Will YOUR School Increase Its Fees? (And What You Can Do)
The new ECI rate for 2017 has been set at 2.4 percent. This means that any school over four years old can potentially apply for fee increases based on the KHDA Fees Framework.
But with seat supply now finally outstripping demand and with the cost of living increasing, WhichSchoolAdvisor.com wanted to gauge the sentiment of the education market and find out just what Dubai's experts predict will happen in 2017/18.
The Fee Increase Details
According to the Fees Framework, schools rated Outstanding will be eligible for an adjustment of up to double the Educational Cost Index (a potential 4.8 percent increase in fees), Very Good schools are eligible for up to 1.75 times (a potential 4.2 percent increase), Good schools are eligible for 1.5 times (3.6 percent increase) and the rest are allowed an increase equivalent to the ECI percent.
The case for an increase in fees
Firstly, all parents have to accept that schools have running costs, and that the better resourced the school, the more it will need just to stand still. In fact, given inflation, unless a school can increase its fees it will either have to find inefficiencies and cut them, or where there are none to be had, just cut.
Staffing is still any school's biggest cost, and teachers are not getting any cheaper to source. In fact, most school operators believe this to be approximately 70 percent of their total expenditure, and is likely to get more expensive, not less.
"Top schools are not just competing on a national level but internationally for top teaching talent," said one school director. "Around 70 percent of a school's expenditure is on staff... Top schools need to be able to attract top teaching talent [which costs even more].
Attached to each teacher are other costs which are also increasing: "Health insurance has gone up, accommodation has gone up, flights, its everything," one Indian school manager told WhichSchoolAdvisor.com.
Outside the core teaching staff are just the costs to run a business - equipment, upgrading facilities and even advertising and marketing to keep more students coming in, and the school lights on...
What do investors expect?
"The comedy in all of this is that many of those who invested in the last few years won't actually see any returns for at least 10 years... education is a long term investment strategy," said a local education consultant.
"Many investors in education are actually socially minded and don't even have an exit strategy... they simply want to add to society... for many the dividend is the children."
The educational consultant, speaking on condition of anonymity, did however highlight private equity investments are not the same, saying, "schools financed by private equity are different, these investors are more focused on the short term and have an 'out' strategy, whether that's 3, 5 or 8 years. They know what they want to make and then get out."
Those working within the schools can often have a different view however. According to a Dubai principal who again did not want to be named, “it depends on just how much of a 'business' your school is. If it's run by ambitious management who have significant expansion plans or if its run by people who don’t necessarily have an education background, the emphasis on profit can be vastly different to those schools managed by people from within the education sector."
He went on to say, “my guess is, schools across the country WILL increase their fees this year.”
Outstanding and Very Good Schools
Pretty much all our experts agree, and believe that schools WILL go ahead and increase fees. This is especially likely for Outstanding schools.
Schools face an inflationary pressure of between 5 and 10 percent, so while some schools might consider absorbing this amount this year and focus on keeping their parents happy, the schools rated Outstanding and Very Good, especially those with waiting lists may well feel their numbers and reputation can ‘ride’ any potential parental storm.
Good Schools
“Here, retention is key,” says our industry expert. “I think they might think twice before increasing any fees. If they do, it might be more likely they increase by a small percentage, not the full allowance."
“I think they will make a calculation between what parents want and what the school needs,” he says.
New schools
If your child is in a school opened for less than four years, you can relax for a few years yet.
New schools have their fees set for the first three years, (check your school's website, most publish the fees and pre-approved KHDA increases for the first three years). It's only after each school has completed its first KHDA inspection and received its first official rating, that it can increase fees according to the Fee Framework.
Indian schools
Our Indian experts believe that most low fee schools in the Indian sector will welcome the opportunity to increase their fees.
"If you look at it, 2.8 percent is really a very small amount for the low fee schools charging around AED 4,000."
Even 4.8 percent for say the Indian High School rated Outstanding, isn't very much when you consider the fees are under AED 10,000.
That said, low cost schools serve a demographic that, in parts, can often ill afford the school fees they are already paying.
"Schools will need to make a call on fees... at the end of the day its about balance."
The not-for-profit schools
Many of the not for profit schools are currently in stages of significant expansion and/or development, which is likely to see these too, increase their fees in 2017/18.
Expected additional fee increases
With the increase in global oil prices and the significant investments recently made in safety/security, it looks increasingly likely that school bus fees will increase this year too!
What you can do:
Ask for a payment plan you can maintain: A school director told WhichSchoolAdvisor.com, “over the past year, we’re seeing more and more families requesting payment plans… it’s a very price sensitive market right now.” [Which means you have more power].
Consider changing schools: "We're expecting more movement within Dubai," said one of our experts, "supply now outstrips demand, meaning people can now shop around for education."
'Ride' it out: "If my child's school increases the fees but in every other way I'm happy, I will figure out a way of paying the fees," says one local principal.
Understand the situation is unlikely to change: "Once you give a discount you're pricing the brand at that level and its effectively devalued," said our consultant. "Schools are saying this is what we're worth and we can't put the fees down."
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