To popa’s analysis:
1. Makes no sense to do just to shift the burden on the parents. Only makes sense if it is to amortize over a longer period of time and therefore be more affordable.
2. Securitizarion makes sense when the default risks in the group are not obvious at the outset. Time will tell who defaults but at the outset all borrowers seem able to meet their obligation. Obviously, in the tuition world this is not the case.
3. You missed the point, the money the school gets each year from the kundergarten class will fund the entire school for a year. Not reasonable to think of it as an endowment for the school, they will spend the entire amount immediately and then run year 2 off the next kindergarten. Idiotic of course, because what if class sizes go down or a school is forced to close? Endowment makes sense but we wouldn’t trust the schools to manage real money.
The idea of my local rosh yeshiva being the borrower on 10 x $8 million bonds (one for each kid) is simply laughable. Think subprime risk, raised to the power of 613 factorial.