How to save and pay for private school fees

Unless you’re lucky enough to get a windfall, you’ll probably need to save and invest wisely to keep up with the rapidly rising cost of fees. 

With smaller classes, more focus on one-to-one teaching and an array of extracurricular activities, private schooling can enrich your child’s learning.  

For most US parents, giving their child a private education is out of the realm of financial possibility.  

Aside from exploring bursaries, scholarships, and elementary schools, you must be ready to spend big if you want your child to be privately educated. 

There is no getting around it, but there could be ways to prepare for these fees financially.  

How much do private school fees cost?  

According to the Education Data Initiative, the average fee for private schools is currently $23,839 per child per year, increasing to $67,270 for children who board. 

This could rise in the future, making sending your child to a private school even more challenging. Finding ways to bring down the cost is crucial for many families.  

When should you start planning for private school fees?  

This question has a simple answer: as soon as possible.  

You may need to save a significant amount, so putting money away early is essential.  

It’s also worthwhile having a savings goal in mind. Do you want them to attend a private K-12 school, high school, or college? Will you need them to board if your top choice is far away? Have you included the cost of any trips?  

Once you know the private school fee costs, not only can you get a savings strategy in place, but you can think sensibly about whether or not you can afford it.  

Although your child’s education might be your priority now, you don’t want to sacrifice your retirement savings and ability to make ends meet.  

Are private school fees tax deductible?  

You can’t use school fees to offset your tax bill unless your child attends a private school for special needs under federal law. 

Some states may offer a tax credit for parents who cover the cost of private school or deductions for private education expenses. It’s worth checking this in advance.  

But there are other ways to pay and save for private school fees. 

One popular route is going through the grandparents, who may be happy to help or use their grandchild’s inheritance to support their education.   

They can give up to $17,000 a year (or $34,000 if they combine allowances) without incurring the gift tax, which ranges from 18 percent to 40 percent.   

If they make payments directly to an educational institution for someone else’s tuition, it is not subject to gift tax, regardless of the amount.  

Another way of saving for your child's education is with a 529 plan. 

Should you open a 529 plan to pay for education fees? 

As mentioned, starting early is one of the best things you can do. Some parents start saving straight after they’ve left the delivery room.  

A 529 Savings Plan is a great place to start if this is an option. The tax-free plan lets you put aside money regularly and invest it to help grow the tuition pot.  

The plan offers tax-free earnings growth and withdrawals, which could be used for private school tuition as they can be used to pay up to $10,000 in K-12 tuition.  

Many states offer tax deductions or credits when you fund this account, but it’s worth checking in advance. 

As a bonus, as of 2024, money from a 529 plan not used for education can be rolled into a Roth IRA without penalty – subject to certain conditions.   

Can you use investments to pay for private school fees? 

Unless you have a very high income and one increasing at the same pace as private school fees-you’ll unlikely have enough spare cash to pay for the fees unless you’ve made some investments.  

You could invest in bonds, which are generally seen as less risky than stocks. Your money will be locked away for several years, but you could time it to get your cash and returns by the time your child starts private school. It’s worth checking whether you’ll pay any tax when investing in bonds. 

Other ways to manage private school fees 

Investing isn’t the only way to get the cash you need to pay for school fees. 

You could borrow money, but be aware that anything you borrow must be repaid, and you may have to pay interest.   

You should also consider taking out insurance, such as tuition insurance.  

If private school is on your wish list, a financial advisor can help you get a plan that works for your finances and other life plans. Unbiased can match you with your perfect financial professional. Get started today.