There is a never-ending debate between going to public or private school. Is private grade school and private university really worth it? I'm not so sure in this day and age of high inflation and free online education.
Personally, I went to international private school while my parents were stationed abroad until I was 13. Then I went to public school for high school, public college (William & Mary), and public graduate school (Berkeley) for my MBA. I found each type of school to have its pluses and minuses.
In this post, let's objectively analyze the decision to attend public or private school using real tuition dollars. We'll also talk about the opportunity cost of paying so much to go to private grade school and private college.
Public Or Private School Dilemma
This article is for:
- Students who want to understand the true cost of their education and the sacrifices their parents make in order to make better choices with their careers.
- Parents who make too much or have too much assets to get financial aid, but not enough to feel like they can comfortably afford private school.
- Students and parents who feel bad for attending or sending their kids to public school or have a tinge of envy for those kids who do go to private school.
I'm going to share with you the actual cost of going to private school over public school. We can then have a more subjective discussion on which type of school is better.
My Bias Towards Public Schools
I've been a big proponent of attending public schools over private schools because I'm biased. In fact, I think more public schools will start ranking higher than private schools over time. As an example, the latest Forbes college rankings for 2021-2022 has UC Berkeley shooting up to #1.
I attended international private schools when I lived in Asia, attended a public high school, and went to a public college. Therefore, I've experienced a good variety of schools.
I found very little difference in education between my private middle school and public high school. Upon graduating from William & Mary, I got a job at the #1-rated investment bank in NYC. After 13 years of diligently saving and investing, I reached financial independence at 34. Life has been good post public school.
The Only Guaranteed Of Going To Private Schools
We all know there's no guarantee of doing anything special or being anything special just because you went to a private school.
With the internet making education free, it's hard to justify paying record high tuition for a private education unless you're rich (make 10X the private school tuition per kid).
Yet, many parents pay for religious reasons, fear of missing out, the desire for smaller class sizes and more attention for their kids, and the need for a more customized program if their child has special needs.
These reasons all make sense, and I respect them.
However, if you send your child to private school and pay full tuition, there is one guarantee. It is that you will spend a small fortune if you don't get grants and scholarships. A lot of parents who advocate for private school got grants for their children to attend. That's wonderful.
But I'm talking about the parents whose children don't get need based grants because they make a little too much, but not enough to feel wealthy. You know, those families making around $150,000 – $350,000 a year, depending on where they live and how many children they have.
Forgoing One Million Dollars To Attend Private School
Given I'm biased for a public education, let's remove my bias by simply doing some math. Let's calculate how much it will cost to send your child to private school from K-12 and four years of college.
Below is a graph I put together with the tuition costs of real private school tuitions in San Francisco. Further, families generally have to pay an additional $1,000 – $5,000 in donations, books, excursions and so forth. These tuition rates are very similar in other big cities such as New York City, Boston, Washington D.C., Los Angeles, and Seattle.
The Cost Of Private School On The West Coast
As you can see from the chart, if you plan to send your little one to private school in San Francisco starting from Kindergarten, you will eventually spend at least $774,924 in tuition through college graduation. You can increase prices by 5% a year.
However, if you can earn just a 2% annual compound return during the entire private school duration, private school tuition actually costs over $1 million!
But if you returned a conservative 5.4% a year, the average return of a 100% bond allocation since the 1920s, your opportunity cost rises to $1,471,000.
Forgoing $1 Million To Send Your Kid To Private Schools
Therefore, it is highly reasonable to assume a total cost of over $1,000,000 for a private school education, especially since I haven't even calculated the ever rising cost of tuition or the add-ons in my chart.
If you are like most investors, you'll likely have a majority weighting in stocks over bonds. With a 60/40 stock/bond allocation, you might see a compounded 7% – 9% annual return leading to a total cost of $1,735,000 in 16 years for your child's private school education.
Now of course you must pay for public college tuition in lieu of private college tuition. That amount comes to $13,500 a year for a school like UC Berkeley, which still makes the total private school cost over $1,000,000.
