Fees: under the microscope

Can independent schools continue to increase fees? Jo Golding finds out why bursars need to take a closer look at their options

The last 12 months have brought unique challenges for independent schools and bursars as they aim to balance the income they need to keep running with what parents can now afford in the time of Covid-19. But what was the state of school fees before the pandemic?

In its 2020 census, the Independent Schools Council (ISC) estimated a fee increase of 4.1% on the previous year. This was a higher jump than in recent years, but the ISC said this likely reflected the increased cost of the Teachers’ Pension Scheme (TPS) – schools faced a 43% increase in employer contributions from September 2019.

In the foreword, ISC chairman Barnaby Lenon said the increase was more controlled than in 2004, despite schools facing even tougher financial pressures. He recalled: “I remember that in 2004, pension and National Insurance costs increased by around 11% and average fees went up 9.4%.

“This year the increased cost to independent schools of the Teachers’ Pension Scheme will be up to £500,000pa per school. For many schools this means 2.5% on fees. Along with a similar level of inflation, this would mean a 5% increase in school fees levels. Therefore, the actual average fee rise of 4.1% suggests that schools are controlling costs despite the pressures on their underlying cost base.”

Some have spoken about the pace at which fees have increased. In an article for Absolutely Education, Gavin Horgan, headmaster of Millfield in Somerset, said the school’s fees have risen “by too much for too long” and that they would work hard to reverse that.

Similarly, at IE Live last year – IE’s digital event – Lenon said fees over the last 15–20 years have risen “too fast”, which has resulted in the loss of some middle-income parents and has made the sector financially vulnerable.

With the cost of independent education rising above the rate of inflation, independent schools have ended up out of reach for many parents who may have been able to afford it in the past.

What is good to see is that there has also been an increase in the amount of fee assistance, according to the ISC. The census shows that £1.1bn was provided in fee assistance in 2020; more than £900m directly from schools and £440m on a means-tested basis. It says pupils receiving means-tested fee assistance received on average £9,919 per annum, an increase of 5.2% compared with 2019.

Covid-19 and fees

While the ISC’s next census will show the impact of the pandemic on fees in more detail around April–May, we can already see the major ways Covid-19 has made its mark.

Cast your mind back to March 2020 and the rapid move to online learning as England entered its first lockdown. Many independent schools offered fee discounts for the summer term, as their buildings remained closed to the majority of pupils (apart from vulnerable children and children of key workers) for most of the term.

David Woodgate, chief executive of the Independent Schools’ Bursars Association (ISBA), explains: “There was a view that schools weren’t able, certainly in the early days, to offer everything that parents might expect. There was a bit of a learning curve, albeit I think schools climbed that curve very effectively.”

Woodgate says the level of discount depended on the financial circumstances of each school. “We saw a range of fee reductions for day pupils from zero to as much as 50%. Somewhere in the middle of that, 20–25%, was the kind of new normal – and a bigger reduction for boarding pupils if they were not able to return to the UK. That helped a lot of parents through what was clearly a difficult term.”

Whilst variable costs were also refunded for things like school meals and buses, for parents in real financial difficulty, Woodgate says schools looked at short-term assistance with fees, such as paying in longer instalments or looking at short-term/medium-term bursary funding.

“Of course, that would happen even in the best of times, people lose jobs, but I think there was a lot of understanding of trying to meet the parents if their circumstances had changed,” he says.

Some schools created hardship funds, deducting a percentage (often around 25%) from the fees of parents who were able to pay 100%, to help parents that could not afford the full amount.

Although many schools were familiar with online education already, there have been considerable improvements in lessons since March

 

Another big change came as independent schools set their fees for the 2020/2021 academic year, with a large number of them deciding to freeze fees entirely. There were a small number of fee reductions too, Woodgate says.

This year we saw the government announce a third lockdown in England starting from 5 January – one day into the new term – which meant independent schools could not offer refunds or discounts due to invoices for that term already having been issued.

However, Rudolf Eliott Lockhart, chief executive of the Independent Schools Association (ISA), said in an article in Tes that parents seem less insistent on fee reductions compared with last year due to the improvements in online lessons. He also highlighted how fees have effectively already been reduced in cases where schools froze fees for the academic year.

Woodgate says: “There’s been a huge amount of learning about remote learning, which means schools are in a stronger position to say they are delivering education to the best of their ability. And not just the education in terms of classroom learning, but also more holistic things, outreach, enrichment and fitness.”

There’s been a huge amount of learning about remote learning, which means schools are in a stronger position to say they are delivering education to the best of their ability – David Woodgate, ISBA

Questions remain over what will happen to fees for the summer term. “Schools are saying that they need to wait and see,” Woodgate explains.

“They don’t know how long lockdown will last and they will look at fee levels for the summer term, or indeed for next September, and see what they need to do to reflect what they know then, based on how long the lockdown has been.”

Woodgate warns that while some schools will freeze fees or offer a small reduction for the next academic year, raising fees above inflation will be “harder to justify”.

“I think schools will have to look very carefully at fee levels for 2021/2022 to see what the market will sustain, and it will vary from school to school. Some schools will not be able to put in place any fee rise, or if they do, it will be limited. Inflation looks to be achievable, but anything much above inflation will be harder to justify.”

Beyond the pandemic

As we look ahead to a post-Covid world, can fees continue to rise as they have been?

“It will depend on local circumstances, the affordability of your parent base and how much cash you need to bring in to balance the books,” says Woodgate.

“I can’t generalise across the sector as a whole, but obviously some parts of the country are in a less economically strong position than others. It will depend in part on how much capacity the school has.

“If you’re full with a waiting list, it’s perhaps easier to look at the pricing in a different way than if you’re not. But I think [there is now] a huge awareness that putting fees up by anything above inflation is probably the last resort. It’s about putting fee levels under the microscope and realising schools can’t automatically pass on financial shocks to parents by way of increased fees. That lever, if you like, is no longer there in a way it might have been once.”

Schools can’t automatically pass on financial shocks to parents by way of increased fees – David Woodgate, ISBA

Woodgate stresses the importance of looking at other options before increasing fees, such as pausing recruitment, voluntary redundancies, mergers and acquisitions, as well as pulling out of Teachers’ Pensions – a scheme that is “increasingly becoming unaffordable”, he says.

Mergers are an emerging trend that will continue, Woodgate predicts, as institutions can bring two schools together and sell one site – the money from which can be used to subsidise fees, offer bursaries or undertake capital expenditure.

Time of growth

The pandemic continues to be a challenging time for educators, but it’s also a time of tremendous growth and learning. Woodgate says bursars have learnt they cannot be complacent and assume their parent base is price insensitive.

There are clearly many challenges ahead, especially for our talented bursars, but it’s certainly not all doom and gloom.

Woodgate sums it up best: “Our schools are very resilient. They have been through periods of change in the past and have come out the other side. “They will survive this particular crisis and further financial shocks to come potentially in the future.”


This feature was originally published in the March issue of IE

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