Paying For Preschool: This Is Going To Be Pricey

This is the first time I have looked into preschool costs, and boy is it a racket.  What really bothers me is that there is this massive cliff in affordability.  There are several preschool programs that are completely free if you qualify based on income, then there are programs that you have to pay for and all of them are incredibly expensive.  I’m surprised there is no middle ground and that for the places that offer free preschool you literally can’t pay them to send your kid there; it’s free or you can’t go.

Our family is composed of 4 kids, my stepson who is 14, my son who is 8, and our nephews who are 6 and 4; they came to live with us a little over 2 years ago after their mother passed away.  In total we have had over a decade of having small children under the age of 5 at home.  My son was born literally 3 days before my stepson started school.  Throughout all of these kids we have managed to arrange our schedules so that we never had to pay for daycare or for preschool.  Last year we decided that we would take the leap and pay whatever was necessary to put our youngest nephew in preschool so that Mrs. C. could take a better position at work, so that we could get a bit of a break from him, and to ensure that he will be ready to enter Kindergarten at 5, rather than going into our schools pre-K program, which all of the other kids have gone through.  If we can skip pre-K, then he would be able to graduate from high school 1 year sooner, which after a total of 28 years of having kids in the house will be a welcome event.

How We Managed To Not Pay For Preschool Or Daycare:

For our oldest kid, Mrs. C. mom and sister did a LOT to help out.  When I first met Mrs. C.  her mom watched her kid and her sister’s kid (they are 2 months apart in age)  while they were at work.  For the first year Mrs. C. and I were together her mom watched him while she was at work.  This was an amazing help, especially when we had nothing.  Looking back I’m sure we would have qualified for daycare assistance.  We were both working minimum wage jobs at just under 40 hours per week while going to school.

After that first year Mrs. C. and I were able to re-arrange our schedules so that we didn’t need a babysitter.  We worked opposite shifts and it really sucked.  After a year of that I stopped working my fast food job and was off when not working nuclear plant outages.  This allowed Mrs. C to work more hours when I was off work, and when I was working she would go down to 1 or 2 shifts per week and her mom or sister would watch the kid(s) for us.

When we got custody of our nephews a little over 2 years ago Mrs. C. set her schedule to primarily work 2 days per week, which were the 2 of the 3 days per week her mom had off of work.  When I worked home outages I requested my day off to be one of those 2 days so her mom would only have to watch the little kids 1 day per week instead of 2. Since the older 3 kids are all in school now, we only need to worry about the youngest.  Since I have summers off work all we need to do is get through this 2017/2018 school year.

Option 1: Preschool / Daycare

The first option we looked at is a preschool / daycare program operated out of our local community college.  Kids enrolled full time can be dropped off as early as 6 AM and picked up as late as 6pm M – F.  The actual preschool program runs for 4 hours on Monday – Thursday.  We would drop him off around 7:45 AM and pick him up around 3:00 PM. This would allow Mrs. C. to work 8 – 2:30 and he would be picked up around the time our other kids get out of school. On their website the cost for this program was $145 per week, however when we contacted them we found out that the rates had gone up to $180 per week.   For the 40 weeks the kids are in school this amounts to $7,200, instead of the $5,800 that we expected. The administrator told us that we should apply for state assistance, which most of their clients receive.

Overall the Michigan DHS system for daycare assistance is on a sliding scale up to 240% of the federal poverty level.  We are just under the 200% so we should qualify.  At the 240% FPL level we would pay $90 every 2 weeks.  This is insane to me.  You get a 75% discount at 240% of FPL, but at 241% of FPL you pay full price.  I haven’t been able to figure out if this is true gross income or adjusted gross income.  If it is true gross income we will be pushing that limit, and will exceed it if the boys Social Security income is included.  We still need to look into this a bit further.  If we truly only had to pay $90 every 2 weeks then our total cost would be $1,800 for the school year. Of course they take up to 45 days to approve applications for day care assistance and you have to fill out a giant stack of paperwork…90% of which is information you already told them with your Obamacare/Medicaid application.

Option 2: Montessori School:

When I was a kid I attended a local Montessori school in Benton Harbor for preschool.  Both of my parents worked full time professional jobs and it was the best solution for them at the time.  I’m not sure what their rates were 27 years ago, but today to have a kid there from  8 AM – 3 PM Monday – Friday costs $8,971.  Since Mrs C. needs to be at work at 8 AM we would need to pay for the early bird program which runs from 7 AM – 8 AM.  This costs an additional $1,183. That’s $10,154 in total. There is an additional $114 classroom fee and a refundable $300 deposit that parents get back after volunteering 25 hours at the school. But wait there’s more.  Each family must pay $170 for 2 auction tickets, and they charge a $250 enrollment fee, I would not be surprised if more fees popped up as well.   The program also ends on June 1st, which is before school gets out for other kids.  This isn’t a big deal for us since my spring outage season would be done by then, however it shows that this total cost is even more on a per week basis compared to other programs. Including all the additional fees this would be an absolutely last resort option, totaling $281 per week.

