Bankruptcy Leaves Parents with the Preschool Blues

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Imagine this:

You’ve survived the Herculean task of applying to preschool, and your child is in. You’ve bought the backpack and prepped your dear child for what’s to come (you will have a teacher and you will listen to her! You will finger paint for hours on end without worrying about the couch! You will snack with 10 other intransigent 2 year olds!) .

Then an e-mail arrives from your preschool director saying the school is declaring bankruptcy. It’s followed by another e-mail saying the school has found a buyer. And another saying the deal is almost done. Then, finally, an e-mail announcing that the deal has fallen apart. Bankruptcy.

That’s the back-to-school story for 20 families who had planned to send their children to Village Kids Preschool, a five-year-old school with a lot of heart but no financial heft.

“We were dedicated to a vision more then a business model,” said Molly Malone, the school’s 35-year-old founder.

Ms. Malone opened Village Kids Preschool in the West Village in 2006, mortgaging her mother’s house and father’s pension fund to secure a small space on 14th Street. She had taught at Barrow Street, and had been the director there for five years. When new ownership came along, she decided to move on and start an ultra-progressive preschool in the neighborhood where she grew up.

“We thought what we were doing was unique, a non-dogmatic, progressive, accountable educational philosophy that was joyful and fun,” she said.

“Secularly, spiritually stimulating,” she added.

She seemed to achieve that. Parents who visited said she gave the tour in bare feet and talked about her father’s days as a trombone player. The kids in the school seemed happy. Unlike other popular preschools, Village Kids aimed to never turn a family away. When other schools rejected kids, Ms. Malone generally took them. “We stood by an inclusive philosophy and accommodated kids with special needs,” she said, adding she gave about $100,000 in tuition discounts every year.

But there were roadblocks to building a preschool. There was the obvious: “Most parents don’t want to go to new schools,” she said. And the not-so-obvious: It took 18 months to get the documentation to start, so that when the school started it was already in a financial black hole.

“We were borrowing from last year to get through next year,” Ms. Malone said. But when the financial crisis hit, the school started having trouble paying its bills, families got wind of the problems and fewer families applied. Last year a teacher left when Ms. Malone paid her late.

In June, seven children pulled out, erasing the school's chances for financial viability. Ms. Malone stepped up her efforts to find a buyer. She has invested about $1 million herself, she says, and even tried to sell for $500,000. The last deal she cut, the one that fell through, was for $120,000. The buyer backed out, concerned about potential liabilities, a letter to parents said.

Parents are angry. Most had paid the first half of the year’s tuition --- anywhere from $6,000 to $8,500, depending on how many days a week the child planned to go to school and how many hours. On Aug. 2, they received a letter requesting the remaining tuition. A week later, they received the bankruptcy letter.

Now families are scrambling. One parent said that when she was notified about the bankruptcy, she went back and called all the schools where she had originally applied. She found some spots, but held off to see if she would get her tuition back. That’s when Ms. Malone announced she had found a buyer. “There was no indication that anything remained to be resolved,” the parent said.

But once it became clear the deal had fallen through -- and all the families’ tuition had been used to try and keep the school afloat, and likely would not be recovered -- spots at other schools were gone.

“What’s so frustrating is that I have to do the whole preschool process again,” said the parent.

Over the weekend, Ms. Malone arranged for the World Learning Class Academy in the East Village to take some of the families and discount their tuition so that parents owe roughly what they would have owed (about half the tuition). The new school is not as progressive, but Ms. Malone said the facilities are great and the individualized learning very impressive.

She’s sad about how things turned out, for her parents – “that was money they could not afford to lose”-- and for the teachers and kids at the school. “I thought things came around when you did it the right way for the right reasons.”

Still, afraid she had left an overly negative impression of her experience, she added: “Even though it was hard all the way through, I'm eternally thankful to have had the experience of working with so many truly exceptional teachers, parents, and kids.”