The Cost Of Private School On The East Coast
Here's another example I put together for a parent who wants to send their kid to The Dalton School in NYC and then Yale in Connecticut. You can easily bump up the figures by 10% for 2023.
As you can see from the chart, the cost of tuition is even more than my West Coast example. With a 10% annual compounded return, we're talking over $2,000,000 in private tuition costs for your child!
Tuition Costs For Other Private Grade Schools Around The Country
This example of San Francisco tuition rates is comparable to other private grade schools around the U.S. Here is a snapshot of costs for other private grade schools during the 2021-2022 school year, based on tuition rates published on each school’s website at the time of this writing:
The Brearley School (K-12, NY, NY): $56,300
Horace Mann School (K-12, NY, NY): $57,200
Trinity School, (K-12, NY, NY): $58,505 – $59,170
The Cathedral School For Boys (K-8, SF, CA): $38,150 – $39,000
Lick-Wilmerding High School (9-12, SF, CA): $52,700, with Flexible Tuition based on income ranging from $700 – $46,200
Nueva School (Pre-K-12, Hillsborough, CA): $31,780 – $55,050
Forsyth Country Day School (K-12, Winston-Salem, NC): $14,990 – $24,990
Punahou School (K-12, Honolulu, HI): $27,716
‘Iolani School (K-12, Honolulu, HI): $26,150
Maret School (K-12, Washington DC): $36,780 – $42,355
Sidwell Friends (K-12, Washington DC): $45,610 – $48,050
The Roeper School (K-12, Bloomfield, MI): $23,550 – $26,450
St. Mark’s School (K-12, Dallas, TX): $27,881 – $34,862
The Bush School (K-12, Seattle, WA): $31,345 – $40,195
St. John’s School (K-12, Houston, TX): $26,545 – $31,820
St. Stephen’s Episcopal School (6-12, Austin, TX): $30,050 – $31,670
Harvard-Westlake School (7-12, Los Angeles, CA): $42,600(plus $2,000 new student fee)
Ransom Everglades School (6-12, Coconut Grove, FL): $43,420
Pine Crest School (Pre-K-12, Ft. Lauderdale, FL): $24,915 – $36,550
Phillips Exeter Academy (9-12, Exeter, NH): $45,859 (day), $58,714 (boarding)
Phillips Academy Andover (9-12, Andover, MA): $48,020 (day), $61,950 (boarding)
Private School Is Expensive Everywhere
As you can see, private school is expensive no matter where you live in the United States. Interestingly, adjusting for cost of living, private grade school tuition is relatively cheaper in expensive cities such as NY, SF, Honolulu, Seattle, and DC.
If you’re on the fence about sending your child to a private grade school, make sure to inquire about financial assistance. With a stronger focus on diversity, there should be more money available for different types of students.
For college, learn how to game the college financial aid system to get more free money. Learn what is including and not including in the FAFSA to make yourself look as poor as possible. This way, you'll increase your chances of receiving grants and scholarships.
Imagine What You Could Do With $1,000,000
Instead of graduating with student debt, imagine if your parents said at the after party, “Congratulations for graduating college! You're free to pursue your dreams, live wherever you want, buy a house, and even start a family because here's a check for $1,000,000.” You'd be set!
If you graduated at 22 years old, invested the entire $1,000,000, saved and invested $20,000 a year, and earned a 5.4% annual compounded return, you would end up with $3,192,000 by age 40. Finally, you will have achieved real millionaire status. Making more money gets easier the more money you have.
Being financially independent by 40 with minimal effort is pretty nice. But what's really wonderful is having the freedom to do whatever you want at the beginning of adulthood. Yes, there's a possibility that having $1,000,000 so young will make you a dead beat loser.
On the other hand, having a financial safety net could make you the biggest success ever because you can take huge risks.
Look at Bill Gates and Mark Zuckerberg who could afford to dropout of college because their families were already rich. Their safety net was kicking back at their respective family's multi-million dollar vacation homes before going back to school.
Educate Your Kids About Money
The key to making sure your kid has his head on straight with regards to money is having regular conversations about all aspects of money. The more you can talk about various financial topics growing up, the less of a shock it will be when you hand over the $1,000,000 check.
