The cost-of-living crisis, Covid-19 pandemic and Brexit forcing families to find more affordable housing outside of the capital is among factors in the decline, says Lambeth Council.
Another issue for schools is the current funding system, which is based on the number of pupils rather than need, it adds.
The birth rate in the borough has dropped by a third, it also warns, adding, “the combination of these factors means urgent action is needed”.
Proposals include closing and amalgamating some primary schools “to reduce the risk of schools building up big deficits”.
The consultation is being launched following initial gathering of feedback from the community.
The council is warning the borough’s schools could be £17m in debt by March 2026.
“I understand how this is an incredibly difficult situation for all involved,” said the council’s cabinet member for children and families Ben Kind.
“However, Lambeth Council has a responsibility to act now, to prevent the situation getting worse and to protect the future of Lambeth’s schools.
“We’re building on the action we have taken over several years and must act now to stop debts mounting and school’s futures being put in jeopardy."
He added: “This consultation is not a reflection on the dedication of our teachers or staff, but on the undeniable reality of declining pupil numbers.
“The council has also written to the government, calling for immediate support to help safeguard the future of Lambeth’s schools. We urgently need the government to recognise the severity of this situation and provide the backing our schools deserve.”
While 10 years ago 3,243 pupils started primary schools in Lambeth, by this year the numbers have fallen to just 2,324.
This has left 500 vacancies in reception classes, which the council points out is the equivalent of 18 empty classrooms.
So far schools in the borough have removed 975 places from their registers since 2016.
Earlier this year analysis by London Councils highlighted a drop in demand for school places in the capital.
It found that among 32 boroughs there will be a more than 4% fall in demand for reception and year 7 places.
This comes amid a 2.4% drop in applications for secondary school places.
Inner city boroughs including Lambeth, Lewisham, Westminster, Islington, Hackney, Southwark, Camden and the City of London are among the worst affected by dwindling pupil numbers.
Mayor of London Sadiq Khan told CYP Now he is concerned about councils taking permanent decisions on school places “based on what could be a short-to-medium-term blip in the demography of London”.
Lambeth's four-week consultation closes on 7 October and can be accessed here.
