School receives, then returns hefty federal loan

Healthy enrollment translates to a healthy financial outlook, CFO says

Augie Hawk, Features Editor

When the school closed due to COVID-19 and the virus began taking a toll on the economy, the Board of Trustees and senior leadership began discussions about the school’s safety and stability with respect to both finances and community health. In March, the school decided to apply through First Republic Bank for a Paycheck Protection Program (PPP) loan, made available by the government to small businesses nationwide.

Board Chair Chuck Brizius P’19’21’24 said there was a broad consensus among the trustees to accept the loan because of the uncertainty of the upcoming school year.

Six weeks later, the government approved the school’s request and issued a $6.175 million loan. The amount, landing in the highest PPP bracket capped at $10 million, was determined by the government’s own formula, Mr. Brizius said, which included the small business’ number of employees and employee salary data as main factors.

In April, however, the government issued more information about the loan and who qualified for it.

“There were different questions being asked about if your business still fits into the profile of the loan, with subsequent guidance given by the government,” Mr. Brizius said.

Chief Financial Officer Dr. Tara Gohlmann said these questions prompted a re-evaluation of the school’s need for the money as a buffer against any future uncertainty.

“We didn’t know what our enrollment situation was going to look like for this coming year, but as time went on, it became very clear that our enrollment and financial outlook into the next year were strong,” she said.

The school returned the loan in full on May 15.

“At this point, based upon where we are right now, we do not plan to participate in the PPP loan program moving forward,” Dr. Gohlmann said.

Several other area private schools—among them Concord Academy, Boston College High School, Dana Hall, and Rivers—also applied for and were awarded PPP loans, though none of them replied to Vanguard communications about whether the loans were kept.

Despite having an over $40 billion endowment, Harvard also applied for and received millions—$8.6 million, to be exact—tapping a federal loan aimed not at small businesses, as the PPP is, but at higher education emergency relief. The university returned the money in April after attracting much scrutiny.

Mathematics and Computer Science Department Head Chip Rollinson said that while he understands the argument that institutions with larger endowments should not accept loans that could go to other companies with greater need, he sees that each case is unique.

“It is not often easy for schools to tap into the money in their endowments,” he said. “If the only alternative is the furlough or layoff of employees that are essential during normal times, then I would feel slightly more comfortable with BB&N using the loan to bridge the gap. Fortunately, BB&N did not have to resort to that, which I am glad about.”

Mr. Brizius agreed, saying that, for schools that qualify as small businesses, the decision to keep or return the loans should be based on each applicant’s different circumstances.

“There are good reasons for other schools that kept the money—or other businesses, for that matter—because they may have a much different admissions and financial outlook than we do,” he said. “They may have a different endowment or financial aid profile—all factors that we don’t know about.”

As of July, the school’s endowment had crested $81 million, Dr. Gohlmann reported. The pandemic has cost the school about $3 million, including accommodations such as new furniture, improved ventilation systems, COVID-19 testing, substitute teachers, and the Knight Corps.