Elite private schools are receiving federal loans — including one attended by Secretary Mnuchin’s children

Published April 30, 2020 Updated May 1, 2020 8:55 AM PT

Brentwood School, the elite K-12 institution in West Los Angeles, has received a Paycheck Protection Program loan, according to an April 24 newsletter it sent to parents, joining a number of exclusive schools throughout the country that have secured government financial aid due to coronavirus disruptions.

The private school, which has more than 1,100 students spread across two campuses, said that the loan, approved and funded in mid-April, would “help us enormously as we move forward into a financially ambiguous future” brought on by the COVID-19 pandemic, according to the letter obtained by The Times.

Many private schools in Southern California and beyond are grappling with financial hardships, but the federal loans offered via the $660-billion PPP are designed to help pay for workers’ salaries. At Brentwood, though, the optics are unique.

Founded in 1972, Brentwood counts among its students at least two of Treasury Secretary Steven T. Mnuchin’s children, according to multiple people with knowledge of the school. Board members include actress Calista Flockhart and investor Lance Milken, son of billionaire Michael Milken, the former junk bond king.

Mnuchin has been critical of another well-heeled L.A. organization that received a PPP loan. In a CNBC interview Tuesday, he called it “outrageous” that the Los Angeles Lakers received a now-returned $4.6-million PPP loan.

Monica Crowley, assistant secretary of the Treasury for public affairs, said in a statement to The Times that “the Secretary has no knowledge if the school has taken out a PPP loan. He saw in the press today that private schools with endowments have taken out these loans and he does not think it’s appropriate.”

Following the publication of this article, Mnuchin doubled down on his criticism of private schools on Friday morning, saying in a tweet:

According to an Internal Revenue Service filing, Brentwood’s endowment was about $17.4 million in 2017, the most recent year for which data were available.

The letter from Brentwood officials did not disclose the size of the loan the school received. In a statement to The Times, the school said that its PPP loan would help it navigate a future that could include “a potential decline in enrollment and charitable giving, accompanied by increased demand for financial assistance and other escalating expenses.”

Tuition at Brentwood ranges from $37,500 a year for K-5 students to $44,000 for sixth through 12th grades.

“The dramatic and enduring impacts of COVID-19 will continue to affect our school financially, and in other ways, over the course of at least the next year,” the statement said.

The issue of private schools accepting PPP loans has been a touchy one in recent days; a Wednesday article in the New York Times listed several elite institutions that have gotten the funding, including St. Andrew’s Episcopal School in Potomac, Md., which counts Barron Trump, one of the president’s sons, as a student.

Allocations of PPP funding — a component of the federal CARES Act that was signed into law March 27 — have come under intense scrutiny, with several high-profile businesses and organizations, including Shake Shack Inc., saying they would give their loan back after facing public pressure. Mnuchin has threatened to hold participating companies criminally liable if they do not meet criteria for the program.

Private prep schools may not be the first entity that comes to mind when considering aid for small businesses. But that’s what they are, and times are tough for many of them, said Mary Menacho, interim executive director for the California Assn. of Independent Schools, the organization for 224 private schools in the state.

More on coronavirus’ economic impact

“All of these schools are small businesses when it comes down to it … [and] have really bent over backwards to keep their programs going and their people employed,” Menacho said. “All of them are highly committed to keeping their teachers, their janitorial staff — everybody that works for them — on payroll as long as they can.”

Menacho said she was aware of California private schools that had received PPP loans, but said she could not name them and did not know whether any had opted to return funds they received.

Officials at five other exclusive Los Angeles-area private schools either did not respond to interview requests or declined to comment Thursday. One sought to make clear that it hadn’t taken the federal funding.

Ari Engelberg, a spokesman for Harvard-Westlake School, said in a statement that the school has tapped into its financial reserves “to provide security and continuity to faculty, staff, students and their families,” and had done so “without accessing federal funding programs.”

