The true cost of the price rise

The middle classes can no longer comfortably afford to give their children a private education, with average fees rising twice as fast as the retail price index.

School fees increased by 6 per cent last year — 40 per cent over five years — and, with the cost of food, fuel and mortgages all rising rapidly, parents on middle incomes are increasingly likely to overstretch themselves to educate their children. The retail price index rose 18 per cent in five years.

Only those in 18 occupations, including doctors, lawyers and accountants, can reasonably afford the fees if they are the sole household earner, according to a survey by Halifax Financial Services.

The figures assume that school fees should account for no more than a quarter of average gross earnings. On this basis, parents could afford day-school fees for one child only if they brought in more than £40,000.

The effects of the credit squeeze have yet to feed through to official data on private school rolls. Last year pupil numbers at independent schools rose by nearly 1 per cent, the biggest rise in five years.

Several heads have expressed concern that the economic slowdown might affect enrolments.

Pat Langham, head of Wakefield Girls High School, where fees are rising 4.8 per cent this year to £9,999, said that she had gone to enormous lengths to keep the increase as tight as possible. “I think it’s inevitable that people are going to have to question whether they can afford it,” she said. “The parents at my school are teachers, police officers, doctors and lawyers. Many are already struggling to pay fees. They have decided to go without other things because they are committed to their child’s education.”

Vicky Tuck, headmistress at Cheltenham Ladies’ College, has deliberately kept her fee increase to 4 per cent in expectation of harder times.

Nick Dorey, of the Society of Headmasters and Headmistresses of Independent Schools and head of Bethany School in Kent, said that parents who had relied traditionally on remortgaging their homes or their parents’ homes to pay school fees might have to reconsider. “If the market falls, that will affect the amount of equity in people’s houses that they can convert into school fees,” he has said.

Equity release schemes became a lifeline for parents in the past decade. One survey suggested that £220 million worth of equity withdrawn from housing in 2006 went to school fees.Bank of England figures show that between the first quarters of 2007 and this year the amount of equity released fell from £13.8 billion to £5 billion.

David Hollingworth, of the mortgage broker London & Country, said: “It is likely to become more difficult, if not impossible, for people with only small chunks of equity in their property to continue to do this in the current climate.”

John King, of Hodge Equity Release, one of the top five equity release companies in the country, said: “It is becoming more common for grandparents to take equity from their home to help with their grandchildren’s fees.”

A survey from Sainsbury’s Finance predicted a rise in the number of parents taking out loans to pay school fees. But, with interest rates ranging from 7.3 to 12.9 per cent, Martin Lewis of moneysavingexpert.com, said that this was not sustainable means of finance for most parents.

“Parents with children at private school should start budgeting now. In my experience, middle-class parents are often very reluctant to admit they have financial worries,” he said. “They continue their spending patterns to keep up appearances because they are too embarrassed to admit they are in trouble and do nothing to sort out their problems. As a result, they tend to go up in smoke more than anybody else,” he said.

Yvonne Goodwin, a Leeds-based financial adviser, said that parents educating their children in the independent sector needed to start planning now to avoid having to pull their children out of school. “We are already seeing seeing parents take a renewed interest in their financial planning to make sure they can continue to pay their school fees,” she said.

Pru Jones, head of research at the Independent Schools Council, said that schools were already responding “sensitively” to the current economic climate. “Parents continue to recognise the value for money that independent education offers,” she said.

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