Tuesday, 21 February 2017

Private School Fee Increases and the KHDA's Education Cost Index

This week the KHDA published its annual Education Cost Index (ECI) which determines the maximum amount by which private schools in Dubai can increase their fees. The ECI is set at 2.4% which means that 
  • 'Outstanding' Schools can increase their fees by 4.8%  (2.0 x the ECI)
  • 'Very Good' Schools can increase their fees by 4.2% (1.75 x the ECI)
  • 'Good' Schools can increase their fees by 3.6% (1.5 x the ECI)
  • All other schools can increase their fees by 2.4% (the ECI).
The issue of increasing school fees and making money out of educating children is an emotive one. The ECI is an important mechanism to protect parents from organisations profiteering from education. Ultimately, parents are reticent about moving children from the schools in which they are settled because of fee increases. 

ECI Theory and Practice

In theory, the ECI incentivises for-profit organisations by allowing those schools who have invested in achieving high standards to increase fees by a higher rate. However, it may argued the unintended consequence of this is that good schools have the income to get even better, whereas weaker schools are caught in a poverty trap by not having the capital to make necessary improvements. 

Where does the money go?

Much depends on where the additional income from the fee increase goes: whether it is reinvested in the school (as it is in full in the not-for-profit schools) or whether it goes to line investors' pockets. All schools should be transparent about the percentage of school fees that goes on profit to the investors so that prospective parents can make informed choice of school. 
At JESS, Dubai, we publish these data on our website and 100% of any annual surplus is reinvested in the school.

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