School fees inflation - what to expect in the long term?

[Pedent]

I'm trying to work out whether it's feasible to send our children to our local GDST school for some or all of their education. When running the calculations, the assumed rate of fees inflation makes an enormous difference: even half a percent makes a difference of tens of thousands of pounds.

I know that fees have been rising much faster than inflation in recent decades, but don't know whether that's likely to continue or to moderate. I guess that that depends on what factors have been driving the increases (teachers' salaries going up in general? rising incomes leading to rising demand for places?), and whether those factors are still in place, but don't really know how fees are set.

Can anyone offer an informed opinion about a reasonable rate to project for the next decade or so?

I personally think fees will carry on rising faster than inflation especially in the wealthy SE because their costs will keep rising, their insurance premiums alone must be eye watering and can only rise, energy bills are constantly rising as are teachers wages. In the SE in particular London the ever increasing number of incredibly wealthy foreigners means that they can afford the current fees and any hike in fees so schools don't have to worry about pricing themselves out of the market. These foreign parents also place IMO more emphasis on image, whereas UK parents might tolerate scruffy buildings, foreign parents are put off by it, so many schools are becoming more corporate, and have incredibly expensive facilities because schools perceive that this is what wealthy foreigners like and expect and this all costs money.

I think it is a bit like the housing market in London, as long as there is a demand from people who can pay! It may be different for day schools like GDST outside London and Oxford when most of the parents won't be overseas or extremely wealthy.
I wonder whether the Britishness will become irrelevant for the extremely expensive UK boarding schools. I suppose they will offer enough bursaries to maintain sufficient British entrants. That does exclude those who cannot afford £35 000 plus a year, especially for more than one child but are not eligible for bursaries. The day school market will become even more competitive, particularly in the south east.

summer makes a valid point about boarding fees now outside of the reach of anyone but the very wealthy there will be more pressure on day schools especially in the SE so as stated above fees are just going to keep rising.
My in laws (senior teachers although not as well paid as senior teachers are now) sent two to top London day and even seriously considered boarding for one but they were only saying the other day that now they certainly couldn't even remotely consider boarding and would struggle to pay the day fees without a bursary.

GDST is usually at the cheaper end of fees because of how they use their endowments.

It's usually a percentage point OT two above other inflation indices, so there is some guesswork involved. Try running the projection at 5% annually. It's unlikely to be much less than that.

Honestly if you can't manage it easily I'm not sure I would consider it because in addition to inflation what "extras" will there be to pay for...

How long until they would start? Get saving now and used to living on a restricted budget etc. to give you a flavour of the commitment you would be making?

Meditrina gives a good guide. I had the same question and tried to get an answer from prospective schools. They were very unwilling to make any forecasts to help us budget. I called the Good Schools Guide (as a paying subscriber) and they only keep the current year, don't keep any history so were unable to tell me what fee inflation has been, let alone what it might be.

However, I did find a couple of parents of our chosen school here who could remember what they'd been paying for the last 3-5 years. I also then remembered that the schools are "charities" and on the Charities Commission website you can get the last few years of charities accounts. Having a little accounting knowledge I could check the student numbers against the total fees and deduce (bursaries excepted) the average increase in fees per student.

The long and short of it is that 5.5% is a good budgeting number, but it might be a little higher at times, occasionally a little lower.

Remember to factor in either wage inflation or returns on your savings to offset the 5.5% fee inflation (at least partially). The funding gap will reduce if you take that into account. I assumed I could get a net 3% increase in savings returns (mostly bonds but some market funds).

Why not ask GDST what they think the inflation rate on their fees will be? They might have something interesting to say. My impression would be that GDST are less "market driven" than some.

Other than that I agree that the pattern is bound to be that schools will respond to perceived increased financial stresses on them by increasing their fees until they start to find that enrollments are tapering off. In London and the SE the supply of private school places is not increasing much and it would seem that the number of parents with the money is increasing above the supply, so that drives fees up also. Its a similar phenomenon too (and actually related to ) what is happening to house prices.

It is also true that, for at least some privates schools - usually the more prestogious - there is an element of a place at the school being a "VEBLEN GOOD"

en.wikipedia.org/wiki/Veblen_good

Where, as increasing the fees drives up demand.....

in my last "prestogious" should have been "prestigious".....

Our DDs have been at GDST schools for the past 11 years. It's difficult to know exactly what will happen over the next 10 years because there are sometimes things that crop up outside the GDST's control, but to give you an idea, ours started in junior school and the fees were just over £4.5k pa (senior school was around £6.5k). The fees for 2013/14 for senior are about £10,700.

THere's definitely shortage for boys in secondary schools South of the river. I think there are more girls private schools. So that may be a factor too.

If you are paying fees out of income, as opposed to eg a lump sum legacy or trust, then it's more important to think about the relativities of your wages vs school fees. If you're in jobs that are tied to the London finance/education/cultural sector then you'll be protected to some extent against runaway inflation because most parents and teachers' wages will be in the same boat. If you're in a different sector or paying from savings then absolute inflation comes into play and you could be screwed by a couple of years at 10% plus.

nlondondad I don't think Veblen is needed by certain schools but conversely probably applies to less well known ones. It does continue to surprise me that certain senior boarding schools cost much the same as the higher ranked ones (rank not limited to academic results). Despite getting a less good "package" from the former people are still prepared to pay the same price.

