How to account for reduced student capacity when calculating program retention?

Rationale

Some of the terms are a little vague, particularly what you refer to as eligible students and returned students. I'll set some variables for clarity, but tell me if I defined them incorrectly.

I assume them to mean:
eligible students $ = A $ being the set of all students in the after-school program 2019-2020
returning students $ = Acap S $ where $S$ is the set of all of summer camp 2020 students

Now we can define retention rate to be $frac{|Acap S|}{|A|}$. I base this on the US government definition of university student retention rate, which I think is pretty similar, but please correct me if it's not.

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The reasons as to why you might have $|Acap S|<|A|$ are irrelevant.

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Example

Let's say you have $|A|=100$ so that, in your situation, $|S|=90$. For simplicity, let's also say that there are no newcomers to the mix.

The retention is, quite literally, how many students you retained. If you retained $90$ students, then the retention rate is $90/100$. Even though $|S|=|A|-10$, the number of students you retained $|Acap S|$ as a percentage of the number of students in the original program $|A|$ is still $90%$.

It wouldn't make sense to normalize this to $100%$.