At one point or another, most parents will face difficulties meeting financial commitments, including school fees. The UAE is not particularly advanced when it comes to banks and help with educational loans. Indeed, as far as we can see from the options listed at the end of the article, interest rates seem higher, not lower than normal short-term loans available to employees in the UAE.
WhichSchoolAdvisor.com is not a fan of using loans to cover educational expenses, but we appreciate it is something that is at times, necessary. We would like to see banks, which in marketing materials at least claim to be socially responsible, step up and offer better terms for UAE parents that are borrowing for fundamentals such as their child’s education.
The use of credit cards to cover school fees should also be managed wisely. However again there can be advantages to doing this if you are fiscally astute – and disciplined. Parents who pay back at the end of the month, can get a 0% short-term loan, and usually the addition of significant air miles or other bonuses – effectively for free. However the key is not to get caught out and to make sure the credit card is paid off.
Note: Some schools – including GEMs Education Schools – now charge a processing fee for the privilege of using a card. In the case of GEMs, it’s a 2% addition to its fees…
Some credit cards do however offer benefits – such as cash back for school fees. Used wisely credit cards may work for you. However, credit card companies and banks, are very much hoping you will not always be able to be disciplined. That is when they make considerable profit from your financial stress.
One thing is clear: the financial commitment expected of parents to education is likely to increase not decrease over the next 12 months. Following the recent publication of the KHDA’s schools inspection reports, schools have started notifying parents of increases in school fees effective from 1 September 2014.
The Education Cost Index estimates that the average operating cost of a school for the 2014 – 2015 academic year will be 1.74 per cent higher than this academic year. Permitted fee increases range from 1.74 per cent to 3.48 per cent depending on the KHDA rating but some schools have been authorised to raise fees by as much as 10 per cent if there has been a substantial improvement in facilities. Many new schools meanwhile are starting at a higher fee level.
With fewer parents benefitting from education allowances and fewer companies willing to increase school fees’ allowances to keep pace with the rising costs, 80% of parents face funding education in the UAE out of their own pocket.
For this reason the most forward thinking parents should be planning early. If you have a child/children at a pre-school age, you can start now to prepare for heavy financial commitments to come. A recent HSBC survey confirmed that UAE parents allocate only 31% of personal funds to education, compared to a global average of 43%. Of those polled in the UAE 67% expressed the wish that they had started saving earlier for their children’s education.
Banks offer a number of products to enable parents to save for their children’s education. Emirates NBD offers the Income Builder – Education Plan with premiums as low as US$150 per month. Applications may be made online.
ADCB’s Unit Linked Savings can be tailored to a specific target with deposits being made on a monthly or quarterly basis and the savings being paid out over 3, 4 or 5 year periods.
HSBC, in conjunction with Zurich International Life offers SavingsPlus, a unit-linked, regular premium plan. Optional Life insurance and a waiver of premium with the investment portfolio are also available. Flexible payment options in a choice of currencies (US$, Euros, UK£) of yearly, half-yearly, quarterly, monthly or a single premium are available.
Expats can of course look outside of the UAE to more mature markets where there may be better options available.
For those who need short-term help, and who have not put away an education fund, banks are just beginning to carve out a new market in the shape of education loans and credit card deals.
A recent WhichSchoolAdvisor survey indicated that 20% of families polled confirmed they sought financial assistance from a bank to cover the cost of annual fees. We stress again: This is not a cheap option.
Some examples: Abu Dhabi Islamic Bank’s Education Finance and ADCB’s Education Smart Loan offer up to 250,000 AED to support educational needs. The processing fee is 1 per cent of the amount borrowed and the interest rate ranges from 9.25 per cent to 12 per cent – not cheap by any means. Loans are repayable over a period of 12 – 48 months (depending on individual circumstances).
If needs are really short-term, a credit card CAN be a better and less expensive way to go. Dubai First Credit offers an interest free amount but charges an administration fee of 3% of the value borrowed, payable over 3-6 months. National Bank of Abu Dhabi offers a specific GEMs credit card that gives its holders a tuition discount at any of the 29 GEMS schools in the UAE up to 11% (on a reducing balance) on advance payments. You would need to investigate what this actually means in practice – never, ever take headline figures like this at face value.
Standard Chartered Bank Titanium credit card offers a 10% cash back facility (maximum of 400 AED per month) when school fees are paid using its card. If you could work out a deal to pay your school fees monthly, it would be a great offer. If you pay by term, the percentage cash return is likely to be considerably less.
