategic advantage. They depend on faculty and staff goodwill while the cost of attracting and retaining talent keeps rising.

That is not a model. That is pressure.

Higher education is now making this pressure visible in public. Recent reporting has documented closures, layoffs, program cuts, hiring freezes, and structural deficits across a wide range of colleges and universities. The common themes are familiar — enrollment pressure, rising costs, shifting demand, uncertain revenue, and financial models that no longer absorb disruption well. 

A sustainable institution has to know its real cost structure, its real break-even enrollment, its real net tuition revenue, its real debt capacity, its real philanthropic potential, and its real program economics. It also has to know which programs are mission-critical, which are market-critical, and which are simply legacy commitments no one has had the courage to evaluate.

This is not about cutting your way to greatness. Schools and colleges cannot shrink their way into relevance. But they also cannot ignore the math.

The future belongs to institutions that can align mission, market, and money. If those three are not aligned, the institution may still have a beautiful mission. It may still have loyal families, students, alumni, and faculty. It may still have history. But it will not have a sustainable operating system.

The Future Question

The future question is not, “How do we avoid closing?”

That question comes too late.

The better question is, “What kind of institution does the future require us to become?”

That is the conversation private schools and colleges need to have now, while there is still time to make choices from a position of agency rather than emergency. Institutions need to read the market earlier, govern more strategically, and rebuild financial models before the final year of cash forces the conversation.

Palm Valley’s closure will be discussed as a local story, and in many ways it is. Westminster’s recent headlines will be discussed as a higher education story, and in many ways they are. But together, they point to a broader signal across private education.

Institutions are not closing, merging, or restructuring because people stopped caring about them. They are facing existential pressure because care, history, and goodwill are not enough to overcome market misalignment, governance drift, and financial fragility.

The next generation of private schools and colleges will not be preserved by nostalgia. They will be built by leaders willing to tell the truth earlier, see the horizon more clearly, and make courageous decisions before the market makes those decisions for them.