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A few things to consider when shopping for a financial lender
A child's K-12 education is perhaps the most important investment a parent will make, as it is during these formative years that academic habits are built. And that is why more and more families are choosing to place their sons and daughters in private schools
But private education is expensive. Day schools cost approximately $6,000 - $12,000. Boarding schools can cost anywhere from $18,000 - $30,000. And special needs schools can cost much more.
With these rising tuitions, many parents are finding it more and more difficult to handle these expenses. Fortunately, banks and finance companies have developed products to help parents tuition payment plans and K-12 education loans.
Payment plans allow parents to spread out tuition payments over a 9 -12 month period for a minimum cost usually around $50. At a $10,000 day school, this allows a parent to pay $1,000 a month. But often times, even that burden is too high. So many turn to loans.
An education loan for private K-12 schools allows parents to spread out payments over a much longer period, usually 10 20 years. This longer repayment period makes tuition payments much more affordable. With this affordability, however, comes interest charges (with some loan programs charging much higher interest rates than others).
Over the past 3 years, many banks and finance companies have introduced K-12 loan options. This has been a welcome sight for many families who were previously forced to take out home equity loans, giving up valuable equity in their homes because of the rising K-12 tuition costs.
For the 2000-01 academic year, loans are offered by First Marblehead / Bank of America, Sallie Mae, PLATO, TERI, Norwest, and Key Bank. The different products offer parents very different features and benefits, so its important to shop around. All of these products are credit-based, so an interested parent and/or sponsor will have to undergo a credit test. Of course, some credit tests are more difficult than others, so a rejection by one company does not necessarily mean a rejection by every company.
Besides credit test differences, these products offer different repayment terms, with some offering a 10 year repayment term, others offering a 15 year term, and still another offering a 20 year term.
While all of the above differences are important, perhaps the most important feature of a loan is cost. The different products in the K-12 loan marketplace offer very different interest rates and fee combinations. The bottom line of all these loans, the Annual Percentage Rate, or APR, is the best measure of the loans cost. It is used to compare the costs of mortgages, credit cards, and auto loans, and should also be used to compare K-12 loans.
At the end of the day, you should go through the following steps to determine your financing.
Step 1: Determine the real cost of the private school you choose
Step 2: Determine if you have enough financial resources to handle the tuition expenses
Step 3: Find out about payment plan options at your school and determine if you can afford the high monthly payments associated with a payment plan
Step 4: Shop around for a K-12 loan option compare costs, as lower APRs will save you hundreds of dollars over the life of the loan
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