Cost of attending private school can definately be a prohibitive factor.  According to the National Association of Independent Schools (NAIS), the average-median tuition (which is an average of the median tuition costs of each grade) for a year at independent schools that are not affiliated with a religion in 2005-2006 was $17,145 for day students and $33,533 for boarding school students.  While this is nothing to sneeze at, many people who are by no means rich, manage to find a way to send their children to private schools. 

The NAIS asked 362 families who applied for financial aid this year where they were getting money to pay tuition.

Withdrawing From Savings and Investments

If you have savings and/or investments on which to draw, you might consider using these funds to pay your child's private school or college tuition bills as they come due.

Apply for School-Based Loans

Some private primary and secondary schools may offer financial aid to prospective students and their parents. This school-based aid is the only financial aid available to these parents because the federal government's financial aid programs (as well as state and private financial aid programs) are available only to students pursuing a college or graduate school education.

Paying As You Go From Cash Flow

Paying from cash flow is the process of setting aside a certain amount of money each week or month from a steady income source and applying it toward your child's private school or college tuition bill.

Using Cash Value Life Insurance

When the time comes to pay your child's private school or college tuition, one option is to withdraw some or all of the cash value of your life insurance policy, much like a withdrawal from a bank account.

Funding Private Elementary/Secondary School

Many parents are committed to sending their children to private elementary or secondary school. Yet paying private school tuition can present a compelling cash flow problem.

Accessing Money From Employer-Sponsored Retirement Plan
 
Qualified employer-sponsored retirement plans are granted special tax treatment under the federal tax code. Profit-sharing plans and 401(k) plans are common examples of qualified employer-sponsored retirement plans. If your employer offers such a plan, this may be a way for you to access funds for college-related expenses.

Utilize Other Loan Sources

You need to pay your child's private/secondary school or college/graduate school tuition, and you need to pay it soon. If you've exhausted your discretionary income, your savings and investments, and any other assets you may have (like retirement plans and cash value life insurance), you may find it necessary to utilize other loans beyond the traditional financial aid loans.

Spouse Returns to or Increases Hours at Work
 
In some instances, the paycheck of one parent or both parents may be insufficient to meet private school or higher education expenses. In this case, to bolster discretionary income, parents may need to consider having a previously stay-at-home spouse return to the workforce or having a working spouse increase his or her hours at work. 

Withdrawing From IRAs

If you own a traditional IRA or Roth IRA, you may be able to withdraw funds from these accounts to pay for your child's college expenses, or to pay for your child's elementary or secondary school expenses. But the effect of taxes and penalties should be considered.

Gifting Assets to Child

A gift is a voluntary transfer of money or property. In the context of education planning, gifts are usually made from parent to child as a way to shift income and reduce taxes.

Using Your Home Equity

If you own a home and have equity in it, you might consider taking out a home equity loan as a source of funds for your child's private school or college tuition.

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