Paying for private school challenges parents’ finances

Paying for private school challenges parents’ finances

by Kathryn Christ

For parents who decide to enroll their children in private school, financing can be a challenge. Hefty tuition fees can be daunting.

With planning, it is possible to face the challenge and ensure your child receives a quality education in the school of your choice.

Education IRAs

Saving for your child’s education should begin at birth.

Beginning in 2002, education IRAs (EIRA) will be available as investment tools for education expenses from kindergarten through college.

“For a couple with a newborn, I would recommend the EIRA as a wonderful thing,” said Marshall Gunn, financial adviser with Gunn & Co. “There are four or five years for funds to build up and then be used for private school tuition and expenses.”

Previously, education account funds were available only for college expenses. Revised regulations allow for tax-free withdrawals for education expenses beginning with kindergarten. Qualified withdrawals include tuition, fees, books, uniforms and other school-related expenses.

The EIRA is an investment that places funds in the child’s name. Contributions are not tax-deductible, and there is an annual maximum limit of $2,000 in contributions per child.

“Unused funds may be passed on to another beneficiary or withdrawn with a 10 percent penalty,” said Richard Rust, a certified public accountant with Langley & Associates.

Some parents are able to meet the costs of private education through a regular savings plan. Using an automatic withdrawal system available at local banks, a set amount is withdrawn from your checking account each month and placed in savings.

“Our pre-authorized transfers are set up so you tell us the date and amount you want to transfer,” said Lisa Sweat, financial sales representative with Compass Bank. “I have a savings account that I use for my daughter. It’s easier to start saving for your child’s education this way because you never see the money.”

Making sacrifices

Private education may mean financial sacrifice for some families. Perhaps the stay-at-home mom decides to return to the work force or dad takes a second job. In some cases, older students may work part time to help offset the costs.

“We are the quintessential family that does whatever it takes to keep our children in private school,” said Sherrie Rowe, mother of a first-grader and a preschooler.

“For me personally, private education is the only option. It’s the only way I can give my child the stepping stone she needs to succeed as a person who will impact the world around her in a positive way,” Rowe said.

“There’s not a day that goes by that we don’t make decisions in this household based on the fact that we need to write that check every month. I drive a 10-year-old Ford Explorer with 187,000 miles on it. Our tuition payment is in lieu of a car payment.”

Rowe’s husband, Jeffery, works two jobs and spends his free time maintaining the family car to ensure there aren’t any unexpected repair bills.

“We don’t take extended vacations. We trim our own hedges and change our own oil. Yes, I do worry about when the Explorer will need to be replaced, but I wouldn’t change our lifestyle for anything,” she said.

For Lyndi Spencer, choosing a school for her kindergartener was an important decision.

“Knowing that kindergarten was approaching, I began checking around, looking at the various schools. My dad and I discussed the options as I thought about where to send my daughter. When I had settled on what I thought was the best school, my dad and I were talking and he offered to pay for my daughter’s education,” Spencer said. “He set up a gift account for my kindergartner and my younger daughter. Each year, he deposits the maximum amount allowed by law and I’m able to use this money for educational expenses as I see fit.”

For grandparents with extra disposable income, an investment in the education of their grandchild is an investment in the future of that child.

“It’s worked out well that my dad is helping us,” Spencer said. “I know that he’s glad he can give his grandchildren the opportunity for a good education.”

Financial assistance

Many schools offer financial assistance to families who qualify.

“At Trinity we have a limited amount of funds available to help qualified families,” said Linda Nix, executive secretary at Trinity Christian Academy. “We use a company called Private School Aid Service to process financial aid information. They send us a list of which families qualify for financial aid and for what amount based on a formula.”

The Bolles School takes a proactive approach to financial assistance. “Bolles understands that the cost of a college preparatory program of our caliber is significant and we are committed to making our educational experience affordable to all students who meet our criteria for acceptance,” said Jan Olson, director of communications for The Bolles School. “Financial aid is based strictly on financial need, rather than academic or athletic performance, to qualifying students in grades six through 12.”

“At Trinity, families may apply for financial aid prior to registration,” Nix said. This allows a family to consider cost as part of an informed decision regarding private school options.

Kathryn Christ is a correspondent with The Business Journal.