K-12 school in this section refers to any k-12 school for which you must pay for your child to attend, particularly independent school, boarding school and parochial school. To keep the terms straight, when we refer to school this is the type of school we are referring to. Moreover, school is school and college is college.

The National Association of Independent Schools (NAIS) has a membership of over 1,400 independent schools and is the primary source of services and support for independent schools in the United States.

Most NAIS-member schools and several non-member schools use the NAIS School and Student Service for Financial Aid (SSS) to determine your expected contribution toward the cost of the school when you complete and submit the Parents' Financial Statement (PFS). For more information on the PFS and SSS, please visit the NAIS website at www.nais.org.

The best source of information on private school financial aid is typically the financial aid office of the school itself. The aid office can provide you with details about the aid that is offered by the school and may have information about outside sources of grants and scholarships as well. In general, there is a lot less financial aid available to families with children in K-12 private schools than there is at the college (post-secondary) level, primarily because colleges often receive funds from state and federal governments.

In general there are two types of financial aid that are available: need-based financial aid and merit awards.

Eligibility for need-based aid is calculated by subtracting your expected family contribution (EFC) from the cost of attendance at the school. If your contribution is less than the cost of the school, then you demonstrate a "need" for aid in the amount of the difference.

If your child is eligible for a need-based grant, the financial aid office at your school will notify you of their award decision. Need-based grants come directly from the operating budgets of the school and do not need to be paid back. In 2005-2006, 972 NAIS member schools awarded a total of $957.7 million in need-based financial aid, with an average award of $17,295 at boarding schools and an average award of $9,232 at day schools.

Unlike need-based financial aid, merit awards are not based upon your family's ability to pay. Many students have demonstrated exceptional abilities or promise in a variety of areas (music, drama, academics, sports, etc.) and are given financial awards based on those merits. According to Mark Mitchell, Vice President of School Information Services at NAIS, "Though they are available, merit awards are relatively rare. More than three times as many schools offer need-based financial aid than those that offer merit awards. Merit awards make up less than three percent of the total tuition assistance provided to independent school families."

Between need-based aid and merit awards, just over 20 percent of students enrolled at NAIS-member schools receive some form of financial aid. Based on your income alone, you may or may not qualify for need-based financial aid. With the average price of Day School for a 6th grade student in 2009 hovering around $18,000 per year, families with one child enrolled in school and an adjusted gross income of $120,000 will have an expected family contribution (EFC) based on that income alone of $18,000 or more. This is a best case scenario that assumes that the family has no assets, no home equity and makes no contributions to qualified retirement plans, all of which would raise the family's contribution further.

Your final EFC will be determined by your child's school and can be influenced by a variety of additional factors, such as the limits of the school's available financial aid budget and school-specific policies on the distribution of aid dollars.

Once you know the projected costs of k-12 school, you can subtract your estimated EFC and calculate the likelihood of your eligibility for need-based financial aid. However, you should also keep in mind that if you do qualify for a certain amount of need-based aid, it doesn't mean that you will automatically receive that amount of aid or that it will be in the form of a grant.

If you don't qualify for need-based aid, or if your need-based grant still isn't enough, be sure to check with the schools you are considering as to whether your child may be eligible to receive a merit award that doesn't have to be repaid.
 

Paying for Private School

Short of qualifying for need-based and merit aid at the K-12 private school level, there simply are not a lot of specific tactics that can be implemented to reduce the out-of-pocket cost of k-12 school.

Regardless of whether or not you can effectively reduce the overall cost of school through financial aid or not, you can still implement some basic tactics that will help you best utilize your income and assets to pay for school and college.

Child Tax Credit

The child tax credit is a credit for dependent children under the age of 17 and reduces a family's tax liability dollar-for-dollar. The credit is first applied to reduce a family's taxes, however families may qualify for a refund if their credit exceeds their tax liability and they meet earnings requirements. The maximum credit is $1,000 per child for families with adjusted gross income (AGI) under $110,000. The credit is reduced for families with AGI between $110,000 and $130,000, and is phased-out at incomes above $130,000.

