CM December 2023

CONSUMER CREDIT
SCHOOL’S OUT
Collecting debt in the education sector.
AUTHOR – Giles Parry
FOR some parents who choose
to send their children to
private, fee-paying schools,
the cost-of-living crisis has
led to financial worries and
hardship. For example, it
has been reported earlier this year that
some parents have been taking out loans
to cover the costs of private schooling –
with the average day pupil now costing an
average of £20,480 and boarders costing
around £37,729.
As you can imagine, deciding to pull a
child out of a school where they’re settled,
doing well and have a group of friends is
a decision not taken lightly by parents,
so they can turn to potentially expensive
loans to cover the cost instead.
For credit managers in this sector,
there are understandably difficulties too
in addressing payment issues, when the
costs – both literally and figuratively – are
so high for a family. In order to commit to
such fees, stable income and inflationary
salary rises are needed – both of which
look increasingly shaky in the current
economic climate.
In addition to the cost-of-living crisis,
another potential issue on the horizon is
Labour’s pledge that, if they are to come
into power in the next election, private
schools will likely see VAT charged on the
fees, potentially increasing the cost for
parents by around 20 percent. Further
studies have predicted the cost increases
over time could be much greater, with
a study by Weatherbys Private Bank
predicting that under Labour’s plans,
the average cost of sending a student to
boarding school will be £688,000 by 2036.
Stressed parents
No matter what the situation, those
looking at chasing unpaid bills in
these education settings often face the
unenviable task of dealing with stressed
parents suffering from financial hardship
and worried about the future of their
children’s education and wellbeing. In
these situations, from a debt collection
perspective, a few golden rules apply
in my experience of supporting private
schools looking to recover tuition fees.
The first is constant and clear
communication about fees and the
options available to parents before any
financial issues arise. Many schools will
have a number of scholarships, grants
and means-tested bursaries on offer (it is
part of their charitable obligation) and it’s
According to
Government
figures, the higher
education entry
rate among UK 18
year olds increased
from 24.7 percent
in 2006 to 30.7
percent in 2015
and peaked at 38.2
percent in 2021.
important these are clearly signposted.
Equally, other discounts can be made
available – if a sibling already attends
the school for instance. Many schools
will also offer monthly payment plans,
which can be a huge help for families
looking to manage their budgets and
cashflow.
But it’s when a payment is missed, or a
family indicates it’s going through a tricky
financial situation that clear and open
channels of communication are most
important. In my experience, not just in
education but across the sectors, so many
problems related to credit collection
arise because the debtor essentially
buries their head in the sand. This can
be particularly prevalent in a private
school setting, where parents can feel
shame and embarrassment that their
personal financial issues are being made
more public than they are comfortable
with – failure to pay could be linked to
divorce, or business failure, for example.
Fostering an understanding attitude
and ensuring parents feel psychologically
safe to discuss any financial issues earlyon
is often vital in ensuring the situation
doesn’t worsen and is carefully and
sensitively managed, keeping the school’s
valuable reputation intact. Encouraging
parents to engage with the process earlier
can also keep legal costs down and boosts
the chances that a realistic repayment
plan can be settled on quickly. An
element of relationship management and
preservation is of course important too –
many parents will try hard to keep their
children in the school and you don’t want
to cut any ties.
Bearing in mind the mostly high-net
worth individuals who can afford to send
their children to private school, a bespoke
approach to debt collection is also often
required, with many of the parents
potentially living abroad or travelling
regularly for instance, with multiple
properties and addresses. Personal
circumstances, and the source of wealth,
also vary hugely. It has been reported
recently for instance, that lots of parents
who are struggling with the rising cost
of school fees are relying on their own
parents to help pay the bills.
There’s no doubt that with high-profile
redundancies regularly making the
headlines and the cost-of-living crisis
showing no signs of abating, private
schools and their credit professionals will
continue to face difficult times.
Brave | Curious | Resilient / www.cicm.com / December 2023 / PAGE 26