Wondering How to Pay for Private School? Here Are Some Hints

Reviewed by Molly Moorhead, CFP®
Students do schoolwork at a private school.
Getty Images

So you considered sending your child to private school … and then immediately crossed that option off the list, due to the price.

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

The average private school tuition in 2021 for K-12 is $11,200 per year, according to Private School Review. Elementary school clocks in at $10,100 and high school sits at $15,000. Some schools in big cities such as New York and California charge upwards of $30,000 per year.

Many private school families don’t pay those prices, though.

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 snag a discount (or at least save on taxes) to make private school education more affordable.

How to Pay for Private School (Without Going Broke)

529 Savings Plan

Good news: The federal government recently changed the 529 laws, so these 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 your state rules.

“Some states have not yet opted to follow new federal rules,” Bambridge says. Still, you don’t have to live in the state where your 529 account is, so make 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 on qualified expenses. It’s similar to a 401(k) or IRA but is specifically for education, Bambridge says.

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

In other words, the owner of the 529 isn’t the only person who can make contributions.

Coverdell Education Savings Account

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

The money must go toward qualified expenses, which include tuition, fees, books and supplies. While the contributions aren’t tax deductible, the amount you deposit in the account grows tax-free until withdrawn, Bambridge says. One catch: If you make an adjusted gross income over $110,000, or if you are a joint filer earning more than $220,000, you can’t contribute to a Coverdell ESA.

In general, Coverdells have faded in popularity because of the greater flexibility of 529s.

State-by-State Discounts

Some states offer their own private school discounts, Bambridge says. For example, in Alabama, parents with children in schools labeled “failing” can apply to transfer to non-failing schools — and they will receive a $2,814 discount. In Louisiana, the state offers up to $5,000 per dependent for K-12 Louisiana-based private schools.

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

Roth IRA

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

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

Financial Aid

Apply for it from the school even if you think you make 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 (more than $200,000), you may still be eligible, depending on the number of children you have at the school, the number of children you have in college and your location. Schools tend to decide on admission first, and then offer aid based on a number of factors, including their financial aid budget.

Most private schools use the National Association of Independent Schools Parents Financial Statement to assess financial aid needs. Most likely, you will only need to fill this out one time to apply for all of your private school financial aid packages. Expect to disclose your entire financial story, including salaries, 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 what appears on the forms Do you have extra people to support? Are there extenuating circumstances? This is where you can explain.

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

Need and Desire

Financial aid offered by individual schools is based on need — and also how much a school really wants the child and the family, says Alina Adams, a New York City school consultant and author of “Getting into NYC Kindergarten.”

“I’ve had families submit the exact same financial information to five different schools, and receive five completely different scholarship awards, ranging from nothing, to a few thousand off, to half off, to ¾ off, to once in a very blue moon, a full free ride,” Adams says. “Same child, same parents, same income, very different results.”

It all comes down to the slot the school needs to fill. This could be: racial, ethnic or religious diversity, or a parent’s profession. Or maybe your child is a firecracker whom the school believes will make them look good eventually. Perhaps your child excels at an out-of-school activity that could also bring positive attention. “They may not be called ‘merit scholarships,’ but the needs-based ones often come down to your child’s particular profile,” Adams says.

So while much of this is out of your control, you can up your chances by explaining to the school why your child would be an asset to the school. Is he a great trumpet player? Is he a natural speller who 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 to give families to use toward private school costs.

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

Danielle Braff is a contributor to The Penny Hoarder.