Over the past five years, residents of the UAE have borne witness to a steep rise in education costs, sending waves of anxiety among parents looking to enroll their children in quality schools in the region. According to a report by HSBC, UAE ranks third in a list of the most expensive countries in the world. A surging cost in school fees places a further strain on family finances and tightens their lifestyle budget strings.

“We’re paying as much in school fees as some people pay for rent annually”, says a parent of two middle-school children.

According to a report in Gulf News,

 UAE families earning less than Dh15,000 a month are the hardest hit financially, with nearly half of them (46 per cent) saying school fees take up more than 20 per cent of their household income on their children’s education.

Most parents are struggling to understand what the reason for soaring fees is. There are a quite a few factors at play here and we’ve attempted to break it down for you:

A genuine problem or just another business model?

The education sector has recently witnessed government and external support over the past few years, which comes as a welcome relief. A serious and proactive focus has been seen in the past six to eight years. This is, most likely, in light to cater to the growing population and a need for higher quality schools.

High Demand, Lesser Supply

Expats constitute about 85% to 90% of the total population of the U.A.E, while 39% of all schools in the country are private. If close to 85% of the population are to enroll in private schools, it creates a huge demand and warrants an increase in supply to balance it.

Like any business of that magnitude, a school requires a large capex. Banks are reluctant to provide loans since there is a lack of confidence in business returns. Loan terms favored by banks are between 5 to 7 years, while schools require 10 to 12 years.

School fees in Dubai among other emirates, are inflated to recover this imbalance. With inflation showing no signs of bowing down, it’s getting increasingly difficult to obtain funds to run a business of this sort.

Sunny Varkey, CEO of GEMS group puts it bluntly here, by saying it’s a choice parents make. As most don’t realize, demand is far outpacing supply, and non-profit schools are short in number. Low-cost private schools, if given the attention and allocated the support they need, can help fulfil the growing demand of the middle-class population.

Does the hike in fees reflect in quality?

Expensive education isn’t necessarily better education.

In the absence of a regulated environment to control the inflation of fees, schools tend to go overboard with fee hikes. However, since 2012, the Knowledge and Human Development Authority (KHDA) has started a thorough check of schools in the region to judge whether or not an increase in fees is justified and this needs to be lauded.

In the latest report from the KHDA, the Indian High School, Dubai received an outstanding rating. IHS has achieved this standing, in spite of being a non-profit organization and one of the oldest schools in the region, in operation since 1961. Schools at the other end of the spectrum, with a lower rating, are charging a considerably higher fee.

To maintain standards, schools would have to keep the teacher to pupil ratio at, let’s say, 1:20 or 1:25. Good teachers don’t come cheap, resulting in an increase of operational costs.

So, without delving into financial mumbo-jumbo, it’s quite evident the quality-expense balance is a problem.

The main point to consider is the value you’re expecting the school to deliver on. The curriculum and style of teaching are probably more important than the number of extra-curricular activities. Some main points to consider are curriculum, age of the school, teacher to pupil ratio, school clubs, activities and style of teaching.

Solutions?

The KHDA has already issued guidelines to schools to regulate their fee increase rates, to give scholarships to children of their employees and other eligible candidates, to ensure no one is deprived of education. However, looking at the scenario from a purely business standpoint, the school still requires profit for functioning.

Corporations in this region can play a big role. Already, 16% of expat school children have their fees paid by the respective companies their parents work for. This number can get higher, but needs to feasible. Not every company can afford to provide an allowance for school fees.
Maybe a system or agreement can be put in place between employer and employee for the former to support the payment of fees in exchange for something else. Banks are also launching a number of products for parents to be able to send their kids to better schools.

This report from HSBC states:

“Education is a right, not a privilege.”

Unfortunately, education is a business model that we’re buying into all over the world.

Some timely structural changes are required in this regard to ease the weight on parents’ shoulders. An entirely educated population can mean wonders for a country like the UAE, which is growing at the speed of light, as I type this.

Featured image courtesy of www.dubai-bus.com