School! It’s a topic that many New Yorkers have spent way too much time researching, thinking about and discussing at cocktail parties. In New York, the sheer number of options can make “the school decision” especially daunting. Many of our clients are considering private school and want to know whether it’s a good decision for their family.
We thought it would be a time to refresh our post about affording private school with some new thoughts – and updated (higher) tuitions!
[Note from Sara: I wrote the original post 6 years ago – exactly the age difference between our kids!]
What it Costs
When we first published this post, we showed the tuitions for the 2013-2014 school years from the websites of selected private schools in Brooklyn and Manhattan.
For our update, we’ve refreshed these numbers with 2018-2019 tuition numbers. See below:
Look at the total row and think about that a second. Now think about the balance in your 401(k). Which is greater?
If you are a parent considering a top private school, $47K per year might not have sounded that bad at first. After all, you may be paying close to that for a full-time nanny when your child is very young.
But have you added up the cost through grade 12? The “total” of $614K is sobering for many.
Of course, there are less expensive options. Many private parochial schools cost far less, as will schools outside of NYC. Financial aid may be available in some cases as well.
However, that isn’t the full cost anyway.
What it Really Costs
Parents need to take the less obvious costs into account: the impact of taxes, inflation and multiple kids, additional expenses of private school, and the opportunity cost.
Taxes. The tuition price is after-tax dollars. If you are in the highest income tax bracket and live in this city, your combined marginal income taxes (federal, state and city) are close to 50%.
To pay $47,000, you would likely need to earmark nearly $90,000 of your gross salary for tuition. And that’s for 1 child. Do you really want to do that? Can you do that?
Many people have heard that 529 plans can now be used to pay for private schools. How does this work?
This could be a whole ‘nother post, but here’s a quick primer:
If you use funds in a 529 plan to pay for qualified education expenses, you won’t have to pay Federal tax on the investment earnings on these funds. Qualified education expenses in this case means K-12 tuition up to a maximum of $10,000 per year. So, that’s less than a quarter of 1 year’s tuition at the above schools.
Further, New York state hasn’t agreed with the Feds that K-12 costs should qualify. This means that if you use the funds held in a NY 529 plan for K-12 expenses, the tax breaks you originally received are subject to recapture by the state – in short, you’ll have to re-pay them.
This doesn’t mean it’s always bad to use a 529 for K-12 expenses in New York state, but if you’re a high-income earner in NYC you’ll lose a good chunk of the original benefit if you use the funds for private school.
Inflation. Do you think prices posted this year will stay the same for the next 12? In just the last 5 years, since we originally wrote this post, the average tuition has increased by 39%. That is a staggering number!
Multiple Children. If you have 2 or 3 kids like we do … you have 2-3 times the expense.
Additional Expenses. Private schools are constantly raising money. Activities and such cost extra too. If you both parents work outside the home, you’ll also need to pay for afternoon childcare, camps, and And it’s pretty safe to predict that when your kid’s friends have expensive toys, yours will want them too.
Opportunity Cost. Let’s assume you can pay the tuition. OK, but will you need to sacrifice in other ways? Many would argue that they will gladly sacrifice or “nothing is too good” for their kids. But is that good for you?
Will this expense prevent you from saving for the future, buying the home you want to live in, or generally enjoying your hard-earned money? If you are not saving for retirement, will your kids or grandkids need to take care of you? If so, can you really afford it?
You don’t want to realize you are in over your head in a few years. It’s much harder to consider taking your 2nd or 3rd grader out of private school, than sending them to public school in the first place. It’s not a place I want you to be.
What is the Alternative?
If you don’t like your zoned public school, there are many other options: district-wide schools, schools in other zones, Gifted & Talented programs, and Charter Schools. If you want more academic enrichment activities for your child, classes, camps and after-school programs for every interest abound.
You CAN get a great education in public school. I actually have proof – I have clients whose New York City public school educated-kids have gone on to the Ivy League.
And I totally understand the attraction to private schools, especially when the whole public school process seems overwhelming…The whole process is extremely stressful.
But I have done the math and taken the highest-priced schools off the list. It’s just not the best thing for the whole family.
If you are considering private school, please consider the effect on your entire financial picture. If you can afford it, great! But if you are not sure, think long and hard before making a 13-year financial commitment.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.