How to afford school fees

Be strategic
Research from Schroders shows that many people are no longer looking for an education solution that meanders through pre-prep, prep and private secondary. Instead, they are targeting their expenditure where they might consider that there are weak points in their local state catchment areas.

The interviews show that many people are considering private sixth-form for their children – which has the advantage of giving them a little more time for financial planning. Sixth-form is likely to be the most expensive time for education, but it does have the advantage of being a short, sharp, shock – you know you only need to pay for two years.

"Given the higher percentage of students drawn from fee-paying schools that fill the elite universities, such as Oxbridge, and the fantastic examination results they deliver, it is little wonder parents are considering switching their children to a fee-paying institution for A-level study," says Robin Stoakley, managing director of Schroders’ UK Intermediary Business.

However, it is not the only way to do things. Many parents choose to send their children to a local state primary, before putting them into a private day school at 11. The drawback is that they may have to pass exams, which they may not be prepared for, but plenty of people do transfer from the state sector to private at 11.

A good guide may be to ask the primary school that you are considering for a list of secondary destinations, to see if they regularly send students to private schools. It's also worth considering tutoring for specific exams. A good tutor can cost around £45 an hour, but that's a bargain compared with private school fees.
 
Those who live in grammar school areas may send their children to private school and hope that they pass the 11-plus. It's a financial gamble, since you can't guarantee that they will get through.

Think for the long term
While many parents pay school fees directly from income, this can be an uphill struggle. If you are a few years off paying the fees you could consider using your equity Isa allowance to save up to £10,500 a year per parent towards school fees.

The stock market rout is off-putting, but has the advantage that shares could now be a bargain – especially if you are looking long term. Those who have an appetite for risk could consider tax-efficient venture capital trusts, or enterprise investment schemes. Those who are more risk averse could consider equity income funds, which look for shares with good yields. If you do this, you may even be able to keep the investments and pay some of the fees out of income in future.

If grandparents are willing to chip in, point out to them that there are inheritance-tax benefits. Each person can give away up to £3,000 a year free from inheritance tax. This is known as the annual gift exemption and includes gifts made to savings accounts, to all types of trust (including designated accounts), child trust funds and awaited Junior Isa.

You can set up a discretionary trust so that grandparents can give towards school fees. This is easy to do, with the income being treated as the child's own for tax purposes. Parents cannot do this, however, as generated income is taxed as if it belonged to the parents.

If you aren't happy with equity investment, you could consider using an offset mortgage to pay for your school fees. This would allow you to offset your savings against your home loan until you need to use them.

Explore the financial options
According to the Independent Schools Council, more than a third of pupils receive some form of help with their school fees. This may be in the form of bursaries or scholarships, so check whether your child may be eligible.

To get a bursary you generally need to earn under a certain amount, which can often be very low. Be prepared to have your finances scrutinised, including the type of car you drive, any holidays you take and any equity you have in your house. Scholarships tend to be a smaller percentage of fees, but every little helps.

You may also want to consider paying upfront to the school for a discount, often of at least 5 per cent – thus avoiding inflation-linked fee rises in the process. However, you would need to be very sure of the school's suitability for your child before you took this option. Telegraph