August/September 2009

If you’re considering a private school or college education for your child during these troubled economic times, then you’re likely wondering how you’ll pay for it. The sometimes high cost of attending private school or college can be a factor that discourages both parents and children from choosing this path. However, even though private school and higher education is relatively expensive, the benefits may greatly outweigh the costs. Private schools generally offer more specialized courses and individualized instruction as well as smaller class sizes, while colleges foster skills such as independence and responsibility and usually allow your child to acquire a higher-paying job than a non-graduate. If you and your child decide that private school or college is the best path to take, then you should not let cost get in the way. The numerous funding options available can help ensure that your child reaps the benefits of a private or higher education.

Ways to Save

One way to fund private and higher education is through parent and student personal savings and investments. Parents may set aside a certain amount of money each month, years prior to their child attending college or private school. Any amount of savings helps. Upromise college rewards program is a subsidiary of Sallie Mae, the nation’s leading provider of student loans and administrator of college savings plans. Founded nearly 10 years ago, Upromise allows its members to earn one to 25 percent back (which is put in their Upromise account) on purchases at the company’s numerous business partners, including restaurants, drug stores, grocery stores and more. Essentially, everyday spending is turned into money for college, and the program is free. Family and friends can also contribute to the account. Members can choose whether they want to receive a check or invest it directly into a 529 tax-free savings plan, a popular method for saving for college.

There are actually two types of 529 savings plans, also called “qualified tuition plans.” One type of 529 is the pre-paid tuition plan, which allows those saving for college to pay for tuition credits, and sometimes room and board, at participating colleges in advance and often comes with state residency requirements. The second type allows college savers to open accounts where the saved funds can be allocated for any college tuition. Earnings in 529 plans are not subject to federal tax, and in many cases state tax, if used for eligible college expenses such as tuition or room and board. At least one 529 plan is available in each of the 50 states.

An additional savings plan that can be used for private and higher education is a Coverdell Education Savings Account (ESA), a trust or custodial account that can be established for any beneficiary under the age of 18 or any special needs beneficiary. Contributions are not tax deductible, but are tax-free if distributions from the account do not exceed the beneficiary’s qualified education expenses at an eligible college or school. To open a Coverdell ESA, your modified adjusted gross income must be less than $110,000, or $220,000 if filing a joint return.

No Begging, Just Borrowing

Another way to fund college or private education is through student and parent borrowing. Much like universities, many private schools utilize financial aid to cover tuition, including multiple-student discounts (for those enrolling more than one child) and payment plans. For example, Mount Vernon Presbyterian School in Sandy Springs breaks its annual tuition into four payments. Like most area private schools, Mount Vernon also offers needbased financial aid through The School and Student Service for Financial Aid (SSS)—a financial aid services solution of the National Association of Independent Schools. SSS ensures that families are considered for aid objectively and fairly. In addition, Sallie Mae offers the K-12 Family Education Loan, which typically carries low interest rates, to parents or other creditworthy family members of children attending private elementary, middle, or high schools.

For college, federal government loans are available to both students and their parents and often come at low interest rates with long-term repayment schedules that may not begin until after graduation. College financial aid offices can assist with acquiring federal student loans, but the process usually requires the completion of a FAFSA or Free Application for Federal Student Aid. Filing this application helps ensure that you and your child will receive all the types of federal funds you are eligible for, including loans and grants.

Grants and scholarships, which typically do not have to be repaid, are another source for funding private and post-secondary education.

For both universities and many private schools, need- and merit-based scholarships are available. A popular need-based grant for colleges is the Federal Pell Grant, obtained by filing a FAFSA and given to low-income undergraduate and certain post-baccalaureate students.

The Children’s Scholarship Fund provides aid to low-income families for use at a private school of their choice. There are numerous scholarship options for college, but perhaps the most well-known (and utilized) merit-based scholarship in Georgia is the HOPE (Helping Outstanding Pupils Educationally) Scholarship funded by the Georgia Lottery. The HOPE Scholarship rewards students with financial assistance in degree, diploma and certificate programs at eligible Georgia public and private colleges and universities and public technical colleges. Scholarships typically are offered directly from individual schools and colleges as well.

With a bit of research and planning, you can help ensure that a lofty price tag doesn’t prevent your child from reaching his or her potential. And you’ll see the return on your investment for years and years to come.