The OP isn’t coming back so we don’t have more information. I think it is hard to continue the discussion.
Is the problem because of the accommodation being removed?
If it were me and if I can find the right school that can address his needs, I will pick #2. Bring him to visit the school and see how it goes. Talk to the school to see how they help him to apply for colleges.
What does he want to major in ? and what skills does he need to be successful in that major?
BTW, if he were to stay in the current school, does he need to complete the 2nd half the school year? Some schools allow kids to take internship. I can’t say which one is the least harm, however, I would think keeping him in an environment and let him accept Ds and Fs as normal will cause most harm.
My sister teaches 4th grade. Last year she had 27 kids, 16 with IEPs. Every single IEP listed ‘sit in the front row’ as part of the plan. So of course they sat in a circle so she was in compliance with 16 IEPs (there was only one row) but it probably wasn’t the best arrangement of their desks.
what is the suggestion?
I suspect the IEP was not well written. Sometimes the recommendation for the kids to sit in the front of the class is to make sure has that kid has the teacher’s attention or that the kid can see the teacher so as to stay focus. Having the kids sit in a circle may defeat the goal of the accommodation as some kids may sometimes be looking at the back of the teacher.
But that is the problem. No one knows what the other IEPs in the same class require when they are writing it for a single student. Many IEPS are inherited from the year before when the student had another teacher, and in my sister’s case, may be coming from another school as she’s in a high turnover neighborhood). My daughter had an IEP written when she was in first grade and the OT/PT ‘threw in’ that she should get extra time in testing because this OT/PT knew that if it wasn’t in there in the early years it was hard to add it later. I loved this OT/PT and thought she did a great job, but she didn’t have time to reinvent the wheel so used the accommodations she knew worked. My daughter didn’t need the extra time in first grade, didn’t qualify for another IEP in 4th grade, but really could have used that extra time in high school.
There is a private school for autistic students here, and some of the kids do get part of their tuition paid by the school district, but also get some paid by medicaid, some by private insurance, and some they pay themselves (it costs $60k). If a district pays its state funds ($10k) to the private school, for every 5-10 students, it’s losing a professional (teacher, counselor, social worker) who probably had a case load of more than just those 5-10 students. The threshold to prove that the school district should pay for this private school is very high and takes years to prove that the private school is the only option. The standard isn’t that it is the best option (it usually is best), but that they public school district cannot provide a suitable education.
the problem was the people who wrote the IEPs and implemented the IEP. Say in this case, the teacher should have spoken up and called for an IEP meeting. The case manager should have known. IEPs should not have been inherited, they should have been rewritten (or revisited ) once a year. If the student came from another school, the school may implement the IEP but should evaluate to see whether the IEP was appropriate.
I do not know the needs of the kids or your state law, I am concerned with putting 16 IEPs in a classroom of 27 kids.
I am sorry, a parent needs to educate herself to advocate on behalf of the child which was what I think @compmom tried to advocate here.
Exactly, hence, in general, it is not easy for a parent to ask for a public funding to put the kid in a specialized school, and if the kid were in specialized school, the kid usually needs it.
If children truly need placement in a private school, there are ways to avoid that expense affecting other students or faculty size, or cuts in programs. In my town, these include going to town meeting, or voting for a tax override so that property taxes exceed that allowed 2 1/2% increase. Advocacy with the state should be a priority since they rarely meet their mandated funding of special ed. Anyway, no OP so not posting again 
MODERATOR’S NOTE:
Let’s move on from how to fund and from relating anecdotes about your neighbor’s sister’s grandson’s experienced and simply focus on answering the OP’s question. I realize that there are some followup questions that she has to answer and that she has not returned, but I’m inclined to cut a bit of slack - it’s only been a few days, the OP is a long-time member, and it’s the holidays; people have other things to do to.
So on the Ds and Fs front. My daughter’s Junior year was sort of a disaster. One of her good friend’s killed himself. She was on the receiving end of a lot of “relational aggression” and her two former best friends were at the center of it - so all of her social support got cut out from under her just when she needed it most. She didn’t get to the D and F point (she did end up with one D+ and a few C-), and she did get accepted to several schools including her first choice. Her test scores were pretty good, and she did write the admissions counselor to explain the drop in grades.
There are a number of private colleges who have open admissions (they’ll take anyone). You can do a search on open college admissions or open college enrollment. If it were my kid, I’d get the IEP back in place for the rest of this year, get him graduated, and do community college to see if college is his thing.
Could you provide a few examples?
And please do NOT include any for profit colleges…which DO take anyone.
Here is a list from 2016 - it was the second Google hit on "open enrollment colleges: http://www.bestcolleges.com/features/best-colleges-with-open-admissions/
Here is the top 100 U.S. News and World Reports colleges with high acceptance rates:
https://www.usnews.com/best-colleges/rankings/highest-acceptance-rate
(North Dakota State schools usually have high acceptance rates, are good schools, and are affordable - even out of state. But you go to college in North Dakota. Valley City State University - 98% acceptance rate, a charming small town).