Private elementary, middle and secondary schools (K-12) are an attractive option for some students. However, they can be as expensive as college, with annual tuitions in the tens of thousands of dollars. Financial aid for students attending private schools is scarce, but not impossible to acquire. Most such aid is provided by the schools themselves, so parents should contact the school and see if they offer any scholarships or other aid. The school will also know about any private scholarships received by their students in the past.

Private schools may offer a variety of financing options. The options include tuition payment plans and education loans. These allow you to stretch out the tuition payments over up to a year or longer. You should also ask the school whether they offer a cash discount for paying the tuition in full by the due date. Again, the best source of information about financial aid for private schools is the schools themselves.

If you also have children enrolled in college, you should ask their college financial aid administrators to use "professional judgment" to make an adjustment for the private school tuition you paid for your other children. Some schools call this a "special circumstances" review. (You should also mention any other unusual aspects of your family's finances.) This can increase the college student's financial aid package by decreasing the discretionary income figure used by the need analysis formula.

Books

There is only one book that focuses on financial aid for private schools, although it is more than ten years old:

Laurie Blum, Free Money for Private Schools,
Simon & Schuster, New York, 1992.
ISBN 0-67174-591-3 ($12.00). 224 pages.

Peterson's publishes a book about private schools that includes a chapter about paying for a private education. This book is more up-to-date.

Peterson's Private Secondary Schools 2005.
ISBN 0-76891-364-0 ($29.95). 1536 pages.

Scholarship Programs

The Children's Scholarship Fund provides partial tuition scholarships to allow low-income families to send their children to private and parochial elementary schools (grades K-8). Scholarship recipients are selected in a random drawing from among qualified applicants. All eligible children in the chosen families receive scholarships. Approximately 2% of qualified applicants receive scholarships, with more than one million applying. The average scholarship is $1,220 per child. Scholarship amounts are based on family size, family income, and school.

The Arizona Scholarship Fund is a non-profit organization that assists children in receiving tuition for private school education (K-12) in Arizona. Recipients must be Arizona residents.

Tuition Payment Plans

The most common types of tuition payment plans are academic year plans, which split the tuition bill into 9 or 10 equal monthly payments. Although these plans do not charge interest, they usually charge a flat fee, which is effectively a form of prepaid interest. For example, a $100 fee on $10,000 in tuition paid over a period of 9 months is the equivalent of 1.4% interest. If paid over a four month period, it is the equivalent of 3.3% interest. The following table illustrates the equivalent interest rates on $10,000 in tuition for a variety of fee amounts.

FinAid's Upfront Fee Equivalent Interest calculator can be used to determine the equivalent interest rates for other tuition and fee amounts and repayment terms.

Some schools may require the family to pay for tuition insurance, which will increase the balance by 1% to 2%.

Education Loans

When selecting a loan, parents should consider the total amount of interest paid over the lifetime of a loan. A longer term loan may have lower monthly payments, but the total amount of interest paid will be higher. A loan with a higher interest rate and fees will also be more expensive. FinAid has a loan payments calculator you can use to calculate the amount of interest paid over the lifetime of the loan. There are also other calculators you can use to evaluate the tradeoff between interest rates and fees. Parents should also ask whether the loan allows prepayment without penalty.

Given that the student and parents will likely be borrowing money for college, it is not a good idea to incur additional long-term debt for a private secondary school.

Alternatives to Education Loans and Payment Plans

Alternatives to education loans include home equity loans, home equity lines of credit, credit cards, and personal loans.

Home equity loans typically have fixed interest rates while home equity lines of credit typically have variable interest rates. Another difference is one only pays interest on the portion of a home equity line of credit that is actually used. A potential benefit of a home equity loan or line of credit is the interest may be tax deductible.

Credit cards usually have much higher interest rates than home equity loans and lines of credit. If the school does not accept credit cards, one will have to use a cash advance to make the payment. Cash advances often have even higher interest rates. Most credit cards use variable interest rates.

Personal loans are available from your local bank. These are unsecured installment loans and are only available to creditworthy borrowers. The best interest rates are available to borrowers with excellent credit, and are slightly lower than the best credit card interest rates. Personal loans may be available with fixed or variable rates, depending on the bank.