Fees Management

Where the money comes from

Historically, it has been difficult to comment objectively on the way parents fund school fees. Rob Roy reveals the findings of a new survey that looks at how the cost of children’s education is met

Previous attempts to get reliable data from parents have always foundered on the understandable reticence of schools to broach the subject with their own paymasters. Previous surveys – for example, the Why and How Parents Choose Independent Schools surveys, carried out by MORI for ISIS between 1989 and 1997 – did elicit some basic information. For instance, they found that fewer than a third of parents made any advance plans for funding school fees, and that most parents used their own earned income to meet the cost.

But vital questions have remained unanswered: the extent to which they rely on others (grandparents or employers) to help, the degree to which payment of school fees depends on both parents’ earning, the sacrifices – financial and otherwise – they make to ensure their children’s education, and their reliance on investments or the value of their property.

It was to begin to explore this unresearched but vital area of independent sector funding that mtmconsulting ltd and Holmwoods Termtime Collections undertook a survey of parents. With help from a number of bold and imaginative school heads and bursars and from hundreds of candid parents, some answers can now begin to emerge from the results of this survey.

Family planning
The survey discloses for the first time the extent of the inroads that the payment of school fees makes into family budgets. More than four out of five of the parents surveyed spend up to, and including, 40 per cent of their net income on school fees; 16 per cent of them devote more than 40 per cent to paying for their children’s education.

The total amounts of fees paid by parents vary widely, depending on the number of children at independent schools, their ages and whether day or boarding education is being purchased.

Three-quarters of the respondents have reduced expenditure in other areas – general household expenditure, holidays, home improvements, car replacement, even pension contributions – in order to meet the demands of school fees. Roughly, one respondent in six either does a second job or does extra overtime to help pay school fees; 12 per cent of their spouses or partners similarly take on extra work.

Domestic bliss
The survey also makes clear that most parents pay all or most of the cost of their children’s school fees out of income. Relatively few add to their domestic debt, either through extending their mortgages or by other forms of borrowing, to help defray the cost. Those who do, however, will typically add 25 per cent to the size of their mortgage, though many will borrow much more than that.

Many parents – more than a third of the respondents – have also clearly depleted their savings. Many of these are also people who have borrowed, either on the value of their property or in other ways. Those who have used, or are using, their mortgage to pay school fees are also more likely to have used, or be using, investments or savings to pay school fees, with almost half (46 per cent) who are using their mortgage also using investments or savings, compared to just over a third (36 per cent) who do not use their mortgage. Even more visible is the relationship between other borrowings and the use of investments or savings to pay school fees.  Those who have borrowed in other ways are 20 per cent more likely to have used, or be using, investments or savings to pay school fees.

The survey shows that approximately two-thirds of respondents pay their school fees on the traditional termly fee structure, whereas just over a third pay on a monthly basis.

What also emerges from the survey is a clear distinction between those families who meet the cost of their children’s education with relative ease, who might perhaps be equated with the 61 per cent of respondents who gave a confident “yes” to the question: “Do you think you will be able to continue paying school fees until your children leave school?”, and those who face the future with less confidence.

Can it go on?
Analysis of responses to most of the questions about the payment of fees discloses a substantial body of parents who are clearly very stretched by the demands of paying school fees and who, as a result, are equivocal about their ability to continue.

Although nearly two-thirds of respondents are very confident that they will be able to continue to pay school fees until their children leave school, a significant proportion of respondents (12 per cent) show some doubt in their ability to do so.

The key perceived threats to parents’ ability to pay school fees in the future are:

• increasing taxes;
• ability to earn;
• job insecurity; and
• increasing interest rates.

The survey has clearly shown that parents can be divided into three groups – those who pay their fees with no trouble or impact, those who can and will continue to pay fees but have to make sacrifices to do so, and those whose sacrifice is significant and ability to continue to pay fees compromised. As such, whatever means that schools can achieve to help the most compromised parents will help to protect fee income flows in the future.

Rob Roy is a consultant with mtmconsulting. He can be contacted on robroy@mtmconsulting.co.uk

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