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How to pay for private school (without going bankrupt)

So she considered sending her son to a private school … and immediately crossed that option off the list, due to the price.

But there are ways to make a private K-12 education affordable.

Average private school tuition in 2021 for K-12 is $ 11,200 per year, according to Private School Review. Elementary school costs $ 10,100 and high school is $ 15,000. Some schools in big cities like New York and California charge more than $ 30,000 per year.

However, many private school families do not pay those prices.

Twenty-eight percent of private school students receive some form of financial aid, according to Education Data, and those who receive aid in the form of grants receive an average of $ 11,500. Another 5 percent of private school students receive tuition discounts averaging $ 10,000 because their parents work at the school.

We spoke with financial aid experts and other consultants about all the ways you can get a discount (or at least save on taxes) to make private school education more affordable.

How to pay for private school (without going bankrupt)

529 savings plan

Good news: The federal government recently changed 529 laws, so they can be used for K-12 education, not just college. You can use up to $ 10,000 annually from a 529 account to cover K-12 expenses. But first, check the rules in your state.

“Some states have not yet chosen to follow the new federal rules,” says Bambridge. Still, you don’t have to live in the state where your 529 account is, so be sure to shop around if your state doesn’t allow it.

A 529 savings plan allows you to invest tax-free as long as your withdrawal is used for qualified expenses. It’s similar to a 401 (k) or IRA, but it’s specifically for education, says Bambridge.

You can easily open a 529 for your child online without paying an annual fee or funding the account with more than a small balance, says Olivia Summerhill, CFP and divorce financial planner in Seattle. “In my experience, family members of older generations are never sure how to properly fund an educational fund for their grandchildren or other younger generations,” says Summerhill. “It’s relatively easy and anyone can contribute to anyone’s 529.”

In other words, the 529 owner is not the only person who can make contributions.

Coverdell Education Savings Account

This is a trust or escrow account that allows contributions of up to $ 2,000 per year, which can be accumulated and grown with tax-free interest, says Alistair Bambridge, a partner at New York-based Bambridge Accountants.

The money must go toward qualified expenses, including tuition, fees, books, and supplies. While contributions are not tax deductible, the amount you deposit into the account increases tax-free until it is withdrawn, says Bambridge. One catch: If you have adjusted gross income greater than $ 110,000, or if you are a joint taxpayer making more than $ 220,000, you cannot contribute to Coverdell ESA.

In general, Coverdells has lost popularity due to the greater flexibility of the 529s.

Discounts by state

Some states offer their own discounts for private schools, says Bambridge. For example, in Alabama, parents with children in schools labeled “failed” can request to transfer to schools that did not fail, and will receive a discount of $ 2,814. In Louisiana, the state offers up to $ 5,000 per dependent for Louisiana-based K-12 private schools.

Check here to see what’s offered in your state.

Roth IRA

This is an individual retirement account that allows qualified tax-free withdrawals for eligible expenses. “While typically used for retirement planning, the flexible nature of Roth IRAs means that they can allow you to make tax-free contributions as long as the account has been open for at least 5 years,” says Bambridge.

In 2021, annual contributions are limited to $ 6,000 (or $ 7,000 if you are over 50 years old). So if you invest $ 5,000 over 15 years, you could get $ 75,000 tax-free.

Financial help

Apply at school even if you think you’re making too much, says Eric Kim, program director at LA Tutors. This is because many schools offer financial aid on a sliding scale. So even if your income is relatively high (over $ 200,000), you may still be eligible, depending on the number of children you have in school, the number of children you have in college, and your location. Schools tend to decide on admission first and then offer help based on a number of factors, including their financial aid budget.

Most private schools use the National Association of Independent Schools Parent Financial Statement to assess financial aid needs. You will most likely only need to complete this form once to apply for all of your private school financial aid packages. Expect to reveal your entire financial history, including wages, debt, assets (vehicles, bank accounts), and other expenses.

But the forms only tell part of the story, so experts recommend attaching a letter explaining your financial situation outside of what appears on the forms. Do you have additional people to support? Are there extenuating circumstances? This is where you can explain it.

The key is to get all the forms on time or early (usually the deadline is April 15), but some schools may have an earlier deadline.

Need and desire

The financial aid that individual schools offer is based on need, and also on how much a school really loves the child and the family, says Alina Adams, a New York City school consultant and author of “Getting into NYC Kindergarten.”

“I have had families submit the exact same financial information to five different schools and receive five completely different scholarships, ranging from nothing, up to a few thousand off, half off, ¾ off, to once on a very blue moon. , a complete free ride, ”says Adams. “The same child, the same parents, the same income, very different results.”

It all comes down to the space the school needs to fill. This could be: racial, ethnic or religious diversity, or the profession of a parent. Or maybe your child is a firecracker that the school thinks will make him look good over time. Your child may excel at an activity outside of school that could also attract positive attention. “They may not be called ‘merit scholarships,’ but the ones that are based on need are often narrowed down to your child’s unique profile,” says Adams.

So while much of this is out of your control, you can increase your chances by explaining to the school why your child would be an asset to the school. Are you a great trumpeter? Is it a natural spell that could be a spelling bee champion?

State voucher

Many states offer private school vouchers, also known as school choice programs or scholarship programs. These programs use public education dollars for families to use to cover the costs of private schools.

Each state has different rules. For example, in a handful of states, families need family income within a certain percentage of the federal poverty guidelines. Some states require students to take an exam to receive a voucher. To see if your state has a voucher program, click here.

Danielle Braff is a contributor to The Penny Hoarder.



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