First, go ahead and test the kid and be honest with the parents with the student's natural abilities. If they're sub-par explain that they will have a serious uphill battle, and push private lessons strongly. If they don't meet expectations, keep an open dialogue with parents, and do everything you can, reasonably, to help them be successful. It will work out one way or another in the end. I know a kid who was like that a few years ago, and it took until their sophomore year to start shining, but became a super strong player in the band and became a band director after college. You just never know!