Research Insights: How Do Parents Pay Independent School Costs?

Winter 2020

By Mark J. Mitchell

One Friday evening not too long ago, on my way out of the office, I stopped by the security desk in the building to wish Diane, the night-shift security guard, a happy weekend. After a couple minutes of pleasantries, I said “See you on Monday.” 
She replied, “No you won’t.”
“Oh really—why not?” I asked.
“This is my second job. I only work here to pay my daughter’s private school tuition. She’s graduating this weekend, so I don’t need this job anymore.”
Diane’s not alone. According to the 2018 NAIS study “How Parents Pay School Costs,” 28% of respondents said that at least one parent took a second job or increased working hours to help pay private school tuition for at least one of their children. What else do parents go through to pay tuition, and how do they feel about it? What do they think of the financial assistance they receive to make tuition more affordable?
In 2006 and 2013, NAIS also conducted the online survey. It helps school leaders understand the choices and sacrifices parents make when paying tuition and whether their attitudes about it shift over time. Such insights can help schools shape tuition-setting and affordability strategies with parents’ realities in mind. With such heavy—and growing—dependence on tuition as the income driver in the financial model, strong enrollment and value delivery are critical to financially healthy schools. Here are the notable insights from 2018, in which 1,891 parents who completed the Parents’ Financial Statement from School and Student Services for the 2018–2019 school year shared their thoughts.
A family’s decision to pay tuition is a battle for its discretionary income. Spending less on discretionary choices such as dining out and vacations is the most frequently cited method of finding room to pay tuition, with 82% of families saying so. Nearly two-thirds (64%) stated they spent less or put off spending on major household purchases such as appliances and furnishings. Saving less for retirement (60%) or for college (58%) were the next most-cited sacrifices. Cutting costs and saving less for other priorities are far preferable to finding ways to supplement income with just 28% saying a parent took a second job or increased work hours and only 12% saying a stay-at-home parent took on employment outside the home.
Mr. Q (names have been changed to protect privacy), a parent with a daughter attending a day school in the Los Angeles area, said, “We don’t do vacations every year and when we do, we’re taking smaller vacations.” Among other cost-cutting measures: He and his wife have increased their work hours. “My wife tutors second and third graders, and I teach an after-school enrichment class to pull in extra income. My wife probably wouldn’t do the tutoring if we didn’t have the tuition to pay. For me, I might’ve done the enrichment class for free but rely on it now for livelihood.”
Parents don’t want to borrow. In 2018, only 12% of parents reported borrowing to help with tuition, down from 16% saying so in 2006. Further, just 5% of parents stated they took out a home equity loan in the 2018 survey, versus 12% doing so in 2006. While credit cards are a mainstay payment option for many Americans, according to the 2016 U.S. Consumer Payment Study, just 13% of survey respondents used credit cards to pay tuition in 2018, not much different from the 11% doing so in 2006. Paying tuition by borrowing or using credit are not options most parents embrace. This could be due to, at least in part, the expectation of needing to borrow for the child’s college tuition combined with the need to pay down education debt they already have.
Parents don’t want to tap into savings. Though more parents used savings in 2018 than who did in 2006, fewer than half (42%) tapped into their personal savings to help pay tuition (compared to 35% in 2006). It is rare for parents to liquidate assets such as stocks and bonds to pay tuition, and they are less likely to do so today (6%) than in 2006 (9%). The use of educational savings accounts has risen given the 2018 tax law change allowing Section 529 accounts to be used for K–12 expenses but is among the least likely ways to help pay tuition (just 6% in 2018).
Parents have mixed feelings when it comes to paying tuition. The top five most-cited emotions felt when thinking about paying tuition are: satisfied (in knowing I’m doing the best for my child), stressed, thankful (that I have the means to make it work), worried, and overwhelmed. Positive emotions are as likely to be felt as negative ones. Not a single respondent said they were “unconcerned” about paying tuition.
Mrs. R, a parent with two daughters who attended a New England day school, felt that the stress was alleviated with frugal habits and help from others. “I feel very good that I could make it work for my kids, even when that means not doing some things I wanted to do. When you find an environment that works for your child,
that keeps them healthy and happy, it’s value added, and you want to pay for it.”
Grandparents don’t help much. Though it happens more than it used to, few respondents reported that their child’s grandparents were a source of help with tuition payment. In 2018, just 15% reported using money from grandparents compared with 10% in 2006. In fact, just 4% of respondents in 2018 cited gifts from other family members and/or friends, about the same as the 5% saying so in 2006. Most parents don’t receive help from others to make tuition payments.
Parents seeking aid are becoming wealthier and more educated. In 2018, 83% of respondents earned at least a bachelor’s degree, compared with 67% in 2006. This means the percentage of respondents with less than a bachelor’s degree dropped in half from 33% in 2006 to 17% in 2018. Also, more than 1 in 5 (21%) respondents earned income of more than $175,000 in 2018, versus just 9% in 2013 (this question was not asked in the 2006 survey). This could be a result of the rise in tuition pricing requiring higher incomes to support the costs, which in turn, push those with higher-paying occupations needing higher degrees of education into the aid pool. 
Younger parents are more likely to feel extremely or very satisfied with the financial aid they received, with 75% of parents 35 or younger saying so, compared with 65% overall. This group is also the most likely to feel satisfied with the steps in the aid process and to feel that the aid they received was more than they expected. Using monthly payment plans is most common among the youngest parents as well. The youngest parents are most likely to say they feel “overwhelmed” when thinking about paying tuition, with 37% saying so, more than twice as likely as each of the two oldest respondent groups.
Wealthier parents are more likely to say they feel “stressed” when thinking about paying tuition. Families earning $250,000 or more cited “stressed” as the most-felt emotion, compared to “satisfied” as the most-cited emotion overall. Families earning less than $25,000 were nine times more likely to say they feel “calm” when thinking about tuition than families earning $250,000 or more. The wealthiest families are also most likely to show dissatisfaction with elements of the financial aid process itself. With fewer than half of the $250,000-or-above earning families feeling “satisfied” knowing they’re doing what’s best, the stakes are raised for schools to affirm the value proposition as families move up the wealth spectrum.
Sacrifices made to pay for tuition differ by age. Older parents are more likely to state that they save less for retirement to pay tuition, with 74% of those ages 56 or older saying so, versus 60% overall. Those between ages 51 and 55 were most likely to sacrifice saving for college costs to pay private school tuition (67% versus 58% overall). Only 43% of parents age 35 or younger stated this was a sacrifice they were making. Parents ages 51 to 55 were most likely (62%) to also say that putting off purchasing new cars was a sacrifice, while those 35 or younger were the least likely (38%) to sacrifice in this way for private school tuition.