My daughter is at one private school and moving to another next year so for both I know last years fees and next years. I nearly had a coronary to find out they are both going up by nearly 10%.

I know that they just added 400 pounds to each term for my daughters school..

I don't mind to be honest but I have to say we do have plenty of day girls and quite a lot of the boarders are local.

In fact as far as I'm aware there really is my daughter
(expat) and a Russian girl who are foreigners.In her year group. So to say the foreigners have just priced the locals out is not really the case.

If you are looking to budget we calculated that fees around 9K per term with extras at 1K so about 10K per term. Then you add on per year a 5% increase. So if your wage increases on average 6 to 10 % you should be ok. Thats if your boarding...Don't forget if your living aboard then you will at least send your kids back 3 times a year...thats another 3K approx depending on fuel tax. Sometime if half term is two weeks we allow her back too but that isn't peak so 800 pounds.

So the total sum per year is about 35K. Which isnt really that bad.

The most important thing is that she is happy there.

Btw disclaimer I did choose this school because they did have a large number of local students. It helps with getting the local accent. Instead of a international accent.

NLondonDad

Thanks for Veblen. Not heard of that before. I wonder if I own a single Veblen thing ... oh wait, yes I do. An iPhone.

Kenlee there is evidence that the number of foreign children in independent schools is rising according to the ISC website an increase of 5.8%, they interestingly state fees amongst their members rose by 4.5% a year (2012). I have a couple of friends who work in top boarding preps they were saying that bar a few exceptions all full boarding 7, 8, and 9 years olds are not British, ten years ago foreign children would have been in the minority. Many Schools both prep and senior are actively recruiting from HK, China etc which they certainly weren't doing when my DS started at his prep.
If you increase demand then you are able to increase your fees yr on yr. I'm not saying schools want to increase their fees they have no choice if they are to survive and the huge pool of wealthy foreign children has enable them to do this. We recently received a raising our fees too £11580 a term from £11250 rising energy/ food prices are stated as the main reasons behind the rise. The letter also stated that the bursary fund had increased and if your struggling to pay you should apply for help.

Happy I know that does happen at the school down the road. Although why a foreign student would want to miss out on a local atmosphere of a truly local school is strange to me. I do admit yes foreign students have increased but not to the extent that would influence price. I just think the cost of living has increased and the desire by local wealthy parents to send their children to a school with good facilities.

However, saying that more and more foreign students come because they believe that an English education is by far the best. Therefore as money is not an issue they can pay the quite high prices which in turn goes towards bursaries for those less well off.

Much as I think it is right to increase bursaries, perhaps schools should discount the bursary element of fees for those parents who are stretched by school fees but do not qualify for bursaries themselves.

Kenlee I'm not saying foreign students inflate prices what I'm trying to say is that foreign students are taking up vacancies in many schools and can pay the fees even if they rise yr on yr, especially undersubscribed boarding schools which in reality are the vast majority, therefore this enables schools to raise the fees annually because they are no longer pricing themselves out of the market. Many UK parents paying fees are already stretched to their maximum and only a minute % can even consider £35k + pa that is the cost of boarding.
I suspect few schools want to raise the fees they have no choice as everything around is increasing in particular energy cost and I don't know but I suspect insurance premiums.

summmer you must have received the same letter as I did I read it that if your struggling apply for a bursary and you may qualify for assistance. I think those who do will find that they don't have to be on the often quoted £40k pa to qualify. Winchester is known to be very generous with its bursaries.

Thanks HG, yes we did. We are fortunate enough to have sizeable double incomes but not enough to stop us resenting the inexorable rise in fees that from taxed income will entail some careful budgeting, especially as it is likely not to be single set of fees. We certainly would only spend that amount for schools that were truly excellent for our DC's individual needs. Luckily Winchester has been one such school just as Kenlee's DD's school is also worth it for her as an individual. I think it can be a bit of a leap of faith sometimes to know whether a school will truly make a difference or mainly be about belonging to a certain social clique.

Ten years ago when my DD started boarding in UK, it was about £7,000 per term and an increment of around £400 to 500 per year since then.
We got a big bill this term for my DS, on top of the £11,250 term fee, he had an oversea trip, DofE, all the exam fees and various extra cost. I really need to say no to all these extra activities he did in order to save some cost!
But again, if I have to compare paying for about £20000 pa for a mediocre Int'l school where we lived or him in a top boarding school. I hope we made a right call.

Xpatmamma just remember that some of those extra costs you would still be paying for him to do if he was elsewhere. It might make the extras slightly more bearable.

Who knows but my DS went to the local London Independent Boys' School in 2003. I think the fees were about 3,000 per term from memory. When he left in 2013 they were just over £6,000 per term. And add £1000 per term for expenses (lunches, book room, shop, exam fees, odd trip etc).

for my kids small local primary (again from memory) between 2002 and 2010 termly cost doubled