The first round of Small Business Administration-backed PPP loans, which totaled $349 billion and were offered on a first-come, first-serve basis, was quickly exhausted. A second round of funding amounting to $310 billion was made available on April 27.

Questions have been raised about the program’s fairness, with many small-business owners saying their operations have been imperiled after failing to secure a loan from the fund. And there is evidence that bigger — and in some cases more sophisticated — banking clients are the ones who have been able to get the loans, which are forgivable if certain parameters are met.

Amid the mounting economic turmoil, even Sidwell Friends School in Washington, D.C., which has educated the children of several presidents, has taken a loan under the PPP. The school said in an April 29 letter to its community that it had been approved for a $5.2-million PPP loan.

“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.”

But not all private schools, including those that educate many low-income and minority students, have been so fortunate.

The Diocese of San Bernardino, which comprises 26 schools, applied for a PPP loan but has not yet received one. Officials remain hopeful. Like many entities that have applied, the diocese does not know whether its application will be approved or where it stands in the queue for limited available funding.

These schools are responsible for their own budgets, and some were financially at risk even before the pandemic, said diocese spokesman John Andrews. Twenty of the 26 schools already are reporting a revenue drop for the current year, with grimmer prospects anticipated for next year.

Overall, 110 employees out of 741 already have been laid off or have taken salary reductions, including part-time employees, instructional aides, support staff and even some teachers. Schooling continues via distance learning, but some families are no longer able to pay tuition, Andrews said.

Before the pandemic, about half of enrolled families at the Diocese of San Bernardino schools received discounted tuition. Depending on the school, full annual tuition fees range from about $4,500 to $7,500 for the lower grades and from about $8,000 to $12,000 for high school.

The federal support “would be a major help for those schools struggling to pay their staff and meet the expenses of providing education,” Andrews said.

The predicament those Catholic schools face is not unique. Menacho said that a 2019 survey of California private schools found that 60% of those that participated “were not at their optimal enrollment.”

She said that the “perspective of elitism around independent or private schools” does not necessarily square with the economic realities of many of these institutions.

“Because a school has a certain history or a certain reputation — that doesn’t really speak to its financial standing or what its needs are,” Menacho said. “What’s their debt? Their deferred maintenance? What costs are they carrying? Those are things that … are very real.”

Those are questions that now are being considered by Brentwood School, which counts among its alumni a slew of show business players, including actor Jonah Hill, producer Ryan Kavanaugh and “X-Men” writer and producer Simon Kinberg. Before becoming Treasury secretary, Mnuchin had been a film financier and Wall Street executive.

The April 24 letter to the Brentwood community was signed by Mike Riera, the head of the school, and Lance Milken, chairman of the board of trustees. Milken is the son of Michael Milken, the Wall Street investor who was sentenced to 10 years in prison following his 1989 indictment on racketeering and securities fraud charges. He was pardoned by President Trump in February.

In the letter, the Brentwood officials said the school, which has 305 full-time employees and more than 100 part-time employees, is now “facing some tough realities.” It said that as part of cost-saving efforts, it already has begun to “efficiently reduce expenditures.”

In its statement to The Times, Brentwood said that with the PPP loan, “the school can avoid layoffs that could compromise a successful return to school for our students.”

The statement from the school also laid out some of its financials. It said that salaries and benefits for faculty and staff are the school’s largest operating expense, and it noted that its endowment “does not contribute interest income to our operating budget.”

“We rely on donations beyond tuition revenue each year to balance our budget,” the school said.

Several elite universities have opted to not take advantage of money available to them under the CARES Act Higher Education Emergency Relief Fund, which is separate from the PPP. Harvard and Stanford said that they would not accept money from the fund.

In a series of messages on Twitter, Stanford said April 22 that its leadership understands “that this crisis represents an existential threat for many of the smaller colleges and universities that are such a critical part of the fabric of higher learning in the United States” and therefore was rescinding its request for funds.

The university said that it was taking such a step even though it faces “significant financial pressures during this time of unprecedented uncertainty.”