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School Fees driving UAE Parents into Debt

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Taking out a personal loan to cover school fees is clearly a last resort of most parents, however a surprisingly high number – over one fifth – have taken on debt to cover school fees at some point during their child’s education.

For the majority that has meant bank debt, but a surprising number of respondents have borrowed from friends and families. Many use credit cards – one in four – to pay school fees, but in the majority of cases this is a short term measure, with the credit card paid within the billing cycle.

Those that have borrowed from banks are relatively happy with the experience – two thirds of cases banks have been helpful in providing finances, but in 37% of cases – for one reason or another – bank debt has not proved to be the solution parents have needed.

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Reasons given by respondents for this included the onerous process, and the length of time it takes to get a bank loan (as opposed to the immediate need to pay). “The banks process was too cumbersome”, one respondent told us, “the paper work is tedious and time consuming…” said another.

However the most frequently mentioned reason is the high levels of interest banks charge. While some banks may have something called an “education loan”, it is not different in any shape or form from any other type of loan a bank offers.

“They treat it just like any other personal loan,” one respondent told us; “There is no short term loan for a school fee with no/low interest rates”, said another.

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Some respondents told us their bank did not like the idea of funding education for students, and so a personal loan for “other reasons” had to be taken.

Banks are of course not government institutions designed or intended to support education, or other social institutions. However, from a PR perspective, they could do well to show greater social responsibility, and to be seen to be supporting education and the community would do wonders for a banks reputation.

Even at a country level, to be seen to be supporting the nation’s development would be a positive PR move by banks.

Too many banks offer schemes that are personal loans in disguise, and for education in name only.

That said there do seem to be some good examples where schools and banks come together to help parents. Taleem shines a light in this regard.

“We have negotiated special payment schemes with two reputed financial institutions to help our parents plan financially and spread out their fee payments,” Clive Pierrepont, Director of Communications of the Taleem group of schools told us.

“We have a responsibility to support the parents who we consider our partners. They have supported us throughout the years and we will help them as far as we can within guidelines given by then KHDA.”

Clearly Taleem has the advantage of representing a group of schools, and its ownership structure is pretty special. However, it clearly offers a blueprint other schools and school groups, would do well to evaluate.

 

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