Fees Management

School fees: from termly to monthly

As school fees continue to rise, how will this affect schools and parents? By Michael Swan

Over the last few months, there has been an increase in media coverage on the continuing rise in private school fees. The headlines reveal the growing pressure and stress that parents are suffering: “Middle classes priced out of independent education”; “Why school fees have parents over a barrel” and “School fees soar out of reach for professionals.”

The reality is that parents are prepared to make financial and personal sacrifices to pay for their children’s private education, not due to snobbishness or for status, but because they feel that they cannot expect as worthwhile an education from putting their children through the state system. No longer is the independent school the preserve of City-types, captains of industry, diplomats’ sons and daughters and those with inherited wealth. It now includes the architect, the IT professional, the engineer – in essence the middle class professional – who have also elected to choose the independent school option.

Early security
During the immediate post-war decades, the subject of school fees was not openly discussed and nor were there complaints. During that era, the annual increase in school fees were more modest and there were benign elements within the economy that supported the general “you’ve never had it so good” factor the country enjoyed. For example, higher inflation rates eroded the real cost of mortgages and companies were investing heavily in final salary schemes. The middle classes felt secure with their lot.

How times change. Middle-class debt is rising hugely as parents take out second mortgages, increased longevity means grandparents may elect to hold onto their savings to ensure the maintenance of their lifestyles, and pension underperformance implies the threat of an impoverished old age. Also, despite the Government’s increase in spending in the state schools sector, many parents will still not risk their child’s future by placing them in a system which is inflexible, heavily politicised and with low teacher morale. Data supports this. Between 2001 and 2006 independent school numbers have increased by 5.9 per cent, while state school numbers have declined by 2.1 per cent over the same period.

Fewer opportunities
Up until the end of the 1980s, there were tax-efficient investment schemes available for those parents who had the necessary capital to begin investing from the birth, or soon after, of their child. Sadly, since then these loopholes have closed. Also, because of other factors mentioned above, many parents are just not able to plan and commit so far in advance. However, in contrast to the past, many families now have two salary-earners, which means that there is more income coming into the home on a monthly basis.

This suggests that it is inevitable that more schools will switch from a termly to a monthly collection of fees. Although remortgaging one’s property to release money is generally the cheapest option, there is only so far this can continue, both from the perspective of the lender and the owners of the property. Parents are more used to paying for high cost purchases and investments (and school fees are an investment) out of monthly income; few individuals, for example, buy a house or a car outright. Also, parents will want schools to market their fees in a way that acknowledges their long-term sacrifice; in effect, which not only allows them to pay monthly, but expects them to pay monthly.

Michael Swan is managing director of HTC, specialists in monthly fee schemes for independent schools and their parents. Michael can be contacted on michael.swan@pcl.co.uk

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