School fees in advance

[Cuppatea001]

Could I ask if anyone has recently considered or actually paid school fees in advance? I’m talking about paying school fees of between 2-5 years in advance and, if so, were there any benefits?

I’m grateful for any advice.

Thank you in advance

[guessmyusername]

A school near me offered a discount for fees paid in advance and was actively encouraging it. It then went out of business before the end of the summer term.

Please be careful before parting with your hard earned cash. See if you can check the school's financial status and see if your money is safe.

The only benefit I can see is the discount offered. It was not something we could do as we paid school fees out of earnings (and didn't send dc to the school I mentioned above!)

[AdidasGirl]

At my DS school there is no discount for paying in full.
I really wouldn't do it anyway for the reason the previous poster gave.
Anything could happen.
We pay monthly each term.

[Cuppatea001]

Thank you for your prompt reply. I’m not very good at this but how would I find out the school’s financial status?

I’m hoping that by paying in advance we can get some sort of discount.

[Cuppatea001]

Thank you Addidasgirl. There are some things I would worry about like school closing etc. The school is well established from what I know. I guess I need to find out about protecting my money should I pay in advance.

It’s a minefield!

[Teenmum60]

Most schools will offer an option for fees in advance - they normally give you a quote and you effectively lock in at today's prices which can save you a decent sum on the assumption that most fees go up by 3-5% annually.

[Cuppatea001]

Sorry - wrong spelling - I meant Adidasgirl!

[Cuppatea001]

Thank you Teenmum60. I think I should phone the school but need to know what questions to ask.

[Bringonspring]

Asked to see the last 3 years worth of accounts.

See also if they’ll hold your money in a client money bank account (means it protected if they go bankrupt)

[Cuppatea001]

Thank you Bringonspring. Great question to ask.

[ChocolateWombat]

Schemes vary. Some give you compound interest on the amount you invest that is then just used to offset chunks of the fees at the same rate as everyone else is paying. Paying into these very early (before starting the school) gives best results.

Others allow you to use the money to pay fees at the rate they were when you put the money in, avoiding fee increases, which is very helpful in times of large increases. These often limit how far ahead the fee increase can be avoided for, or add on a certain base percentage increase after a point.

I used a scheme and stayed 2 years ahead of fees theoughout the time at a school, which meant I effectively paid the fees of between 1 and 2 years previously. I think I calculated that it saved me about £1.5k per year - it wasn't huge, when you worked out what you could earn on that amount by putting it elsewhere, but in a time of low interest rates when fees wee still rising quite a lot faster, I decided it had been worth it, but didn't save big bucks.

The other advantage is security in knowing you've paid. It's surprising how many people really scratch around and struggle to find the fees each term. If you've paid in advance there's none of this.

Re security or leaving the school, you need to ask about this. A tiny school with dwindling numbers who suddenly offering a scheme to boost its immediate income is not one to do this with. I was told and it was clear in the terms, that if we left the school early or when there was still money in our pot, we would get all of it back, as lomg as we gave proper notice. If we didn't give the term of notice, they would extract a term of fees from the advance fees pot. All of this seemed reasonable.

[Cuppatea001]

Chocolatewombat - I love your name!

Fantastic advice. I’ll write all the suggestions down and will call the school.

My main concern is losing money if the school
folds. Would they draw up some type of legal documentation?

[ChocolateWombat]

How big is the school in terms of numbers and is it a prep or secondary or all through? Is it big name or not? Is it investing steadily in an ambitious building programme and growing in numbers? I'd be wanting to know this stuff before choosing a school, never mind deciding if to give them a big pot of money. I want any school I send my child to, to be open still when they leave and far into the future.

[ChocolateWombat]

How big is the school in terms of numbers and is it a prep or secondary or all through? Is it big name or not? Is it investing steadily in an ambitious building programme and growing in numbers? I'd be wanting to know this stuff before choosing a school, never mind deciding if to give them a big pot of money. I want any school I send my child to, to be open still when they leave and far into the future.

