Planning For a Child’s Private School Education

Sending a child to private primary and secondary school is an expensive proposition. Because of this many grandparents are assisting financially in the education of their grandchildren. Some parents have the income that makes this easier, but for the rest, it’s necessary to create a pay-as-you-go system that will somehow make it all work.

The parents and grandparents who make it work tend to plan from the time the child is very young. They keep abreast of every possible resource for scholarships, discounts, loan programs, and other forms of financial aid. Also consider state plans like the Florida Prepaid College Plan.

Haisman Wealth Management Inc. can help you link a child’s pre-college education planning to the financial planning necessary for college, grad school and beyond. Here are some things to know about the process:

Start with cost: The National Association of Independent Schools (NAIS), a national organization representing private pre-schools, elementary and secondary schools, estimates that the median annual tuition in 2009-10 for all grades of private day schools was $17,880. For boarding school, the average annual tuition was $34,900.

Is aid available? Definitely, and that’s why it’s important to keep your ear to the ground as part of your overall planning strategy. Just remember that grants and scholarships are the best form of financial aid because they don’t have to be paid back. Financial aid grants for private elementary and secondary schools are awarded on the basis of demonstrated need, just like college. According to NAIS, the average endowment per student during 2009-10 was $19,122. This is why it is important to check the size of the endowment fund at any school you consider – that’s money that the school keeps in reserve to invest so it can extend aid to families in need. Many faith-based schools offer discounts to those families that are supporting the church sponsoring the school. Also look into discounts for additional children attending the same school.

The application process: Most schools use the Parents’ Financial Statement (PFS) from the School and Student Service for Financial Aid (SSS). This is a service owned by NAIS that helps schools determine how much a family can afford to pay for school tuition and other educational expenses. The form considers how many children you’re paying tuition for in K-12 or college and how high the cost of living is in your area. The wealth of the grandparents is rarely a considered in the determination of assistance.

Consider a Coverdell Account: While the best solution will differ by family, one savings vehicle might be a Coverdell Education Savings Account. Coverdell accounts are trusts created to save money for a child’s primary, secondary or college education. Contributions are relatively small — $2,000 per beneficiary from all sources during the year. Yet since Coverdell accounts are considered the asset of the account owner, you may want to keep it in a parent or grandparent’s name since an account in the student’s name could adversely affect financial aid eligibility.

Gifting: If you’re the grandparent, you can save for your grandchild’s education without triggering the gift tax obligation. Each grandparent can give up to $13,000 tax-free to each child each year.