Kindergarten loan

I’m a parent, and so I get that many other parents want the best for their children. I understand that when it comes time for college, if parents don’t have the savings, they take out loans to pay for their children’s higher education.

But what about those parents who are also bent on getting their children into the best preschools and who, if they can’t afford the tuition, just borrow the money?

“It used to be that families first signed up for education loans when their child enrolled in college, but a growing number of parents are seeking tuition assistance as soon as kindergarten,” writes Annamaria Andriotis of Smartmoney.com. “Though data is scarce, private school experts and the small number of lenders who provide loans for kindergarten through 12th grade say pre-college loans are becoming more popular.”

Andriotis goes on: “Much of this demand is coming from high-income families. Roughly 20 percent of families that applied for aid to pay for their children’s kindergarten through 12th grade private school education had incomes of $150,000 or more, according to 2010-11 data, the latest from the National Association of Independent Schools.”

She explains that “the rise in private school loans coincides with a rise in tuition. The average cost of private school is nearly $22,000 a year, up 4 percent from a year ago. The average interest rates for the pre-college loans range from around 4 percent to about 20 percent.”

Andriotis reports that one couple that took out loans for their kids is hoping to give them the best education early on to improve their chances of getting into a better college. “We’ll figure out how to pay for it then, or with any luck they’ll get scholarships,” the father said. “Right or wrong, we’re hoping our experiment works.”

I’m not sure what to say because my head feels like it’s exploding. Loans for kindergarten? One word: crazy. But that’s just me.

What do you think? This week’s Color of Money question: What do you think of the trend of well-heeled parents taking out pre-college loans to pay for their child’s private-school tuition? Send your responses to colorofmoney@washpost.com. Be sure to include your full name, city and state and put “Kindergarten Loans” in the subject line.

Your Money and Your Honey

A survey conducted by Today.com and Self.com asked couples a very interesting question: How much money is it okay to spend from a joint account or credit card before checking with your partner?

Of the nearly 22,000 people who responded, about 36 percent said they would feel comfortable spending $50 to $99 before consulting their spouse or partner. Another 22 percent said the bar is between $100 and $499. About 28 percent of readers said they check in with their spouse about every single purchase, no matter how small. Only about 6 percent said they never tell their spouse how much they spend on anything.

In another survey, Today.com and Self.com investigated financial infidelity.

It turns out that 37 percent of men and 56 percent of women in the survey acknowledged having lied to their partner about money. The poll also showed that women were nearly twice as likely as men to hide purchases or receipts from their partner, with nearly one-third of women admitting to the practice, reports Allison Lin of TODAY.com.

My husband and I have a rule that neither of us may buy something that is more than about $200 without consulting the other. This rule forces us to discuss major spending, and if one of us disagrees with a proposed purchase it doesn’t happen.

Scott Stanley, a research professor at the University of Denver and co-author of the book “Fighting For Your Marriage,” adds that couples who are planning for a financial future together by sharing accounts or saving money for retirement tend to have a better chance of marital success than those who keep finances separate.

Financial Literacy Month

Mint.com contributor Cyrus Sanati is tackling the Individual Retirement Account, or IRA, this week in his continuing series on basic financial topics for National Financial Literacy Month.

Sanati says, “You may fare well managing your IRA by yourself, meaning you choose what you invest in and for how long.”

This type of investment is known as a self-directed IRA, and it allows you to take your retirement fund and invest it in just about whatever you like.

“For many, that is a scary proposition, as one bad investment could see their entire nest egg wiped out,” Sanati writes. “But for savvy investors, it could offer crucial capital at a time when bank lending is stringent.”

Color of Money Responses

Last week, I wanted to get your opinion on two hot financial topics.

The first was the Secret Service prostitution scandal, which The Washington Post reported on Wednesday was part of a pattern of misbehavior. The scandal topped the headlines after a prostitute became angry for not being paid what she wanted after a night with a Secret Service agent. The penny-pinching by the agent led authorities to uncover the now infamous scandal and inspired one of last week’s Color of Money questions.

I wanted to know: “Do you remember a time when pinching pennies led to far more trouble than the saving was worth?”

“Years ago we saved about $50 by dropping the comprehensive coverage on our old car,” said Mary Phillpotts of Leominster, Mass. “Then we got rear-ended backing out of angle street parking and could never afford the bodywork repairs. Fortunately the car had an aluminum trunk lid and the v-shaped damage didn’t keep us from opening and shutting it, but we had to drive around with that for several years.”

I also asked your thoughts on the Wonk Blog post by The Post’s Brad Plumer about some students in California who would like to avoid being saddled with student loans after graduation by pledging part of their future salaries toward tuition instead.

The idea was that, rather than charging tuition, public universities in California could take five percent of the graduates’ salary for the first 20 years after graduation (for annual incomes between $30,000 and $200,000).

Christine Bieri of Severna Park, Md., says while this sounds like a great idea, it all depends on your definition of income.

She wrote: “For example, what if some graduate lands a great job and is paid a large chunk of his/her salary in stock options? The grants would not count as income, and when exercised, would be capital gains and taxed at a much different rate. This sounds like this is a plan to make for more creative salary arrangements.”

I hadn’t thought of that.

Tia Lewis contributed to this report.

You are welcome to e-mail comments and questions to colorofmoney@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”
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