Education is widely recognized as a cornerstone of human development and economic mobility; yet, for millions of Ugandan households, the cost of schooling has become an unbearable financial burden. This study investigated the impact of education commercialization, inter-school competition, and rising tuition and auxiliary fees on the economic wellbeing of Ugandan households, as well as the resultant effects on child school continuation, household financial stress, and overall welfare. A cross-sectional survey design was employed, drawing on a systematically sampled population of 400 household heads across urban and peri-urban districts of Uganda. Data were collected using structured questionnaires and subjected to univariate frequency analysis, bivariate ANOVA and Pearson correlation analysis, and Structural Equation Modeling (SEM) using maximum likelihood estimation. Results revealed that the majority of low-income households (55.8% earning below UGX 700,000 per month) allocated over 48% of their monthly income to educational expenditures, with households in the lowest income bracket spending up to 62.4% of their budgets on schooling. ANOVA revealed statistically significant differences in educational expenditure across income groups (F(3, 396) = 47.81, p < 0.001, η² = 0.266). Pearson correlation analysis confirmed significant negative associations between education expenditure and household wellbeing (r = −0.587, p < 0.01) and between household income and child drop-out rates (r = −0.518, p < 0.01). SEM results demonstrated that competition-driven school fees had a significant direct effect on education expenditure (β = 0.581, p < 0.001) and on education-induced financial stress (β = 0.612, p < 0.001), which in turn significantly reduced household wellbeing (β = −0.555, p < 0.001) and increased child drop-out rates (β = 0.503, p < 0.001). The model exhibited excellent fit indices (CFI = 0.962, RMSEA = 0.048). The study concluded that the commercialization of education is systematically eroding household economic resilience and undermining equitable access to quality education in Uganda. The study recommended targeted fee regulation mechanisms, means-tested scholarship programs, and the strengthening of government capitation grants as immediate policy imperatives.