When the Numbers Don’t Add Up: How International Schools Can Respond to Lower-Than-Expected Enrollment

The start of a new school year is usually a time of positivity, fresh cohorts of students, new arrivals on staff, renewed energy among returning faculty, and a budget carefully prepared months in advance of the start of the semester. However, for many international schools in 2025–26, the reality is more sobering. Enrollment is below budgeted levels, resulting in reduced income and the risk of a budget deficit.

While factors such as uncertainty in U.S. public policy and funding may be impacting enrollment in some markets, there are often multiple local, regional, and global drivers at play. Whether the cause is temporary or part of a longer-term shift, school leaders must act quickly, strategically, and transparently.

Understand the Nature of the Decline

Before making adjustments, it’s vital to establish whether the drop is:

1. Temporary – Caused by short-term factors such as delays in family relocations, changes in corporate assignments, or geopolitical uncertainty.

2. Structural – Indicative of longer-term shifts in demand, such as declining expatriate postings, greater competition from other schools, or demographic changes in the host city.

If the decline appears temporary, a “tighten the belt” approach may suffice, identifying short-term savings without making deep structural changes. If structural, however, the school must prepare for strategic cost adjustments to maintain long-term financial sustainability.

Monitor In-Year Enrollment Trends

Enrollment at the start of the year is not the final number. Families arrive (or leave) mid-year, altering fee income. Analyzing historical patterns can help leaders:

• Anticipate in-year gains or losses.

• Adjust budget forecasts accordingly.

• Avoid over or underreacting to a single data point.

For example, a shortfall of 20–30 students in August may shrink by year-end if the school typically gains 10–15 students mid-year. Your fee structure and refund policy will often mean that you benefit from any changes in enrolment during the year.

Use Reserves Strategically

Many School Boards prudently set aside reserves for years when enrollment dips unexpectedly. These “enrollment reserves” may be sized to cover the income equivalent of a specific number of students (e.g., 20 students). General reserves can also be used to maintain liquidity until numbers recover.

Reserves should be drawn on with care, ensuring that they bridge the gap while the school addresses underlying issues, rather than masking a longer-term decline.

Analyse Fixed and Variable Costs

If a sustained reduction in enrollment is likely, understanding cost structures is critical. In most international schools, personnel costs make up around 70% of operating expenditure.

• Overseas Contracts: Some schools have clauses allowing early termination or modification of contracts in cases such as reduced enrollment or force majeure. These can be used, sensitively, to manage costs.

• Without Such Clauses: Personnel costs are largely fixed for the current academic year, making it essential to plan changes for the following year. Attrition can be a key tool, with staffing reductions phased in as teachers leave voluntarily.

Immediate redundancies, while potentially effective in balancing a budget, can severely damage staff morale and the school’s reputation. Decisions should be guided by the school’s values, mission, and long-term positioning.

Communicate with Transparency

Clear, timely communication is one of the most important factors in successfully navigating an enrollment shortfall. This includes:

• Explaining the challenge to staff, parents, and the Board in terms of financial sustainability and educational quality.

• Engaging the community in understanding the rationale for budget adjustments.

• Reinforcing long-term vision so that cost-saving measures are seen as protecting the school’s future, not undermining it.

Transparency fosters understanding and can lead to collaborative solutions.

Review Capital and Operational Expenditure

At the start of the year, much of the facilities budget may already be spent, with summer works completed. However:

• Postpone discretionary projects that can be delayed without harming the school’s appeal to current and prospective families.

• Revisit department budgets to identify uncommitted spending that can be trimmed. Work collaboratively with department heads to set realistic revised budgets rather than imposing unachievable targets.

Even small cuts across multiple cost centers can cumulatively help close the gap.

Explore Enrollment Opportunities in New Segments

Schools historically reliant on expatriate families may find that this demographic is shrinking. If possible, targeted outreach to the local national community or other underrepresented groups can offset enrollment losses.

Actions may include:

• Meeting with local companies and organizations.

• Developing partnerships with chambers of commerce.

• Offering special enrollment packages to attract new families mid-year.

While the local national community may appear to be a panacea to enrollment woes, in the short term the school also has to consider how it manages English as a foreign or learning language with this new demographic.

Optimize Staffing Models and Substitute Policies

As schools look for costs savings one area to explore may be in reducing substitute teacher costs. Many schools spend around 1% of their budgets on substitute teachers. While seemingly small, this can be a place to find savings, by encouraging internal coverage by existing staff (with workload considerations).

If explained as part of a broader effort to protect the school’s finances, staff are more likely to accept and support such measures.

Avoid Wishful Budgeting and Forecasting

As your school revisits its budgets and long term financial plans. One of the most damaging financial habits is setting overly optimistic enrollment targets in the hope that numbers will rebound. If such forecasts fail to materialize, the school can face:

• Under-priced tuition fees that do not cover actual costs.

• Erosion of reserves to cover repeated shortfalls.

• Compromised strategic investments due to funding gaps.

The Board and Finance Committee have a responsibility to base budgets on realistic projections, balancing ambition with prudence.

Plan a Long-Term Fee Strategy

When enrollment falls, raising fees can seem counterintuitive. Yet if fee levels are too low to cover fixed costs and achieve strategic surpluses, the school’s long-term viability is at risk.

The challenge is to communicate the rationale for any above trend fee increases, linking them to quality preservation, staff retention, and program continuity.

Enrollment volatility is a fact of life for international schools, very few schools have the luxury of stable enrolment and waiting lists. What matters is how quickly and effectively leaders respond. Although it is August when the enrolment number for the school year becomes certain, unsurprisingly, many school leaders and Boards have been occupied with managing enrollment uncertainty for the last seven months. By diagnosing the cause, protecting reserves, adjusting costs with care, communicating openly, and exploring new market segments, schools can not only weather a current shortfall but emerge stronger and more resilient.

In times of uncertainty, the most successful schools keep one eye firmly on the horizon to balance short-term fixes with the strategic decisions that secure their future.