Help is here for UAE expats facing rising private school fees

With average school fees in the UAE's Indian schools at Dh22,042 and in British schools at Dh50,678, parents are struggling to cover the cost of their child's education. So what options are there to pay the fees?

Students at Raha International School in Abu Dhabi learn Arabic from flash cards. An HSBC survey found that UAE parents typically only earmark 31 per cent of funds for their children’s needs to educatShow more

Average school fees in the UAE ranged from Dh22,042 in the Indian school system to Dh50,678 in the British system, with year 12 annual fees as high as Dh94,215, according to recent data from Cost of Living Reports.

The subject has in recent months become increasingly fraught, with the announcement in February by the Dubai Schools Inspection Bureau that private school fees in the emirate would rise in September for the first time in years, by between 1.7 and 3.5 per cent, depending on the school’s performance rating.

Such increases could be extremely disruptive for a family’s finances; a poll conducted in March by the personal finance website Souqalmal.com found that 45 per cent of parents would consider changing their child’s school if fees were increased.

All too often expatriates’ dreams of saving for property and retirement are severely tempered by the high-cost reality of educating children in the country.

“We always said that the reason we came to Dubai was that we wanted to save money. But what we’ve saved is now all being spent on our kids’ education,” says one Dubai-based mother, who asked not to be named. “Everything’s gone towards their education, our entire nest egg.”

Faced with the high cost of fees in the UAE, increasing numbers of parents are choosing to send their children abroad for schooling, she said.

“You tend to be OK when they’re at the primary school level,” she says. “But there are so many people we know who’ve moved their children back home for schooling as they approach senior level.”

Anxiety over education fees has resulted in the UAE’s banks launching a number of products designed on the one hand to help parents plan for their children’s educational needs in the longer term, but also to offer a series of measures to help in the short term with the upfront payment of fees.

The importance of building a savings plan to provide for education costs was recently highlighted by an HSBC study, which found that parents in the UAE – both nationals and expatriates – had high aspirations for their children’s education but were underestimating the need to save.

Some 86 per cent of respondents in the UAE hoped their children would be educated to a postgraduate level, compared with a global average of 69 per cent and just 40 per cent of respondents in the UK.

However, the survey found that UAE parents typically only earmark 31 per cent of funds for their children’s needs to education, compared with the global average of 43 per cent.

And 67 per cent of those polled said that they wished they had started saving for their children’s education earlier.

“Parents are not aware of how they can financially prepare for their child’s future,” says Gifford Nakajima, HSBC’s head of wealth development in the Mena region.

“While there is an evident tendency to fund these costs through current incomes, parents have to realise that they need to move beyond relying on these short-term approaches to funding their child’s education.”

Consumers are now spoilt for choice when it comes to financial products to help them pay the fees – from longer-term savings products, specifically geared toward children’s education, to more general savings vehicles, such as HSBC’s Savings Plus Plan and ADCB’s Unit Linked Savings Plans.

Plans that are specifically marketed towards educational needs include Emirates NBD’s Income Builder – Education plan, and Abu Dhabi Islamic Bank’s Banoon Children’s Saving account.

At the other end of the spectrum, parents have the option of loan products to assist with upfront payments of big expenses such as school fees and rental cheques. Increasingly banks are marketing such products as specifically geared towards educational needs.

One of the most recent products to come to market is United Arab Bank’s Cash Flow Loan product. Launched in March, the product provides a loan for up to 12 months, for either school fees or rental payments.

One feature of the product is its availability for those who have recently changed jobs, with no minimum length of service required.

“Everyone understands the pain of school fees here,” says Tony Graham, the head of retail banking at UAB. “These are huge expenses that can really eat into your cash flow.”

In addition to straight loan products is the option of paying fees via credit card. National Bank of Abu Dhabi launched the Gems Titanium credit card in December 2011, targeting parents of children attending the network’s schools in the UAE.

The card gives parents a 0 per cent interest payment plan that lets parents spread the cost of school fees over a 12-month period, with reducing discounts of up to 9 per cent on advance payments.

“We don’t ask for income documents when providing the card,” says Haresh Gursahani, the bank’s head of card products.

“Instead we underwrite them based on school registration of the child. We know what the average fees are at each Gems school and we assign them an initial credit limit on that basis.”

Take-up for the card has exceeded NBAD’s expectations, says Mr Gursahani, declining to give details.

In a similar vein, Standard Chartered offers 10 per cent cash back on school fee payments made via its Titanium credit card. But as with all credit facilities, parents must make payments on time to avoid racking up late payment charges and falling deeper into debt.

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