Fees Management

Show me the money

One vital aspect of surveys into school fees has been hitherto largely unstudied: how do parents find the money to pay them? Dick Davison reveals the findings from a new survey that uncovers the answer

A much larger survey than has previously been carried out into independent schools has, for the first time, secured a reliable picture of the spread of parental incomes across the sector. About 2,500 parents, with nearly 4,000 children in more than 30 independent schools of all kinds, took part in the online survey conducted by mtmconsulting. The results show graphically the scale of the financial commitment that parents make to their children’s education. The degree to which parents rely on second incomes, on assistance from third parties, on using their savings and investments, and on borrowing is laid bare.

And there are signs, too, that the depredations of the last two years have had an effect on parental confidence, with fewer parents indicating that they are sure they will be able to continue to fund their children’s education, with increasing concern about job security and falling earnings.

With an estimated 21 per cent response rate, the 2,500 families in the survey gives a sample nearly three times the size of previous studies. A wide variety of schools took part, including seven GSA schools, nine HMC schools and nine IAPS schools. 17 of the participating schools have boarding pupils.

Almost half the parents had only one child of school age; nearly 40 per cent had two children. In almost all cases, parents were paying fees for all their school-aged children.

Why do parents pay and how much?
The reasons parents gave for choosing to spend so much money on their children’s education were consistent with other surveys of independent school parents, with most citing high quality academic standards (57 per cent), an all-round education (57 per cent), closely followed by small class sizes (51 per cent). About one in five cited their inability to find a school that suited them in the state sector.

There were significant differences between the main reasons given by parents of prep school children and boarding pupils. Both groups were slightly less likely to be looking for the best academic education, while prep school parents were much more likely to be motivated by smaller classes and individual attention. Boarding parents were more likely to be looking for:
• an all-round education;
• sporting opportunities; and
• a wide range of extracurricular activities.

Just over half the sample (52 per cent) paid more than £15,000 in school fees during the last school year, with 14 per cent paying more than £30,000 during the year. Parents with more than one child were, inevitably, paying much more in fees: for example, 77 per cent of those with two children paid more than £15,000 last year.

Incomes and sacrifices
For the first time, we have detailed information on the incomes of school fee-paying parents. The new survey discloses a wide range of incomes, some way removed from the media stereotype of the super-rich:
• two-thirds are families where both parents are earners;
• more than 20 per cent of parents are self-employed, higher than the national average of 13.6 per cent;
• 10 per cent have a gross annual income under £40,000;
• 16 per cent of families in total have a gross family income under £50,000; and
• only 20 per cent of families have gross incomes of more than £150,000pa, the rate at which the new 50 per cent upper income tax rate applies.

The scale of the financial sacrifices parents make to afford school fees is confirmed by the new study. Nearly three-quarters reduced other expenditure to pay their children's school fees. The most common reductions are on holidays, general household expenditure and home improvements.

How else do parents pay fees?
The survey also explores the other financial resources parents exploit to help cover the cost of school fees:
• 13 per cent use the equity in their house to help pay fees, the majority increasing the size of their mortgage by 25 per cent or less;
• 14 per cent borrow in other ways, most often from a relative or friend; and
• nearly half (48 per cent) use savings or investments to help pay fees, well up on the 37 per cent in 2007.

A quarter of respondents (26 per cent) received some third-party assistance with fees. Financial help from relatives is the principal source of assistance for 15 per cent of all parents. Financial assistance from the school is the next commonest source of help, more often from scholarships (received by 8 per cent of all parents) than from bursaries (received by 6 per cent of all parents).

Analysis of the scale of the financial contribution made by these other resources to the payment of fees shows that savings make the greatest difference, with 10 per cen  of parents using savings or investments for the bulk of their fee payments. Third-party contributions make up the next largest financial component.

Declining confidence?
There has been a slight shift downwards in parents’ confidence that they will be able to continue to pay school fees. The proportion confident that they will be able to fund school fees to the end of their children’s education has declined from 61 per cent to 52 per cent. Almost one family in six (15 per cent) doubts that it will be able to continue to afford fees to the end of school careers; 3 per cent are sure they will not be able to. However, given the scale of the reversal in economic circumstances over the past few years, this is not too discouraging a finding: most parents remain reasonably confident that they will be able to continue to fund their children’s education.

Falling earnings, increasing taxation and job insecurity are the three main threats to parents’ continued ability to pay school fees. Concern about falling earnings has almost doubled, from 30 per cent to 56 per cent, and concern about job security has increased from 40 per cent to 53 per cent.

Concern about rising interest rates has decreased somewhat but remains a concern for nearly a third of parents (31 per cent). The cost of university education remains a potential threat for nearly a quarter.

The actual penetration by the independent sector of given income bands varies from a mere 1 per cent of the population earning less than £40k annually, to 51 per cent of those earning more than £100k.

Dick Davison is head of strategic consulting at mtmconsulting ltd. To see a full report on the 2010 mtmconsulting School Fees Survey, go to www.mtmconsulting.co.uk. 

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