Is Knowledge Power or a Gateway To More Debt?

education spending

Let's take a look at the fictional but typical Cartwright and Morrison families - same income, wildly different results. See if you recognize yourself and your family and how different approaches to spending on education and education planning can improve your family’s financial well-being while providing for children's secondary education.

Both families live in the same community with similar homes and mortgage amounts. The Cartwrights and Morrisons each have a net annual income of $95,000 and both families have two children; one in middle school and one in fourth grade. One family is struggling to stay current with education costs and college planning; the other has no such worries. Let’s find out why.

Private or Public School

The Cartwright family decided to place both children in private school, partly influenced by marketing-driven and peer-generated fears that the quality of public schools simply could not provide the necessary background for their children’s college plans and overall quality of education. The Cartwrights struggle mightily to pay the total annual tuition of $20,000 for both children to attend an excellent local K-12 private school. They do without luxuries and live a meager lifestyle compared to their income.

The Morrison family also had some misgivings about public schooling but since they live in an area with highly rated public schools, they elected to enroll their children in the local school system, for free. They have encouraged their children to take advanced classes wherever possible, to participate in school activities, and have employed the services of specialized tutors as needed, to supplement classroom training. The Morrisons spend about $500 a month on tutors during the school year, or about $3,500 a year. Both children are doing extremely well and the family lives comfortably.

College Funds

With private school tuition eating up $20,000 a year, or more than one-fifth of the Cartwright family’s net income, there is precious little room left for college funding. Through haphazard savings, the Cartwrights have managed to salt away only a few thousand dollars toward college expenses. Their “plan” is that both of their children will benefit so much from the private school education that they will both receive full scholarships to college. According to a 2011 Washington Post article, only three-tenths of 1 percent (0.03%) of students receive a full, all-expenses paid scholarship to college. The article describes parents who bank on their children receiving such an offer as “delusional.”

The Morrisons on the other hand, have enrolled both of their children in 529 college plans with automatic monthly deductions of $200 from each parent’s salary. They started both children at age five, and have now invested $21,000 in their older child’s account and have earned an additional $6,500 through account growth. For their younger child, the savings have reached $12,000 plus $4,200 in growth. Altogether, the Morrisons have achieved $43,700 in college savings while spending $4,800 a year. They estimate the older child will have more than $40,000 ready for college expenses when she is ready to enroll, and a similar amount for their younger son.

What Happens…Happens

annual tuition increases

According to, the average private college annual tuition and fees expense is just more than $29,000 while the same cost for state colleges is about $8,600. Room and board, according to the same source, averages about $9,200 at public universities and $10,500 at a private one. Expenses continue to grow each year but we’ll use the static data for comparison.

As the Cartwrights' older son graduates private high school, he has applied for and received a partial scholarship of $10,000 to a fine private university. However, the annual stipend covers only one quarter of the actual costs of tuition, housing, food and fees. Since they have been accustomed to doling out $10,000 a year at private school, the Cartwright family will continue paying that sum as their son enters college. However, they are still about $20,000 a year short on costs for their son to attend this college.

As the Morrisons' daughter leaves high school – she graduated second in her class – she has applied for and received an $8,000 annual scholarship to her state’s leading university. It covers virtually all of her tuition and school fees. The Morrison family must still pay for housing, food and occasional expenses, or about $10,000 a year. Fortunately, their 529 savings plan fully covers the expenses and their daughter is on her way to earning a degree at a well-respected school with no additional financial burden.

At the Cartwright home, a hard discussion has to take place. In order to fund the difference in their son’s college costs, they elect to take out a second mortgage on their home for $80,000 at 4 percent, to cover the difference in their son’s college costs. The second mortgage uses up all of their hard-earned equity and costs the family an additional $810 a month out of pocket for the next 10 years.

Stunned, the Cartwright parents wonder what they’re going to do when their younger daughter is ready for college. In fact, they wonder if they’ll ever be able to retire. At the same time, the Morrison family has begun paying the extra $200 into their younger son’s 529 plan, and will be able to cover most additional expenses should he not receive any scholarship funding when he’s ready for college.

how the costs compare

Years of Struggle … or Years of Contentment

The Cartwright family, having spent more than 20 percent of their net income on private K-12 schooling, still must pony up nearly $30,000 a year for their son to attend the private university they dreamed of, even with the help of $10,000 in scholarship funds.

The Morrison family, by supplementing public school education with targeted tutoring, and investing wisely in 529 plans for their children while investing in 529 plans for less than half the annual amount the Cartwright’s paid for private K-12 schooling, will see both of their children go on to quality college educations at no additional annual expenses. The Cartwright family is paying down their son’s extra educational fees with their second mortgage at $9,700 a year (instead of the hard $30,000 annual cost) but they will pay it for the next 10 years. The Cartwrights are still wondering what to do about their daughter’s college expenses.

Can You Afford It?

Many children educated at private K-12 schools go on to continuing education at some of the finer universities in the country, and a small percentage do achieve full scholarships, but is the quality of the private school that much higher than the nearby public school, supplemented by specialized tutoring and parental support? How much of the demand to enroll children at these schools is created by peer and marketing-driven urgency?

When family income is of no concern, it’s much easier to justify private schooling but when middle class families try to overreach their budgets for the perceived extra value of a private school education, it can bury them in expenses for decades. We haven’t even begun to look at the real value of the extra $11,700 a year the Morrisons have available now and for years to come, while the Cartwrights stay chained to the burden they've created and are growing increasingly nervous about their younger daughter’s college plans. Combined with the sometimes mercurial choices made by young adults, caution and common sense should have a leading role when spending on education.

Where to Learn More

Online resources on college planning and savings abound, and include CollegeData.comU.S. News and World Report, the U.S. Consumer Finance Protection Bureau and your favorite financial institution or licensed planner. Learn more about 529 plans at and the U.S. Securities and Exchange Commission.