Financing Basics

There are several ways to finance a private school education, learn more about your options here. We'll explore some of the most expensive schools, explain why tuition is rising and show you how it's all paid for.
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Updated July 01, 2014 |
Why Tuition Insurance is Necessary
You insure your property and valuables. Here's why tuition insurance is necessary when you attend private school.

Many parents think that tuition insurance is a waste of money or that they really don’t need it. I suppose if you happen to be fabulously wealthy, losing $30,000 or $40,000 because your child has to withdraw from her private school might not be a big deal. But for the rest of us, that's real money.

Here’s why you are required to take out tuition insurance. When you sign the contract with the school, you are responsible for the annual tuition, room and board charges for the academic year. The school will have operating expenses which it must honor regardless of whether your child completes the full year or has to withdraw after the second month.
 
To protect themselves most schools offer you two options: you can pay the entire year’s tuition, room and board in one payment by July 15; if you opt to pay in two installments or in monthly payments, then you will be required to purchase tuition insurance. The school has to know that the fees on which it is counting to balance its budget will indeed be there. Regardless of whether or not your child is at school or has withdrawn.
 
Here is how one tuition insurance provider explains the concept:
 
"The cost of a private school education is a substantial investment. The Tuition Refund Plan provides insurance to protect your investment. Because student withdrawals are sometimes unavoidable, the Tuition Refund Plan is a welcome resource for families who must commit to a full annual tuition
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Updated November 06, 2014 |
How Much Do Private Schools Cost?
Private schools charge everything from nothing at all to well over $50,000 a year for their services. Here are some examples of what the various types of private schools charge.
The cost of a private school education ranges from virtually nothing at several free schools to well over $100,000 at a couple of exclusive European boarding schools. For the purposes of this article you and I will consider the tuition if we are looking at day schools. We will examine tuition and room and board only as we review boarding school costs. I am leaving out all the extras such as riding or music lessons, school trips, travel to and from the school, local transportation, health insurance, computers and so on. These sundries add up quickly so don't forget to take them into account. Also not included are acceptance deposits, application fees and admissions testing.
 
Here are some examples of what the various types of private schools charge. Remember that this is merely a sampling. You should explore every school which interests you as part of your school search process. Set aside financial concerns for the moment. Focus on finding the school which is the best fit for both you and your child. While paying for private school obviously is a major concern, you will discover that you will have a couple of options available to you.
 
One final bit of guidance: you will have to visit each school's web site in order to determine what the current costs are. Generally you can find that information under the admissions links.
 
Day Schools
 
Day schools are non-residential schools. Most of them offer classroom instruction Monday to Friday. Intramural sports and activities are fitted
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Updated April 09, 2015 |
How Do They Pay for That?
You have several options. They include tuition payment plans, loans, scholarships and more.
One of my young employees was horrified to discover that a certain Los Angeles day school charges $30,000 tuition. "How do they pay for that?" was his shocked cry. It's difficult for a 24 year old who's only making $40,000 to understand how families can afford college much less private school. So, exactly how does a family afford a private school education? Here are some ways they can make that special educational opportunity possible.
 
Scholarships
 
There are not many scholarships for K-12 private school students. Still, it is worth doing your research in this area to uncover the scholarships which do exist. Several states have programs set up which allow citizens to contribute to funding for private schools. Arizona and Washington offer special tax credits for gifts to private schools for scholarships.
 
Financial Aid
 
This is the most exciting part of the 'paying for private school' picture. Understand that each private school is independent. Each school stands on its own two feet financially speaking. That's why financial aid will vary from school to school. Older, established schools such as Andover and Exeter have substantial endowment funds. That's why they and a few other schools can offer a virtually free education to students who come from families which make below a certain amount. $75,000, for example. But you will have to visit the schools' web sites to find out the details. Better yet, call and ask.
 
Loans
 
If you are strapped for cash, but have assets which can be pledged as collateral,
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Updated June 25, 2014 |
True or False: Do Declining Endowments Mean Less Financial Aid?
The impact of the 2009 financial meltdown on private school endowments has not been as severe as it was on college endowments.
The article in the New York Times sounds ominous. Certainly, as it points out, private school endowment funds have seen declines in their value as a result of the economic and financial meltdown of 2009. But there are other factors which the article does not address which make the impact on financial aid less of an issue than the writer would have you believe.

Let's look at the facts.

Conservative Investment Policies

The investment approach for private school endowments has historically been a conservative, cautious approach. Trustees and their advisors have generally been good stewards of their finances. They avoided risky investments such as derivatives and real estate despite calls from some quarters to maximize returns. The reason for the decline in their portfolio value is simple: just about every investment-grade instrument declined.

Sustainability

Back in the 90s, sustainability became an important principle in private school mission statements and philosophies. The National Association of Independent Schools has taken a leadership role in supporting all kinds of sustainability initiatives including financial sustainability with its 1,500 member schools.

From the Nais: "In order for independent schools to thrive in the 21st century, NAIS believes that they must be sustainable along five dimensions: financial, demographic, programmatic, environmental, and global."

As a result, schools with significant endowments (greater than $10 million) generally were well-positioned to weather the economic storm which 2009 brought on with a vengeance.

Financial Aid is a Priority
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Updated June 25, 2014 |
Why Are Tuition Costs Rising?
Private school tuition seems to go nowhere but up. We look at some of the reasons why and offer the opinion that a private school education is still good value.
No doubt about it, private school tuition costs are rising. Some schools seem to be rising at a faster rate than others. Why? What's behind those tuition increases? Unfortunately for many private schools costs of basic goods and services have risen dramatically. Energy costs alone chew up a major part of any school's budget. Faculty and staff salaries and benefits are a substantial part of  budgets as well. In order to attract and retain qualified, skilled and experience personnel, you need to offer a decent compensation package with annual increases. Most schools also offer free or substantially reduced tuition for children of faculty and staff.

The Foundation Center keeps Forms 990 for every non-profit organization which files with the IRS. It is fairly easy to see how much the school reported as income and expenses as well as a wealth of other data. Note that it is frankly impossible to compare apples to apples when it comes to private schools. Even their accounting and reporting varies from school to school. But a review of the data paints the same picture: costs are rising.

Another fact to consider is that tuition charged by a school does not completely offset expenses. That is why you will see your tuition bill filled with additional charges for technology, communications, laundry, athletics, uniforms and so on. These sundries, as the more bespoke schools style them, vary from school to school.
 
Is it worth it? Private schools have to spend their income wisely. They
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