“Locked fees” are a thing of the past for private + international schools in Egypt as the economics stop making sense: In the last 15 years, as several new private and international schools set up shop in Egypt, a handful of them offered “locked fees” — a financial package that allowed parents to pay a fixed, marked-down rate for children until they graduate. Locked fees were initially introduced as a means to attract new clientele, but most of these schools did not account for foreign exchange risk or red-hot inflation to squeeze them as much as they did. Now, these schools are doing away with the locked-fee business model after its financial flaws started to show, our sources told us.

What are these locked fees? Some new schools offered parents an agreement to pay a fixed, reduced tuition fee in a bid to pull students from already-established schools. These schools offer fixed fees in different forms: Some offer a percentage of a markdown, rather than a fixed tuition fee; some offer a markdown for the first two-five years as an initial incentive; and others offer reduced tuition fees for students whose siblings already attend the school.

In the industry, it’s become common knowledge that new schools use this business model, particularly those set up in satellite cities in the Greater Cairo Area, including Sheikh Zayed, Six October, and New Cairo.

“I’ve noticed during my years as an educator that these new schools that open every year pump a lot of money in the beginning, they attract good teachers with inflated salaries and they offer locked fees to get lots of students to fill up spaces quickly and get accredited from the British or American systems then after accreditation,” educator Rowida Rizk, academic dean at Nermine Ismail Schools, told Enterprise. When these schools start to hit the black, they sometimes scale back their operations, “which is why the turnover is high at these schools for management, teachers and students,” Rizk tells us.

Why offer locked fees in the first place? One school that used locked fees to pull in students in its early days is the British School of Egypt, an international school in Sheikh Zayed. "When we first started 15 years ago, we had one building, and we were a new school, so we wanted to attract students," BSE Administrative Director Walid Askar told Enterprise. BSE chose to offer parents locked fees that would allow them to pay the same fees for their children from enrollment through to graduation. 

But the numbers quickly stopped making sense when the economic landscape changed: Following the 2016 devaluation, BSE management attempted to review its contracts with parents to amend the fees to reflect the new EGP rate, but most parents refused to budge. “I have to admit it was our mistake. We were and still are in a tight spot,” Askar told us. The school began cutting costs, but doesn’t have much room to maneuver, he said. “What can we cut? We can’t touch teachers’ salaries because they’re the most important component of education — having happy teachers makes happy students. But having locked fees over two revolutions and three devaluations has been very tough for us economically. The money we stipulated at the beginning lost 200% of its value,” Askar said.

One solution: Just open more schools: BSE opened a new sister school, the American School of Egypt (not to be confused with the American International School of Egypt, or AIS Egypt), which opened its doors this academic year, Askar told us. “We learned from our mistake and introduced a locked markdown instead of locked fees,” he said, which allows for a better business model.

REMEMBER- Locked fees aren’t the only thing squeezing schools financially: Since 2019, private schools have faced a more stringent cap on tuition fee hikes after parents lobbied the Education Ministry to put a stop to what they said were unfair increases. After initially only allowing to raise prices by 7% each year on a baseline year, the ministry has since agreed to let schools calculate the annual increase based on last academic year’s fees, rather than the baseline year.

In a bid to make ends meet, operators have already been cutting costs, but there’s only so much they can do. “In 2011 we started going digital, it was way before the devaluation or the pandemic, but because we were trying to go green, and it proved to be an economic strategy that saved us a lot of money,” NIS’ Rizk said. This strategy also ended up working out well when schools went online during the height of covid-19 because the students “were already trained digitally” and the school was already prepared, Rizk said.

The current economic landscape makes it difficult for schools operating in Egypt to compete for teaching talent with markets such as Dubai, Mexico, and Thailand, EduHive CEO Karim Mustafa told Enterprise. “The international appeal to attract good caliber teachers is not in our favor. Other markets can offer more appealing packages and they have more stable economies,” Mustafa said.

Ministry fee cap isn’t helping: Even EduHive’s schools — which aren’t grappling with the effects of having locked fees — are struggling, Mustafa said, calling the government’s cap on tuition fees “crippling,” as inflation is far outpacing the 7% increment by which schools are allowed to raise their fees. International schools are still lobbying the Education Ministry to be allowed a 10% fee increase, which Mustafa says “would be meeting the parents halfway between the cap and the [effect of] the devaluation.”

On the other hand, parents are feeling stretched to their limits — but can also see shifts in quality: It’s difficult to keep pace with higher expenses as everything is more costly, while household incomes aren’t keeping up, one parent with three children at BSE who requested to remain anonymous told Enterprise. “If it were just school fees it would be fine, but I am paying for private tutors, sports practices, and so many other expenses,” the parent said. Signing on to locked fees allowed for some measure of long-term financial planning, so a change to the contract for the locked fees upends those numbers, the parent said. Another parent with two children at another international school who also requested to remain anonymous also noted that there’s a tangible difference in the type of education and activities available at the school as the economic realities have changed. In addition to the reduction in expat teachers, schools have scaled back activities, the second parent said.

Your top education stories for the week:

  • The EU wants to boost technical education here, EU Vice President Margaritis Schinas said last week.
  • USAID to fund five applied tech schools: The Education Ministry and USAIDinked MoUs to establish five international applied technology schools under the USAID-funded Workforce Egypt project.
  • Italian is set to beintroduced in public schools as an elective second language by the 2024-2025 academic year.
Tags: