Private school goes bankrupt
Some things cannot be privatized. Any function where the price of failure is catastrophic cannot be insured, because the risk/reward ratio is beyond any sane or prudent private company. And yet some of those functions must be done.
One of them is national defense. The price of failure is complete social destruction. Therefore the people, as a collective entity, have the right to supersede individual decisions and allocate for national defense. This right includes taxation but also conscription when necessary. Most libertarians understand this; most libertarians allow for national defense.
But there are other functions with the same risk/reward ratio. Disease control - demanding that each individual undergo the tiny risk of vaccination so that the entire society can avoid decimation. Few libertarians are willing to grant the CDC a pass, but that's only because they don't understand the science of vaccination.
And now we have a concrete example of another function. In a perfect libertarian world, insurance companies or lawsuits would redress the harm that Mobray College cause by its breach-of-contract. Except: how do you give a kid back his senior year? Time is not a fungible commodity. These kids, having been disrupted in the middle of their education, will carry that burden (however minor) for the rest of their lives. This is a time-sensitive endeavor, like cooking an egg. You can't make up for being 5 minutes late.
Given that the burden of not educating an entire graduating class of students is unacceptable to society, society must step in and fill the breach. The Victorian government has already shelled out $400K just to get these kids to their mid-year exams. If you can find a libertarian who thinks the government was wrong to do so - if you can find a libertarian who thinks those kids should have been left to rot because some private equity firm decided profits were more important than educating the next generation or because their parents weren't smart enough to detect a well-hidden scam that government regulators missed - punch him. (And I say him because we all know it will be a him).
And if government is going to have to bail out the private school system when it fails, then why in the hell should it even allow a private school system? If the government has to pick up the tab - and it does - then why doesn't it get to run the show?
Come to think of it, the same logic applies to banks.