This is Part 2 of my series where I describe the top challenges to the growth of alternative education and what potential solutions there could be to these challenges. For Part 1 I looked at challenges 1–2 and for this post I look at challenge number 3.
3. The heavy financial investment required and lack of accessibility for lower-income families
Tuition for alternative education is actually cheaper than the average private school in America.
According to US News, the average annual cost for traditional private school is $12,350. Compare that to some alternative education startups:
- Sora Schools: Tuition varies from $3600–$12000 based on the amount of financial aid
- Prisma: $7415 for year round school
- Prenda: Free tuition, but only for families in Arizona so far
- Galileo: $3,600 for first premium tier, $9,000 for top tier experience
Most alternative education startups also have commitments to providing financial support for a certain percentage of their students. Overall they’re less expensive than traditional private school, but I definitely wouldn’t label them as “affordable.”
As a result, I spent some time researching different ways to pay for alternative school tuition outside of just financial aid. I was first made aware of ESAs (Education Savings Accounts) by a friend of mine, and I wanted to know whether ESAs or any other type of government funding could make alternative education more affordable.
For my research I found that Twitter threads by Joe Connor and the EdChoice website were very useful for learning about alternative education funding strategies and how they vary from state to state. So shoutout to them.
Think of ESAs as a debit card that families can use for private school tuition and fees, online learning programs, private tutoring, community college costs, higher education expenses and other approved customized learning services and materials. They are currently only available in 8 states but many others are considering them. When I first heard about ESAs it sounded like an amazing idea to crack the alternative education cost problem, but digging deeper I found that there were several problems with ESAs.
- Not many students are eligible. With the exception of West Virginia, every state has around 10–20% eligibility statewide. To be eligible typically requires that students come from families earning no more than 300 percent of the threshold for free and reduced-price lunch (FRL), which is $147,075 in income for a family of four in 2020–21 and the student must be on an Individualized Education Plan (IEP) for students with identified disabilities.
- There’s currently not much money to go around in ESAs either. Even for those who are eligible, the largest median award of all states is $10,515 in Florida, whereas for other states the awards are around $5,000–7,000. That’s barely enough to cover the tuition for these alternative education startups.
Perhaps more states pour money into ESAs, or perhaps the states that already have ESAs expand eligibility, but currently I believe that ESAs do not make a significant impact on making alternative education more affordable.
However, there might be some innovation in this space in the future. Getting approved for an ESA is also an arduous and complicated process, and states don’t have a platform to safely distribute ESA funds to families. I’m very excited about Joe Connor’s new company Agora, which is looking to help states manage and distribute ESAs funds and make ESAs a more consumer friendly experience for families.
Other Sources of Funding
Besides ESAs there are still several other funding choices. There are 11 tax credits or tax reduction programs in 9 states (some state have multiple) that allow state income tax relief for approved educational expenses. Again there is an issue of eligibility and the size of the award/deduction — there’s a strong inverse relationship between the two (i.e. in Iowa where everyone is eligible but the median award is only $133 and in South Carolina only 11% are eligible but the median award is $7,353). In states where everyone is eligible, a couple hundred dollars in tax deductions can be helpful, but not a solution for facing high tuition in alternative education.
There are also Tax Credit Scholarships, which basically private school scholarships to students. I honestly have no idea whether alternative or online schools are eligible use cases for these types of scholarships, but regardless these scholarships have the same low eligibility issues.
Overall, these government funded options aren’t widely accessible, which makes them difficult to use for alternative education tuition purposes.
Other Financial Barriers
Let’s say however that a low income family maybe wants to do take learning in their own hands, or join a local learning pod, instead of attending a program that charges a formal tuition. How accessible is that?
First, as I mentioned in Part I of this blog series, there’s a serious time investment involved with parents taking learning into their own hands. Concerns about setup costs, administrative hassle, and parent time investment are amplified for low-income families who may have greater problems to take care of, and may not always have a parent who can stay home to oversee their child’s education. Low-income families also cannot make the same financial sacrifices and likely do not have the same work from home flexibility that other families do.
To me a good amount of evidence suggests that financial barriers are a massive hurdle for alternative education. There’s no clear solution yet, although there is some business model innovation with Prenda, who’s able to offer free tuition in Arizona due to receiving charter school funding from the state.
It would suck if alternative education remained only an option for rich people, but I also don’t think that alternative education startups are doing that intentionally. It may just be a matter of figuring out how to keep costs low through technology and how to optimize the physical operations of these schools/programs at scale. And perhaps government funding will also become more transparent, convenient, and abundant in the future.
I think that lower income families could eventually have the most to benefit from alternative education. Many of these families live in areas that don’t have well-funded public schools, and allowing them to explore high quality, alternative education options in an affordable way could be extremely transformative for education.
As always, I really appreciate you if you’ve read this far down. I haven’t had as much time recently to do research and talk to people in education, but hopefully I’ll have more time to focus on that since I’ll be interning at an early stage EdTech startup in the summer! Feel free to dm me on Twitter @alex_yang15 if you ever want to discuss EdTech or have any feedback for me.