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Are you considering enrolling your child or children in a private elementary, middle, or high school? Private education alternatives have been available for a long time and are alluring to many parents. They promise high quality and consistent academic standards, as well as numerous extracurricular opportunities.
There are several types of private institutions to choose from:
- College Prep Schools
- Montessori Schools
- Waldorf Schools
- Catholic or Parochial Schools
- Hebrew Schools
- Military Schools
- Special Needs Schools
While families often plan and expect to pay for college tuition, paying for a private early education can be more difficult. Private schools have annual tuitions, which range in price depending on academic level, location, accreditation status, and reputation. The national average private institution tuition is approximately $10,676 per year, but some private boarding schools charge as much as $83,000 per year.
Rates like these can make it extremely difficult to afford a private education. There are, however, financial assistance options available. A loan can help you meet the various costs associated with enrolling your child or children in a private institution.
What Are K-12 Loans?
If you are unable to afford a private school’s tuition, you may be interested in requesting a K-12 loan. These loans are specifically intended to cover expenses associated with a child’s early education. When financial aid and traditional payment plans are not enough, you can still gain access to the money you need.
In most cases, K-12 loans are easy to apply for and have low interest rates. Unlike personal loans, however, lenders frequently agree to finance up to 100% of the school-certified cost of tuition. The approved amount also goes directly to the institution, instead of to you. Interest rates can be fixed or variable, depending on the financial entity providing it. Additionally, there may be miscellaneous fees associated with this borrowing option and most lenders expect repayment to begin as soon as the private school receives the funds.
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Is There a Federal Option?
Many college students can apply for financial aid and loans through the federal government when enrolling in a public or private college institution. It is important to realize, however, that federal loans are not an option for private primary or high school. This is because the government already provides free, public education to all K-12 school students.
While the federal government does not offer much in terms of financial aid or loans for private primary, middle, or secondary school, some states do provide vouchers to help offset the cost of a student’s private education. These state-funded vouchers are available to qualifying students in fourteen states, as well as the District of Columbia.
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These are the states in which vouchers may be an option for you:
- Arkansas
- Georgia
- Indiana
- Louisiana
- Maine
- Maryland
- Mississippi
- New Hampshire
- North Carolina
- Ohio
- Oklahoma
- Utah
- Vermont
- Wisconsin
- Washington, D.C.
Each states approaches private school vouchers a little differently, so it will be necessary to research this option thoroughly before proceeding. Some offer vouchers to specific jurisdictions, while others have statewide programs. Vouchers may also not be available to every student; some states only provide them to low income students, special needs students, and/or students attending failing public schools. In some cases, there is a maximum dollar value or a cap on the number of vouchers distributed each year.
Financial Aid vs Loans
K-12 loans are not the only financial aid solution for those looking to enter their children in private schools, though they may be the most prevalent. Students and parents can also apply for school-offered scholarships, as well as aid offered outside of the institution. There are several important distinctions between a loan and a scholarship.
Scholarships
Scholarships are a money-based award to be applied to education-related expenses, and they do not need to be repaid. Not all students will qualify for scholarships, however, as certain criteria must be met prior to applying. Most scholarships are awarded to students based on merit, talent, or academic performance. They are available through a wide variety of sources including private schools, non-profit organizations, foundations, and private businesses.
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School-offered scholarships are generally provided to gifted students and those from low-income families. In fact, many private institutions offer more aid than is expected. You should contact your chosen school’s administration department for specific financial aid information. Outside scholarships may be harder to find, but usually offer aid to students who are academically talented, students from low-income families, and student minorities.
Loan Options
Loans consist of money that is borrowed and must be paid back within a certain time frame. They also accrue interest, which must be repaid. Loans are available to everyone with acceptable credit but may not be granted if the requester cannot demonstrate an ability to pay the loan back. It is possible, however, to qualify for a loan with a cosigner, or other creditworthy individual who agrees to share repayment responsibility.