You can always spread the money out into multiple tranches based on various conditions that need to be met if you feel your son or daughter still needs time to mature.
At the age of 22, I would have used $200,000 for a 20% downpayment on a $1,000,000 property in NYC. Then, I would have invested $100,000 in alternative investments like real estate crowdfunding. For the remainder, I would have invested $500,000 in stocks and $100,000 in bonds.
The $1,000,000 would probably be worth $4,000,000 today. The NYC property alone would be worth ~$2,500,000 and be fully paid off.
Now Imagine What Parents Can Do With An Extra $1,000,000
If you decide not to give your child $1,000,000 upon graduation, think what an extra $1,000,000 can do for your retirement timeline.
You could literally retire 10 years earlier based on a $100,000 annual spend. And for some folks who live in an expensive coastal city and average closer to $200,000 a year in expenses, saving five years off work hell could be a godsend.
Saving time is truly the best thing you can do when you have a financial windfall. Each year you live takes up a larger percentage of time you have left. Think about how much money you'd be willing to give up to rewind time or live a life of leisure.
If you want to try and contain inflation, then one solution is to send your kid to public school, trade school, or community college.
Deciding To Go To Public University
I decided junior year in high school that I was going to attend a public university. William & Mary only cost $2,800 in tuition. This way, my parents could retire earlier if they wished. Further, I could pay them back more easily.
I knew their rough salaries as federal government employees. Therefore, to attend private university just didn't feel right. I couldn't understand how they could afford $20,000 a year in tuition at the time. Nor could I easily pay them back if I graduated with a regular $30,000 a year job.
Given I've been unemployed since 2012, having an extra $1,000,000 wouldn't dramatically change my life. But it could help improve the lives of others. I'd use some of the money to treat my parents and in-laws to a luxurious round the world cruise.
My father in-law always wants to update his old log cabin in the woods. And then there are several charities dealing with underprivileged youth I'd donate to. With what's left, I'd conservatively invest the rest to help pay for my son's education through a 529 plan.
Even public universities can now cost an arm and a leg over four years. Learn the different ways to pay for college so you can plan better.
Public Or Private School Is Your Choice
If you're rich or have awesome merit based scholarships, then send your kids to private school all you want. But for the majority of people who don't have an endless amount to spend or who aren't as academically gifted, it's good to run the numbers like I have here.
Make sure you go to the school that best fits your child's needs. I personally think trying the public school route first to see if it works is the best bet. Then apply to private school if public school isn't a good fit.
The only downside is that by the time you apply to one of those K-12 private schools, there might not be any spots left for you. Deciding between public or private school is a personal choice. Find the school that best fits your budget and your kids learning style and you'll be set.
Private Or Public School During The Pandemic
One thing to realize about private schools during a pandemic is that, overall, they are hurting. Small businesses are getting shut down and many families are trying to save on private school tuition. As a result, there's been less applicants for private schools. Therefore, if you want to go to private school, you should have an easier time getting in, at the margin.
Further, many families, such as ours, have decided to home school our children until there is herd immunity. So far, we've been saving $2,000 a month in preschool tuition since March 2020 homeschooling our almost 4-year-old. We ended up doing so for 18 months.
We've found that homeschooling is wonderful, albeit exhausting. You get to teach at your child's unique pace. You get to go on field trips whenever you want as well. If your child has any type of disability, you will easily provide better accommodations.
Providing your kids the best education possible is a gift. The irony is that homeschooling might be the best education of them all and its free! If you are a college-educated parent, you might as well unlock your education's full value by teaching your children everything you learned in college.
At the end of the day, every parent just wants their children to have the best education possible. When children are happy and thriving, the ability to pay private school tuition goes way up.
Related posts about the public or private school debate:
Stay On Top Of Your Money
Sign up for Empower the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool. You will see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator to plan your financial future. There is no rewind button in life. Take advantage of free financial tools!
Build Wealth Through Real Estate
Real estate is my favorite way to build wealth in an inflationary environment. Not only does inflation boost capital values, it also whittles down the cost of debt.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Everything is written based off firsthand experience.