Sidwell Friends Keeps Federal Small Business Loan, Sparking Outrage

Sidwell Friends School, an elite D.C. private school, applied for and received a $5.2 million loan from the recently established federal government program designed to help small businesses and nonprofits survive the pandemic and still pay their employees, sparking a controversy about the ethics of the school’s decision. 

In response to the criticism, the Board of Trustees at Sidwell, a school with a $53.4 million endowment and multiple presidents’ children among its alumni, announced last week in a letter to the community that it intends to keep the money. 

“The Board determined that accepting the loan was appropriate and fully consistent with its fiduciary responsibilities, as well as our Quaker values,” the letter said. “We need to protect people—teachers and staff members—who provide the foundation for our community.”

Many Sidwell parents and alumni quickly denounced the decision, saying the money should go toward struggling small businesses. Sarah Remes, a Sidwell alum, sits on the board of the School Justice Project, which provides legal services to incarcerated students with disabilities. Her organization was unable to receive federal funding in the first round of loans due to a money shortage. “Every penny Sidwell gets is a penny that another organization that doesn’t have Sidwell’s resources is not getting,” Remes said to WAMU.

Sidwell is not the only school in the DMV to accept a loan from the federal program. St. Andrew’s Episcopal School, Landon, Lady of Good Counsel and The Field School all applied for and accepted federal aid. However, multiple schools, including GDS, The Potomac School and Holton Arms, all applied and were approved for a loan but declined to accept it. 

GDS “leadership felt that the money apportioned by Congress for this program was, in the end, more suitable for organizations and companies that have greater needs than GDS,” said Jeffery Houser, chief financial officer of GDS. “GDS felt that accepting such a loan would have limited these resources for people whose existential needs are greater than GDS.”

The Small Business Administration’s loan program called the Paycheck Protection Program (PPP) was established through the federal CARES Act, a $2 trillion relief package passed by Congress in March. The PPP, which designated $600 billion in loans, was designed for nonprofits and small businesses with fewer than 500 employees. 

PPP loans are forgivable if 75 percent of the loan goes towards keeping employees on the payroll. The rest may go toward other expenses necessary to ongoing operations, including rent and utilities.

Across the country, businesses and nonprofits have come under scrutiny for accepting the money, including wealthy entities like Shake Shack and the Los Angeles Lakers. Elite private universities have also been under pressure from the White House for accepting loans from the federal government.

Treasury Secretary Steven Mnuchin criticized Harvard when it accepted a federal loan. “It has come to our attention that some private schools with significant endowments have taken #PPP loans,” Mnuchin said in a tweet. “They should return them.” 

However, private high schools have insisted that their large endowments, high tuition and donors do not make them immune from the economic distress caused by the pandemic. Cato’s Center for Educational Freedom is tracking private schools shutting down as they face the COVID-19 economy, and the list already includes 11 institutions. 

In response to the backlash surrounding Sidwell accepting the PPP loan, the Cato Institute published an article stating, “Most private schools are not Sidwell Friends, and they should not be shamed for help they need to survive not just in the COVID economy, but as they compete against taxpayer-funded public schools.”

Hellen Hom-Diamond, a spokeswoman for Sidwell Friends, said tuition—which is on average approximately $45 thousand per year—covers only 83 percent of expenses, and the majority of Sidwell’s $53.4 million dollar endowment is restricted and unable to be used for payroll or other operating costs. She also added that 12 percent of the school’s budget comes from fundraising and other programs and the school expects to take a financial hit from lost tuition, lower fundraising and canceled programs.

Sidwell and GDS have nearly identical financial profiles. GDS, an elite nonsectarian school, is similar to Sidwell in size and tuition, and had a comparable endowment of $47.6 million as of 2018. GDS, however, declined to accept a PPP loan after being approved. According to Houser, 87 percent of GDS’s expenses are covered by tuition and during COVID-19, “generous contributions to the crisis fund and generally prudent fiscal management has allowed GDS to keep its personnel paid.”

“GDS’s commitment is to do everything it can to keep our community whole,” said Houser. “Our conviction is that together we can weather these uncertain circumstances, if we stand together.”

Will Olsen ’21