What to Keep in Mind
If you think a K-12 loan is a good option for you and your family, there are several factors you should consider when looking for one. Keep the following in mind:
Length of Terms
As with any loan, K-12 loans are available in varying term lengths. The longer your term, the lower your monthly payments will be. It is important to realize, however, that a longer loan term also means you will ultimately pay more back to the lender over time. This is because interest is continually accruing on the amount you borrowed; the faster you pay off the loan, the less you will pay your lender in interest. You must keep this in mind when deciding whether or not to take out a new private school loan with a long repayment term each year.
Interest Rates
As previously state, most K-12 private school loans have relatively low interest rates. Exact amounts will, of course, vary depending on the lender you select, your income, and your financial history. The specific rate offered is largely based on your credit score; individuals with poor credit can end up with significantly higher interest rates than those with a good credit score.
It is also important to distinguish between a variable and fixed rate loan. While variable interest rates, also known as floating rates, are generally lower in the beginning, they fluctuate over time to correspond with financial trends. An increase in your rate will make your monthly payments, and total amount due, go up. Fixed rate loans, on the other hand, have interest rates that do not change throughout the life of the loan. You will pay the same amount each month until the loan is completely paid off.
Eligibility Requirements
Not everyone is eligible to receive a K-12 loan. Most lenders have established eligibility requirements that applicants must meet before qualifying.
While these vary widely, agencies tend to require the following:
- United States Citizenship
- Proof of stable income
- Good credit score
- Student admittance to a licensed or accredited private institution
- Private school certification, enrollment agreement, or tuition bill
If you do not personally qualify for a K-12 loan, you may still be able to request funding. Most lenders will accept applications with a creditworthy cosigner. Cosigners become responsible for the loan in the event that the primary borrower is unable to continue making payments. In this situation, you may be able to ask a relative or close friend for assistance.
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Repayment Options
Depending on the K-12 loan details and lender, you may have various repayment options available to you. Chief among these is the loan term, or the length of time over which you agree to repay the amount borrowed. You can generally expect these to be anywhere from one year to five years in length, with shorter periods resulting in higher monthly payments but a lower overall expense and longer periods resulting in lower monthly payments but a higher overall expense.
It is also important to realize that repayment for private K-12 loans usually begins as soon as the funds are disbursed to your chosen institution. Unless otherwise stated, you will be responsible for starting payments as soon as you are approved for the loan.
Some lenders do offer the ability to make lower monthly payments while in school. In certain cases, you may be able to make interest-only payments until you have completed your education. After graduation, however, you will be expected to begin making full payments on the loan.
Sallie Mae Private School K-12 Loans
While there are numerous options available, one popular loan is offered by Sallie Mae Bank. Sallie Mae provides a wide variety of private student loans, including a K-12 Family Education Loan. This loan is designed to pay for the expenses associated with a child’s private early education.
Why Sallie Mae for Loans?
The Sallie Mae K-12 Family Education Loan allows you to borrow up to 100% of the school-certified cost of your child’s private school education.
This includes the following:
- Tuition
- Room and Board
- Fees
- Books
- Supplies and Equipment
- Transportation
- School-Related Computers and Electronics
You are able to borrow what you need for the entire school year and the funds are sent directly to the private institution of your choice.
Repayment Options
The Sallie Mae K-12 Family Education Loan has a variable interest rate between 9.36% and 16.01% APR. Your interest rate may rise or fall depending on market index changes. This means that your monthly payments may vary over time. Advertised rates assume the borrower requests a $10,500 loan with a repayment term of three years. Principal and interest repayments begin within 30 days of when the loan is disbursed.
Features and Benefits
One major benefit of the Sallie Mae K-12 Family Education Loan is the easy application process. You can apply for this loan online in as little as 15 minutes. Afterward, you will receive all of the documentation you need to proceed, including loan details for review and an e-sign document.
While a three percent disbursement fee may apply, there is no application fee or penalty for paying off the loan before its due date. Additionally, you will be able to track your credit health for free with quarterly FICO Credit Scores available online.