Amortizing Tuition

Last month our washing machine broke.  It was the original machine in the house, built in 1968.  I thought the repair man was going to cry when he couldn’t fix it.  “They just don’t build them like they used to,” he lamented.

The next day we went off to shop for a new machine.  In each store the salesperson showed us a set of machines with different features, but then continued to tell us about their financing specials.  In one store we could get 0% financing for twelve months, in another 2% for two years, and so on.  The sales pitch reminded me of buying a car a year earlier, when the sales pitch was both about the quality of the car and about the terms of payment.

With most major purchases we are given the opportunity to amortize the cost over time.  A mortgage for a house, a loan for car, and financing for a washing machine allow us to enjoy the benefits of the purchase while spreading out the expense.

In education, the key example is university tuition.  In the US, where college tuition is significantly higher than in Canada, parents start saving from early in a child’s life.  Then, through college and for years afterwards parents and children continue paying off student loans. Rather than paying for college for the four years of an undergraduate degree, families pay for it over the span of several decades.  Like in the US, the Canadian government incentivizes such amortization by offering Registered Education Savings Plans for the years before university and government sponsored student loans for the years after. 

Student loans afford students the ability to defer the costs of education until they have a higher income to pay for it. During university, after all, many students have little to no income.  Later, however, graduates are (hopefully) reaping the benefits of their education and earning a salary which allows them to pay back the school debt.

In many ways, we face a similar challenge with day school tuition.  When children enter day school – in nursery, kindergarten, or grade one – their parents are still at the beginning of a financial journey. They may have recently bought a new house, may be in the early stages of their career, and may even still be paying off student debt.  It can be a challenging time finically and the cost of day school tuition adds to the burden. 

As we experiment with ways to make day schools more affordable and sustainable, one of many ideas percolating is the possibility of amortizing tuition over time. 

For some, personal financial security comes later in life – when a mortgage is paid off, when we have climbed the career ladder and found more solid professional footing.  What if tuition were payable over a longer period, allowing families more certainty in their cash flow and the ability to pay for tuition when their income is higher and expenses lower?  While doing so would require bridge funding to allow schools to sustain themselves while waiting for families to pay their full bill, it could go a long way to alleviate the crunch of paying for day school at a time in life when finances are especially tight. 

I have written before that tackling the challenges of day school financial sustainability and affordability will require creative thinking and a willingness to experiment.  This spring, as hundreds of high school students attend the March of the Living, we are dipping our toe into the experiment of amortizing Jewish educational costs.  In collaboration with the Jewish Free Loan Society, a group of participants in the March received interest free loans, allowing them to pay the participation fee over time.  The program is an experiment from which we’ll learn, but represents a helpful step in the right direction.

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