It is often assumed parents largely select schools from among those that they can afford, without having to go into debt.
Edstart, which provides loans to parents to pay for school fees, reckons only about half of parents can afford to pay for fees out of their disposable income.
About 15% of 500 families surveyed by Edstart say they are using their credit cards and about 10% are extending their mortgage to pay the fees.
That leaves about 25% who are drawing from savings, selling assets to raise the money, taking out personal loans or tapping the child's grandparents to help out.
Jack Stevens, the chief executive of Edstart, says that when he co-founded the business in 2016, he thought the sweet spot for his business would be those parents sending their children to low to mid-fee independent schools.
While there are plenty of those parents, what has surprised Stevens is the number of loans extended to the parents sending their children to high-fee schools.
"We have a lot more who are at high-fee schools. They have a couple of kids and are paying about $30,000 a year each," he says.
What it costs
A report from 2013 on the costs of raising children by AMP/NATSEM shows high-income families spend a much higher proportion of their income on educating their children than do lower-income families.
The study found the costs of educating two children, which includes any childcare, makes up about 6% of a low-income family's total expenditure, about 9% of a middle-income family and about 21% of the expenditure of a high-income family.
"In dollar terms, high-income families spend almost 10 times as much on their child's education and childcare than a low-income family," the report says.
"These parents tend to require more childcare as both parents are likely to work while the children are young and return to full-time work sooner, and the children are more likely to attend private schools," the report says.
Australian Scholarship Group (ASG), which provides savings plans for parents, says that for a child born in 2018 the estimated cost of a private education is $240,679 a child.
It estimates the cost of a government education, with the expense of uniforms, shoes, computers, school excursions and sporting trips, is $66,320.
The Independent Schools Council of Australia Council says ASG's estimate represents the upper ranges that parents can expect to pay.
"ASG's fee estimates state that the 2018 national metropolitan upper-range figure parents could expect to pay in secondary school fees is $21,004 per annum," Colette Colman, the council's executive director, says.
"However, the most recent official data available shows a median Australian metropolitan independent school fee of $6,441 per annum."
Nationally, 70% of metropolitan independent schools are charging below $10,000 a year, Coleman says.
How to pay
For most parents, paying for school fees and other education costs is most likely going to be achieved through a combination of strategies.
Ideally, the best approach is to start saving as early as possible. Not only does that give more time to save, but more investment risk can be taken in exchange for higher returns.
For those with an investment time frame of at least 10 years, exchange traded funds (ETFs) that track or mirror the returns of the Australian share market are an easy and low-cost way to invest.
Then there are the education savings plans, of which Australian Scholarships Group is the oldest.
ASG also has an annual school fee payment service where it pays the fees and then parents pay back the fees to ASG in monthly or fortnightly instalments. Edstart offers something similar. However, many schools allow parents to pay in monthly instalments.
For parents with a mortgage, saving through a mortgage offset account is one of the best ways to save.
Most lenders have offset accounts that can be attached to their mortgages. The balance in the offset account is deducted from the mortgage balance for interest calculations.
The money in the offset account is, in effect, earning an interest rate that is equal to the mortgage interest rate, much higher than could be earned on a term deposit at a bank.
This article was originally published by the Sydney Morning Herald on 19 February 2018. It represents the views of the author only and does not necessarily reflect the views of AMP.