Families are more satisfied with the tuition assistance they received. In 2006, 57% felt very or extremely satisfied with their aid offer compared to 65% stating so by 2018. Similarly, 61% of families in 2006 stated the aid they received was the same or more than they expected to receive. By 2018, 73% felt this way. There is also growing confidence that parents felt treated fairly when it comes to schools’ ability to separate their admission decision from their need for financial aid, given that 83% felt this way in 2018, up from 79% in 2006. Mr. G, a parent of a seventh grade boy, reflects, “Our income is in the low six figures, and I didn’t believe we were eligible for any aid. We were surprised to learn we were.”
Many conversations about the financial sustainability of independent schools rightfully begin with looking at tuition price point. Pricing decisions don’t operate in a vacuum of the school’s income and expense budget. How can we moderate tuition growth and still generate the revenue needed to provide the highest possible quality? Is our tuition competitively priced against other schools in our area and still affordable for families? These are critical questions in schools whose financial models are heavily tuition-driven. Schools must not ignore the real impact on families’ evolving financial realities, sacrifices, and emotions. Building an affordability strategy with the parent experience in sharp detail will help schools better balance meeting families’ expectations with schools’ overall enrollment and retention goals.

Read More 

NAIS’s 2018 “How Parents Pay School Costs” report provides insights into the ways independent school families pay tuition, the importance of financial aid in their enrollment decisions, and their emotional state when paying. To read highlights on parents’ perspective on affordability and find strategic questions, next steps, and shareable graphics, download the full report.
Mark J. Mitchell

Mark J. Mitchell is vice president at NAIS.