With credit cards the simplest way to benefit is just to make sure you always pay them back at the end of the month…
Note: The following loans, credit cards and savings plans are not endorsed by WhichSchoolAdvisor.com and are provided for informational purposes only. If you represent a bank and are responsible for the educational facilities your institution offers, please write to us at email@example.com and we will add your options to this list.
ADCB Education Smart Loan
Fee: 1% of the minimum borrowed
Available to borrow: Up to AED 250,000 (higher amounts only available for higher education)
Interest Rate: 10-12%. 10% if salary greater than 15,000. 12% if salary less than 15,000.
Minimum Salary: AED8,000 – no salary transfer required for loans less than AED150,000
Repayment Period: To be repaid 6-12 months. Up to 48 months where loan is higher and used for higher education.
Comments: Partnered with Taaleem
Abu Dhabi Islamic Bank Education Finance
Fee: 1% of the minimum borrowed
Available to borrow: Salary x 20 Max AED250,000
Interest Rate: 10.25% reducing. For locals 9.25%reducing
Minimum Salary: AED10,000
Repayment Period: Minimum 12 months. Max – 48 months. 60 months for government employees
Barclays Education Loan
Fee: AED 250-500 Arrangement fee
Available to borrow: Up to AED250,000
Repayment Period: Up to 48 months
Comments: Only available for MBA courses at leading international business schools. *Pay a nominal loan financing charge and rest assured the tuition fee will be paid directly to the school when it is due *Interest-only repayment for the first two years *Competitive interest rates *Multiple ways of loan repayment through post dated cheques or from your salary account with Barclays.
United Arab Bank – Cash Flow Loan
Available to borrow: Up to AED 400,000
Interest Rate: Rates starting from 3.99% p.a.
Minimum Salary: Minimum income required is AED 10,000 for Salary Transfer customers. Minimum income required is AED 20,000 for Non - Salary Transfer customers. Offered to customers who are new to job in UAE – no minimum length of service required
Repayment Period: 12 months
Dubai First Credit Card
Type: Credit card
Fee: 3% of value borrowed
Interest Rate: 0%
Repayment Period: 3- 6 months
Standard Chartered Bank Titanium Credit Card
Type: Credit card
Available to borrow: Minimum AED 1,000
Comments: 10% cash back. Maximum AED400 cash back per month when school fees paid
ADCB Unit Linked Savings Plan
Available to borrow: Savings plan tailored to target amount. Contributions made on monthly or quarterly basis.
Interest Rate: Enquire at bank
Comments: Savings paid out over 3, 4, 5 year period
HSBC Savings Plus Plan
Available to borrow: SavingsPlus offered by Zurich International Life is a unit-linked, regular premium plan. Zurich's flexible Investment plan. Optional Life insurance and Waiver of Premium with your investment portfolio. Flexible payment options of yearly, half-yearly, quarterly, monthly or a single premium.
Comments: Option for single life or joint life first death. You can increase your regular contributions to your plan at any time. Option of additional single premium. Available in Pounds Sterling, US Dollars and Euros. Extensive and comprehensive range of Investment funds
Abu Dhabi Islamic Bank Banoon Children’s Savings Account
Available to borrow: Subject to achieving the expected profits, the more you save for their future, the higher distributed profit rates they will be eligible for. You can save regularly through free standing instructions from your ADIB account to your child's Banoon Account. ADIB Education Takaful protection of up to AED 100,000 with a takaful contribution amount of only 1 Dirham per day,
Emirates NBD Income Builder – Education Plan
Fee: Premiums from $150 per month
NBAD GEMS credit card
Worth contacting the credit card company directly - as the offer is as clear as mud. However this is the only credit card GEMs Education schools accept. A discount of "up to 9%" on GEMS schools. Variables: Discount depends on the curriculum. Reducing balance. Only the payment for the last month of the school year gets the full nine percent discount. 0% credit card transaction fee for GEMs schools. Applicable only if a minimum of three months’ worth of tuition fees are paid in advance... ... More details here - although note, the GEMs offer is very vague.
Standard Chartered Titanium
Up to 9 percent cash back on school fees. Variables:
- Pay more than AED 2,500. Up to AED 2,500 – 5,000 AED, get 3% cash back
- Pay between 5,000 – 10,000 AED, get 5% cash back
- Spend over 10,000 AED - get 10 percent cash back.
Check the credit card covers your school. If your child is within a GEMs school - see above.