To be eligible a child must meet 5 criteria for you to receive child-related tax benefits. He or she:

• must be your son, daughter, stepchild, foster child, brother, sister,
• stepbrother, stepsister or a descendant of any of them
• must be younger than 17 at the end of the year
• must not have provided more than half of his or her own support
• must live with you more than half the year
• must be a U.S. citizen, U.S. national or resident of the U.S.

In previous years, families with little or no tax due were not able to take advantage of the Child Tax Credit because it was not refundable, but that was changed and families can now receive a refund. Before President Obama signed The American Recovery and Reinvestment Act, families earning at least $12,550 in 2009 would have qualified for the refund. The refund amount phased-in at the rate of 15% of the family earnings above the $12,550 threshold, up to the maximum $1,000 per child tax credit remaining after all taxes were satisfied.

Since almost all families earning $12,550 per year or less had little or no tax liability, they were not able to benefit from the Child Tax Credit. The new legislation lowers the refundability threshold to $3,000 for 2009 and 2010, increasing the number of families now eligible for the refundable portion of the child tax credit.

Tax savings achieved from the child tax credit could be used to help pay current K-12 costs or could be saved in an ESA or some other type of account, and used to pay K-12 costs in the future. Saving the $1,000 per year for fourteen years with an annual rate of return of 8 percent produces $24,000 by the time a child reaches ninth grade.

Tax savings achieved from the child tax credit could be used to help pay current K-12 costs or could be saved in an ESA or some other type of account, and used to pay K-12 costs in the future. Saving the $1,000 per year for fourteen years with an annual rate of return of 8 percent produces $24,000 by the time a child reaches ninth grade.

Controlling and Reducing Household Expenses
 

Budgeting
A budget is really just a way to organize and determine how much you plan to spend, and actually spend, on your household expenses each month. Most budgets are organized by categories such as transportation, housing, groceries, utilities, clothing, recreation, etc. The goals of a budget are to keep your finances organized, keep track of where you are spending your money and help you to save as much as possible while maintaining your lifestyle.

Cost-cutting
When you have a budget it is easier to identify categories in which you can cut costs so that you can save more each month or add to another area of the budget. But, as the Salada tea bag says, "The cost of living is the difference between your net income and your gross habits." Cost-cutting is not always easy. It requires determination and discipline, just like exercise, studying and most other things in life that require commitment. Some habits are hard to break, but the payoff is worth the effort.

For example, eliminating a $3.33 expense every day (cup of premium coffee), equates to about $100 per month in savings. Assuming an annual return of 8% per year, that $100 per month savings can translate into an additional $31,000 for education costs fourteen years down the road when you enroll your child in a private high school.

If you just can't give up that great cup of coffee every morning because you have been up all night with a newborn, you might be able to save $100 a month in one of these areas: Insurance premiums, vehicle payments, cell phone plans, eating out, clothing, dry cleaning, memberships, subscriptions, movie rentals, etc. Challenge yourself to see if you can save $25 a month to start with and then increase it.

A young guy I know saved enough for the down payment on his house by what he called "putting an end to loose change larceny." He said that by not paying attention to where the "loose change" in his finances was going, he was stealing from himself. He created a budget, cut out the cost of little, non-essential items and saved that "loose change." This helped him get his first house and have less debt against it.

Debt reduction/elimination

If you have debt, you have to have cash flow (income) to make the payments on that debt. So if you can reduce or eliminate that debt, your cash flow can be used for something else.

The most effective ways to reduce debt are typically thought to be 1) paying off the highest interest loans first and 2) paying off the loan with the smallest balance first, then adding what was being paid on the first loan as an extra payment on the loan with the next highest balance. In the example above, an extra $100 a month can go a long way toward saving money or, in this case, reducing your debt.

In my experience, the families that consistently come out on top are not the ones with the highest paying jobs or the best mutual fund returns, but rather the families that live within their means and save regularly.