Paying for a Child's Private School Education is More Challenging Than Ever

Online, April 8, 2010 (Newswire.com) - Few parents who decide to send their children to private K-12 schools regret the decision. They will tell you their children receive superior educations in classrooms with lower teacher to student rations than public schools, and that they benefit from elite amenities. However, paying for their children's private school educations is more difficult or impossible for many families than it was in the past, leading more families to consider personal loans to finance their children's educations.

A 2003 study by the National Association of Independent Schools (NAIS) found that a full 23% of parents were either taking out home equity loans or using credit cards to pay for their children's private school education. Most parents drew from a combination of various sources to meet tuition expenses, including financial aid received directly from the school. At the time of the NAIS study, those other sources included gifts from grandparents, sales of assets, alimony or child support and raiding their own retirement funds.

However, many of those funding sources dried up during the recession. Home equity loans are no longer an option for many families. Home values have dropped by as much as 50% in some areas of the country, and a full 25% of homeowners with mortgages are upside down, owing more on their homes than their current market values.

Private schools that used to offer financial aid typically limited that assistance to low or moderate-income families, but fewer schools are able to do so now. The U.S. Department of Education estimates private school enrollment declined by 3% between 2006 and 2010. Enrollment is California private schools dropped approximately 5% in the 2008-2009 school year, according to the California Department of Education.

Financial aid from private schools used to be funded almost entirely by donations from alumni, tuition and return on investments. Those donations have shrunk, rosters are shorter and investments show less return or even loss.

Deflated retirement funds means many grandparents are no longer able to be as generous in their educational assistance, too. Financial assets are worth less than they were before the recession and many parents' retirement accounts significantly lost value or were used to meet expenses after a job loss.

For parents still committed to providing their children with private school educations, loans and credit cards are the only remaining options, and even those may now have lower limits and much higher interest rates than two or three years ago.

Many parents will tell you that providing their children with the best available education is an essential, but it is an essential they may no longer be able to afford.