Option 3: Head Start:

Head start is a preschool program that is only available to families at or below 100% of the Federal Poverty Level.  As discussed above we are at almost 200% of FPL so we do not qualify for Head Start and there isn’t even an option to pay them to attend.  There are multiple head start locations in our area that would be convenient and offer full day pre-school, but since we don’t qualify this option is out.

Option 4: Grapeseed Program

The Grapeseed program is offered at Benton Harbor Charter School.  50% of participants must be low income.  At least with this option there is the possibility of sending a kid there without being under 100% of the FPL.  Kids must have at least 2 of 8 risk factors to qualify.  Here are the risk factors.

  • 1. Extremely low family income: <200% of FPL.
  • 2. Low family income < 300% of FPL.
  • 3. Diagnosed disability or identified developmental delay.
  • 4. Severe or challenging behavior.
  • 5. Primary home language other than English.
  • 6. Parent or guardian with low educational attainment.
  • 7. Abuse/neglect of child or parent.
  • 8. Environmental risk.

Based on these risk factors he absolutely qualifies for 2 of them,  No matter how they look at income we are well under 300% of the FPL, so that one is in the bag.  Under environmental risk the definition is parental loss due to death, divorce, incarceration, military service, or absence.  Because his mother passed away he would qualify under this risk factor.

My sister in law sent one of her kids through this program for preschool and the main challenge was that they do not offer school on Fridays, so this would require Mrs. C.’s employer to make some adjustments, but I think it would be doable, especially for a savings of around $7,000, as this is a free program.  Mrs C. stopped by and talked to them about the program and was given the impression that they may be full for the school year. We are going to get an application in anyways in case of drops.

Option 5: Church preschool

There are several churches in our area that offer preschool programs.  Most of these programs are only half day programs for a few days a week and cost in the range of $140 to $160 per month.  So far I have not found a full day one.  Unless something else pops up this option is out as well.  Having the kids in preschool only til noon is not a good solution for us.

 

What I’ve Learned:

1. Apparently when trying to get a kid into preschool you want to plan ahead.  I did not realize that spots filled up so quickly.  We should have started this process back in early June instead of late July.

2. What I think the cost should be doesn’t matter:  Ultimately with the supply of preschool centers lower than the total demand, prices will rise, regardless of the value I feel it is worth.  For us I think $120 – $150 per week is reasonable, but that’s based off of Mrs. C.’s income.  Ultimately there are more benefits to starting our youngest in preschool that what Mrs. C. will be earning instead of staying home with him.

  • 1.  With Mrs. C. earning around $11 per hour and working 30 hours per week we still end up ahead on cash flow by $150 per week if we go with the preschool option at our community college.
  • 2. Mrs. C. is building up her future Social Security benefits:  For several years Mrs. C’s income has been under $10,000.  Earning a bit more will help her maximize her future Social Security benefits.
  • 3. Preschool should get our youngest ready for Kindergarten, allowing him to skip the young 5′s program and ultimately finish high school 1 year earlier.
  • 4. Mrs. C. is able to take an opportunity that presented itself now, transitioning to a different role at her work that she will enjoy more.

3. Don’t count out state help.  I thought for sure the only way we would qualify for state daycare assistance was if only Mrs. C’s income counted.  This is because she is the guardian of both our nephews, not me.  When we needed to do the paperwork to file for guardianship I was working out of town, so we had to do it solely in her name.  Regardless, I thought our income was way too high for assistance. I figured that would only be offered for people earning maybe half of what we earn.  In Michigan it looks like a family of 6 can earn up to $78,900 per year.  I’m still not sure if this is a “total resources” number or an Adjusted Gross Income number.

4. It pays to leave your kid there.  The costs for full time daycare are the same regardless of whether your kid is there for 6 hours or the full 12 hours the center is open.  This is a major benefit to people working long hours, but for people working shorter shifts, like Mrs. C. it makes the per hour cost fairly expensive.

5. Look at the taxes: There is a tax credit for child care expenses that is capped at $3,000 in expenses per kid year.  It is on a sliding scale and our credit will be 20% of what we paid.  If we pay $7,200 between the 2017 and 2018 tax years, this should be a total of $1,200 in tax credits, because the maximum would be $600 per year.

Have you had your kids in preschool or daycare? What was the experience like and how much did it cost?

John C. started Action Economics in 2013 as a way to gain more knowledge on personal financial planning and to share that knowledge with others. Action Economics focuses on paying off the house, reducing taxes, and building wealth. Check out the Action Economics archives section for all past posts.

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