Can you afford private school?

Different values: If your financial statement shows that you've just bought an expensive sailboat, taken the family on a European vacation and invested in a couple of BMWs, a school may choose to disallow those expenses when calculating what's left in your discretionary income. If your child happens to be a champion sailboat racer, though, and that's something a particular school values, it might consider the boat purchase to be a necessary expense.

Different budgets available: Some schools with large endowments or other sources of funding are able to promise that they will offer 100 percent of what they determine to be a family's need for aid. Others simply don't have the budget to make that possible and they may set a benchmark like funding 75 percent (or 90 percent or 60 percent) of demonstrated need. They might also have a philosophy that says they want families to really stretch and make sacrifices for their children's education, so they define "need" more stringently than the SSS formulas do.

Different cost of living: SSS provides multipliers to help schools adjust for the cost of living in their area. San Francisco, for example, is assumed right now to be about 70 percent more expensive than living in an "average" city in the U.S. New York is more than twice the average. A school may adjust awards to reflect this, or they may choose not to. A boarding school has the option to apply cost of living adjustments not just for their own area, but for the section of the country where the applicant's family lives.

Will I qualify?

Even the people who work on this question most closely admit that they often cannot predict the answer. "The formulas change all the time," says Myra McGovern, director of public information for National Association of Independent Schools, or NAIS, "so it's impossible to say whether a family will qualify. I would certainly urge any family making under $100,000 to apply. And," she says, "we find we get quite a few families who make over $100,000 to apply."

Income alone, of course, does not determine whether a family is eligible for aid. Other major factors include assets, such as your savings and the value of your home; number of siblings in tuition-paying schools; and unusual expenses, such as high medical costs.

The credit crunch

Even before the recent credit crunch, it was not common for banks to offer student loans specifically for private school education. The federal government doesn't offer guaranteed loan programs the way they do for college students, and the IRS doesn't have any special allowances for the interest on pre-college student loans either.

So long-term loans for this purpose may not be easy to get. Which is just as well, according to Steven Dodd, president of Key Education Resources, a division of KeyBank. "Ninety percent of kids in private school go on to college," says Dodd. "Families should work very carefully to avoid taking on debt at the lower level when it's likely they will have more debt from college."

However, short-term loans for private education are quite common and even better they're interest-free. It's just that they usually go by another name: payment plans. Two major companies work with a large number of schools to administer these plans. They are FACTS and Key Education Resources, both of which set up automatic monthly debits from your bank account into the school's.

"Many families get in trouble because they think they have to come up with a lump sum payment in June or July," says Dodd. "Not true. Usually, you can pay as you go." In most cases, this payment plan is spread over nine or ten months but must be fully paid by the end of the school year.

Other sources of funding

Before you apply for financial aid from a school, you may want to think about what other resources are available to you. If there are grandparents in the picture, they can help pay for education costs as a way of reducing their estates and doing something good for the family while they're around.

Grandparents (or other relatives, or friends) can pay for education costs without incurring any gift taxes, as long as they write the checks directly to the school. And the total they pay does not reduce the annual tax-free allowance for gifts made to any one person.

As McGovern says, "If you're considering independent schools and worrying about whether you can afford it, you should apply. Maybe you'll get aid; maybe not. It's good to be aware of all the options."


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