[Bringonspring]

Remember if they enter administration it doesn’t matter when the legal document says you’ll become a creditor just like anybody else. All school assets will be liquidated, pooled and then the funds dispensed among the creditors, you’ll get so much pence to the pound you owe.

Only way to probably protect it is through having it in a client money account. This means that it remains your asset and isn’t pooled to pay other creditors.

As PP have said it depends on how the due diligence works out, eg if it’s St Paul’s school you don’t need a client money account and you know that school is going to fine, you can pay 8 years.

It’s a good point a PP made by getting a discount by avoiding school fee increases also.

[Cuppatea001]

The school is an all through school from reception to 18. In the last 4 years they have invested in a multi million pound project to update buildings, sports grounds etc.

I will ask the school for accounts but to be honest I wouldn’t know what to look for.

I’m learning lots already though. Never knew about client accounts so will look at this and hope the school offer this.

The school is one of the oldest schools in London. It’s not oversubscribed but seems to have a steady stream of students.

So much to think about.

Thank you for your help so far.

[AgainPlease]

My parents used to pay my school fees in full at the start of every academic year and I think I'll do the same with DD when she's old enough to start school (funds permitting). But never paid more than 12 months in advance as they could never be sure we might up and move to another city or country with work or something else happens and I could no longer feasibly stay at my school.

It might be worth stashing the cash in a high-interest account or ring-fence the money and withdraw as and when needed for the fees.

[pigshavecurlytails]

Which school? Ours offers interest accruing at 2.5%, which is obviously net as your money just pays more fees, you don't actually get the cash back so no tax to pay. You can do anything from one year upwards.

[jeanne16]

The London schools my DCs attended would give no benefit for payment in advance. As they pointed out, interest rates are so low that they also struggled to invest the money. These included the GDST schools so I was not worried about their long term viability. In fact I would be suspicious of any school that did offer a deal for money upfront.

[ImListening]

I considered this for one of my dcs. I’m glad I didn’t as I ended up moving one of the dc as they were unhappy at the school. The other one stayed so do bear that in mind.

[ChocolateWombat]

You shouldn't have to worry about leaving the school. Joining the scheme doesn't mean you can't get the money back - you will probably get in back but without the interest or any other benefit which would have accrued - obviously you can't benefit from lower fees if you aren't paying them.

If the school is an established and secure school and the scheme looks like it will save you money, it should be fine. People leave schools all of the time and they get this money back. You just need to ask how they approach it and it's fine to ask about the financial stability of the school and where the money is held. All of this stuff should be in the terms and conditions anyway.

Ask away and don't feel embarrassed. Bursars expect to answer these questions and don't seem them as a suggested slight on the school. Most will provide you with illustrations too of the impact off different levels of investment for different periods of time, so you can see the impact. Again, do ask - they will provide this without commitment from you. Every year some people look into this, ask the questions, get the illustrations and decide it's not for them....that's fine and the school expects it.

[JessyJames]

We did it for DSs prep school. We got a small discount and were exempt from any fee rises during his stay.

We now pay annually as his senior school hasn't offered much of a discount and they couldn't guarantee we wouldn't be affected by future rises. They still manage to cock up the invoice every term, drives me mad!

[TheletterZ]

If the school is a charity you can check the accounts with the charity commission, gives a good idea of incomes and outgoing and while nothing is certain can give you some hints.

[JenniferYellowHat1980]

I did a brief stint in an independent school recently. They paid their staff poorly and had very limited resources - a TA told me that teachers resorted to photocopying lines paper towards the end of the financial year before as budgets were frozen. I don't think their finances are health, moreso given recent redundancies. I think you would be very unwise to pay in advance.

[ChocolateWombat]

It's true that there are lots of small,my struggling private schools, particularly of the Prep variety. Any school that has only 1 Form in a year or reducing numbers from a small base is a concern.

That said, there are hugely successful big name schools which are very financially secure.

They are wildly different. It is incumbent on the parent to check it all out before handing over shed loads of money, but it's not true that all schools are a big risk.