The Tuition Gap
The Tuition Gap is the difference between what a private school or childcare center expects to collect in tuition and what it actually receives. It is caused by late payments, partial payments, family defaults, and mid-year withdrawals. For most private schools and childcare centers in the United States, tuition is the single largest source of operating revenue — and the Tuition Gap represents a persistent, often invisible drain on financial health.
Unlike a single bad debt or an occasional late check, the Tuition Gap is structural. It compounds month over month, semester over semester. It forces school leaders to make reactive decisions — cutting programs, deferring maintenance, reducing staff — instead of investing in growth. And because it's tied to the school's relationship with families, it's one of the hardest financial problems in education to solve.
The Tuition Gap in Private preK-12 Schools and Child Care Centers
Private and independent schools depend on tuition for the vast majority of their operating revenue. According to the National Association of Independent Schools (NAIS), net tuition revenue represents approximately 80% of the average independent school's total revenue (NAIS, "Open Door: The Impact of Money in Independent School Culture and Communities," 2024).
But that revenue is increasingly under pressure. NAIS data from the 2022–2023 school year shows that median net tuition covered only about 76% of actual per-student expenses, leaving schools to make up the difference through fundraising, endowments, or operating cuts (NAIS 2022–2023 Facts at a Glance, via TADS). Twenty years ago, net tuition was approximately 98% of gross tuition. By 2020–2021, that figure had fallen to around 83% for NAIS member schools (SAIS, "FastStats: Financial Health Trends").
The gap is widening. And the schools most affected are often the ones with the fewest alternative revenue sources — smaller independent schools, faith-based schools, and schools in communities where endowments and major gifts are not the norm.
The Tuition Gap in Childcare Centers
Childcare centers face an even more acute version of the Tuition Gap. Operating margins in childcare are notoriously thin. A single family defaulting on a month of tuition can mean a teacher doesn't get paid, a classroom closes, or a center shuts down.
The numbers tell a stark story. According to Child Care Aware of America, childcare prices have risen 29% over the five years from 2020 to 2024 — outpacing the 22% rise in overall consumer prices during the same period (Child Care Aware of America, "Child Care in America: 2024 Price & Supply"). Parents are paying more, yet centers are still struggling.
A January 2025 NAEYC survey of over 10,000 early childhood educators found that 55% of childcare program administrators reported being underenrolled relative to their capacity. The top reasons: not enough staff, wages too low to attract qualified workers, and families unable to afford enrollment (NAEYC ECE Workforce Survey, January 2025). When families who are enrolled also fall behind on payments, the financial strain becomes untenable.
The childcare sector has lost over 40,000 workers since 2020, largely because wages can't compete with other industries (Center for American Progress, 2023). Late and missed tuition payments are a direct contributor to this cycle — less revenue means lower wages, which means fewer staff, which means fewer enrolled children, which means less revenue.
The Human Side of the Tuition Gap
Numbers tell part of the story. But the Tuition Gap plays out in daily interactions that school leaders, teachers, and families know well.
It's the school director who has to call a parent about an overdue balance — knowing that the parent's child is in her classroom. It's the childcare center owner who hasn't paid herself in months because three families fell behind. It's the business manager who spends Friday afternoons chasing payments instead of planning next semester's budget. It's the family that feels judged at pick-up because they missed a payment they intended to make.
The Tuition Gap isn't just a financial problem. It's a relationship problem. Schools exist to serve children and families. When tuition collection becomes a source of tension, it erodes the trust that makes education work.
Why Traditional Solutions Don't Close the Tuition Gap
Payment Plans
Spreading tuition across monthly installments helps families budget, but it doesn't eliminate the risk of non-payment. If anything, more payment periods mean more opportunities for a payment to be missed. The administrative burden of tracking and following up on each installment falls entirely on the school.
Late Fees and Penalties
Punitive fees may motivate some families, but they damage relationships and disproportionately affect families already under financial stress. They also generate a fraction of the revenue lost to the underlying delinquency. A $50 late fee doesn't offset a $2,000 unpaid tuition balance.
Collections Agencies
Sending delinquent accounts to collections recovers some revenue — at the cost of the relationship with the family. It's also slow, unpredictable, and typically yields a fraction of the original amount owed. Most schools view collections as a last resort, not a solution.
Tuition Management Software
Payment platforms make billing more efficient, but efficiency doesn't eliminate non-payment. The school still bears 100% of the risk when a family doesn't pay. Better invoicing doesn't close the Tuition Gap — it just makes the Gap easier to measure.
Closing the Tuition Gap with School Income Guarantee
School Income Guarantee (SIG) is the only financial model that fully closes the Tuition Gap. Under a SIG arrangement, a third-party provider guarantees 100% of the school's expected tuition revenue on a predictable schedule. The provider assumes all collection risk and delinquency management. The school pays a take rate that is always lower than its historical rate of late or missed payments — meaning the school receives more net revenue than it was collecting on its own.
Clad Payments is the first School Income Guarantee platform for private preK-12 schools and childcare centers in the United States. The model was proven at scale in Brazil, where Clad's founder, Danilo Costa, grew the concept to over 1,000 schools and 250,000 students. In the US, Clad currently serves schools and childcare centers in seven states, with 100% school retention and 96% of partnerships originated through referrals.
Schools that work with Clad gain predictable cash flow, zero delinquency exposure, and freedom from the operational burden of collections. Families experience a fee-free, friction-free payment process. The Tuition Gap closes — and both sides benefit.
FAQ: Frequently Asked Questions About School Income Guarantee
Is School Income Guarantee a loan?
No. SIG is not debt financing. Schools are not borrowing against future tuition. The SIG provider guarantees revenue and assumes collection risk in exchange for a fee. There is no repayment obligation.
What happens if a family stops paying entirely?
The SIG provider absorbs the loss. The school has already received its guaranteed payment. The provider manages all collection efforts directly with the family.
How is the take rate determined?
The take rate is calculated based on a confidential analysis of the school's historical payment data, enrollment patterns, and delinquency rates. It is always set below the school's historical rate of late or missed payments, ensuring the school gains revenue compared to its current situation.
Does SIG work for schools with low delinquency rates?
Yes. Schools with low delinquency rates receive a correspondingly lower take rate. Beyond the direct financial benefit, these schools gain predictability, reduced administrative burden, and protection against unexpected payment disruptions.
Where did the School Income Guarantee model originate?
The model was created in Brazil by Danilo Costa under the name "Receita Garantida" (Guaranteed Revenue). It has since been adopted by over 1,000 schools serving 250,000+ students in Brazil, with multiple companies now operating in the category. Clad Payments is bringing this proven model to the United States for the first time.
Sources Referenced on Page
NAIS, "Open Door: The Impact of Money in Independent School Culture and Communities," 2024 — net tuition ≈ 80% of revenue
NAIS 2022–2023 Facts at a Glance via TADS — net tuition covers ≈76% of expenses
SAIS, "FastStats: Financial Health Trends" — net tuition fell from 98% to ~83% of gross tuition over 20 years
Child Care Aware of America, "Child Care in America: 2024 Price & Supply" — 29% price increase, outpacing 22% CPI
NAEYC ECE Workforce Survey, January 2025 — 55% underenrolled, staffing, and affordability cited
Center for American Progress, 2023 — the childcare sector lost 40,000+ workers since 2020