Increase in private school tuition loan inquiries amid potential employment tax reforms

According to the School Fee Plan, applications for loans to help pay private school fees have increased by a quarter.

The company, which assists parents by paying school fees in advance and allowing repayments in monthly installments, has seen a significant increase in interest rates compared to the same period last year.

School Fee Plan, a subsidiary of Premium Credit, is used by 420 private schools in the UK, including Harrow School. The company charges a transaction fee of about 3.56%, which some schools pay on behalf of parents. Unlike cash advance plans that offer discounts for lump sum payments, these monthly financing packages help parents manage their cash flow without reducing overall costs.

A spokesperson for School Fee Plan explained that the company's services are more popular among mid-market private schools. The number of parents taking out loans from the company has risen 93% since 2022, driven by higher private school fees and concerns over Labour's proposed tax policy.

The rise in demand comes after Labor reiterated its pledge to abolish VAT tax exemptions for private schools, making them liable for a 20% VAT levy if the party wins the general election. Stewart Ward, education director at School Fee Plan, warned that this policy could have significant consequences for both parents and schools, prompting many to seek financial help.

“The important thing is that right now the traffic we're seeing on our website and the conversations we're having with potential new schools is at a fairly high double-digit increase over last year's activity – probably 25 percent,” said Mr Department .

A survey by The Telegraph earlier this year found that 95% of private school leaders expect to increase fees if Labor introduces VAT. This has raised concerns that many families could be pushed out of private education, potentially leading to a shift of 40,000 students from private to public schools, according to the Institute for Fiscal Studies.

School Fee Plan has noted that interest in their services is driven by several factors, including inflation, pressure on household incomes and the potential for VAT. The company supports more than 10,000 students every year, including students from prestigious institutions such as Harrow, Dulwich College and Reigate Grammar School.

At some schools, such as the £19,000-a-year Wellingborough School in Northamptonshire, around half of parents use the company's finance services. Amid uncertainty, many schools are encouraging parents to pay several years' worth of fees in advance through advance arrangements to avoid potential tax increases. However, this could lead to tax problems with HMRC, and Labor has hinted at clamping down on such practices.

Labor wants to use the estimated £1.7 billion from VAT on school fees to recruit 6,500 new teachers at state schools. A Labor Party spokesperson said: “Labour will invest in providing brilliant state education for children in every state school by recruiting more than 6,500 new teachers, funded by ending tax breaks for private schools.”

They added that independent schools, which have raised fees above inflation for more than a decade, will not have to pass on Labor's proposed changes to parents.

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