Precollege schooling: How to pay for pre-K through prep school

Parenting is known for delivering surprises – and that includes the financial shock of educational costs that can begin as early as preschool.

Preschool programs will set a family’s budget back by about $9,000 per year, according to Child Care Aware of America, a nonprofit focused on childcare issues. Private K-12 education is also costly, with elementary school and high school charging an average of almost $8,000 and $13,000, respectively. By comparison, the average annual tuition and fees for an in-state university totals about $10,000 per year.

That means preschool alone can be as costly as college for some parents. And those expenses may mount if a child enrolls in a private K-12 school. Some parents interviewed by USA TODAY say they were blindsided by these educational costs, especially pre-K, because free or low-cost programs can be tough to find for young children.

“It’s something that I felt I should have been aware of as someone who works with little kids, but it’s nothing we thought about before we had a child,” says Megan Estey Butterfield, a children’s librarian who works in Burlington, Vermont, and is the mother of two boys, ages 4 years and 6 months. “The cost can be a struggle.”.

Many parents are coping with the financial pressures of precollege education, says Jessie Doll, a wealth management adviser at TIAA. Her advice is to assess your readiness to handle precollege educational costs by asking three questions:.

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  • Do you have an emergency fund?
  • Are you funding your retirement?
  • Do you have a college savings plan for your children?
  • “If we don’t have those things solidly in place, then we don’t want to put the family’s financial future at risk,” Doll says.

    Get budgeting

    Budgeting is key for figuring out how to balance the cost of private schooling. That’s because it will help you zero in on spending that can be trimmed, such as cutting back on eating out, Doll adds.

    “It’s really figuring out as a family, ‘How do we do this and not go into debt? What are my flexible areas of spending?” Doll says.

    She adds that she’s seen some poor advice, such as recommendations to tap credit cards to pay for pre-college tuition. Doll says it’s a bad idea because of the high interest rates on credit cards and the potential for getting into debt. Likewise, don’t tap home equity or retirement funds to pay for a child’s tuition. “Make sure to put on your own oxygen mask first,” she notes.

    Do your research

    Not every preschool or private school charges the same tuition, so it’s important to do your research.

    Investigating local preschools helped Leah Selvaggio, a teacher in Gibsonia, Pennsylvania, find less expensive child care for her twins. Before finding the new school, she said she and her husband were paying almost $1,800 a month in costs, which they have now reduced to about $1,100.

    “That helps with our budgeting,” she says. Her advice to soon-to-be parents: “Start saving now.”.

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    Pre-K funding

    Setting aside some money every month for precollege educational costs can help build a cushion for those expenses.

    If it’s available through an employer, consider setting up a dependent care flexible spending account, which allows you to set aside up to $5,000 in pretax dollars each year that can then be used for pre-K programs and some other child care expenses.

    There are a few catches with using these plans, however. For one, they can’t be used for private K-12 education. Secondly, if you don’t claim the money before the reimbursement deadline, you lose it.

    Lastly, research whether your city and state offer programs that support universal pre-K. For instance, in Vermont, where Butterfield lives, the state pays for children between 3 to 5 years old to attend preschool for 10 hours a week. Without that support, Butterfield says their pre-K expenses would be more than $1,000 per month – more than their mortgage – rather than their current pre-K expenses of $550.

    Setting up 529 plans

    Parents who send their children to private K-12 programs received a break in 2017’s Tax Cuts and Jobs Act, which expanded 529 plans – best known as college savings plans – to include K-12 private school tuition.

    “The longer you have it, the better it’ll be for the beneficiary because the money will keep growing,” says Elaine Griffin Rubin, senior contributor at Edvisors, which helps families plan for college. “We have a lot of grandparents who are using it to help pay for college and K-12 expenses as well.”.

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    Grandparents, other relatives and friends can set up 529 plans to help fund a child’s education, Rubin notes. Earnings in these plans aren’t taxed at the federal level when they’re used for educational expenses. Rubin recommends Fidelity’s 529 calculators for comparing the plans offered by your home state versus other states.

    There are a few limits to be aware of. For one, 529 plans are capped at a $10,000 annual limit for covering a child’s educational expenses. And if you withdraw the money for uses other than educational expenses, the IRS will charge a 10 percent penalty, Rubin notes.

    Coverdell accounts

    Lesser known are Coverdell Education Savings Accounts, which TIAA’s Doll says lack the flexibility of 529s. Annual contributions are limited to $2,000, and the IRS bars joint filers with annual income above $220,000 or individuals who earn more than $110,000 from participating. But the money invested in these plans can be used for K-12 educational expenses.

    Families can also apply for financial aid at most private schools. It doesn’t hurt to apply since the National Association of Independent Schools says there’s no income limit that makes families ineligible.

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