School tuition loans on the rise

With tuition costs set to rise even further, two banks are offering parents tailored 'school-fee loans'.

DUBAI // The increasing cost of schooling is forcing more parents to take out loans for their children's education.

Abu Dhabi Commercial Bank and Barclays Bank are offering tailored "school-fee loans", with the former saying loan demand for higher and lower education grew by 20 per cent last year from the year before.

Bursars at private schools also say more parents are signing up for student loans.

JC, a parent from the UK, says he has been struggling to pay for the education of his two children at an international school.

He took out an education loan last year to pay the annual Dh74,000 for his son, 9, and daughter, 5.

"It was because of the amount of money that we have to pay up front," said JC, 40. "Before I took out a loan, a large chunk of my salary would go towards their fees. It's too much, and taking out a loan is far more economical."

He said he expected to pay about Dh96,000 to educate his children next year.

"It is a concern that school fees go up every year and because the options of quality schools are few, it leaves parents with very little choice."

Mohan V, 37, who has two boys at an Indian school in Dubai, said he used several credit cards to finance their education.

"When we had one in school it was somehow manageable," he said. "But with two it's just getting difficult to manage our budget."

Mohan, who pays about Dh15,000 a year in tuition, transport, books and other expenses, said the only way to avoid it would be to send his children home.

"I may do that once they are older because it does not seem worth it," he said.

Clive Pierrepont, the director of communications at Taaleem, which operates almost a dozen schools, said parents who used bank loans usually had big families and needed to spread the cost of education over the course of a year.

With fees set to increase in Dubai schools next academic year, more parents are likely to feel the pinch.

Regulations announced by the Knowledge and Human Development Authority last week allow schools to raise fees based on an Educational Cost Index and their inspection rating.

"Outstanding' schools receive a fee rise of 6 per cent, while those rated "good" can apply for a 4.5 per cent increase. Those rated "acceptable" and "unsatisfactory" have been granted a 3 per cent increase.

Mike Hynes, a managing partner at Kershaw and Leonard, which publishes the annual Cost of Living in the UAE report, said education costs had grown by more than 50 per cent over the past six years.

"School fees have increased enormously, and so secondary education that may have cost Dh15,000 now costs Dh22,000," Mr Hynes said.

He said he had questions about what determinants were used in the Educational Cost Index.

"Where does the school inflation come from?" Mr Hynes asked. "It's not coming from inflated salaries because teachers' pay does not seem to have increased in the past few years."

He said the fundamental problem driving up school fees was a lack of competition.

"There is a limited pool of preferred and quality schools," Mr Hynes said. "They have big waiting lists and so parents are often not left with too much choice."