{"id":549674,"date":"2022-09-26T04:00:25","date_gmt":"2022-09-26T04:00:25","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/blackboards\/private-schools-are-struggling-to-make-ends-meet-with-a-cap-on-tuition-fee-increases\/"},"modified":"2022-09-26T04:00:25","modified_gmt":"2022-09-26T04:00:25","slug":"private-schools-are-struggling-to-make-ends-meet-with-a-cap-on-tuition-fee-increases","status":"publish","type":"blackboard","link":"https:\/\/enterpriseam.com\/egypt\/blackboards\/private-schools-are-struggling-to-make-ends-meet-with-a-cap-on-tuition-fee-increases\/","title":{"rendered":"Private schools are struggling to make ends meet with a cap on tuition fee increases"},"content":{"rendered":"

<\/a> How are private + international schools keeping up with costs as a cap on tuition fees <\/strong>remains in place?<\/strong> Recently appointed Education Minister Reda Hegazy decided tomaintain<\/a>the 7% tuition increase cap on private schools, dashing operators\u2019 hopes that the government would loosen the regions on tuition fee hikes this year amid rising inflation<\/a> and a weakening EGP. Some of these schools will likely make losses this year, their operators told us, citing the cap as the main cause of financial strain.<\/p>\n

REFRESHER-<\/strong> Private schools have faced a strict cap<\/a> on tuition fee increases for the past four years, after parents lobbied the Education Ministry to end what they called unjust increases. Those that charge more than EGP 10k per year have been limited to raising costs by 7% per year on their 2015-2016 fees, which the government deemed their baseline year, meaning the actual increase increment has remained steady each year, EduHive CEO Karim Mostafa explained to Enterprise. Private schools with tuition fees below EGP 10k per year have a 10-25% cap on their annual tuition fee increases, Private Schools Owners Association Chairman Badawy Allam told Enterprise.<\/p>\n

The middle ground:<\/strong> The ministry agreed to let schools calculate the annual increase based on last academic year\u2019s fees, rather than the baseline year, in an effort to help education operators who are feeling the pinch of inflation<\/a> and facing higher costs, Mostafa told us. \u201cThey did meet with us, and they saw our point. But it\u2019s still not enough, especially with the FX rate on the rise,\u201d he said. Sources we spoke to previously were hopeful<\/a> that the cap for costlier private and international schools may be revised within a year or two \u2014 possibly pushed up to 10%, or even scrapped completely.<\/p>\n

Schools may request exceptions to the tuition rise cap, which the ministry grants or rejects on a case-by-case basis.<\/strong> El Alsson, for example, has had its request approved once in recent years, because the institution recently purchased a new campus on pricey land, has faced soaring building costs, and has gone through two EGP devaluations, El Alsson Executive Director Karim Rogers told us. But the process of applying for this exception is quite lengthy, requiring the submission of audited financial statements, balance sheets, and a hefty amount of paperwork. Other school operators, such as Mostafa, find the procedure \u2014 which begins with the school district office before moving on to the ministry for final approval \u2014 to be tedious, and the raises they receive can be modest and not worth the effort, he says.<\/p>\n

It\u2019s better than nothing, but the increase in fees schools are charging falls far below the increase in costs \u2014 the biggest of which is their FX expenses<\/strong>, including expat teachers\u2019 salaries. FX payments \u201caccount for some 70% of our budget,\u201d Mostafa said. Schools wrapped up last year when the FX rate was at EGP 15.75 per USD 1, several international school managers told us. The Central Bank of Egypt (CBE) has allowed the currency to depreciate gradually since March, falling nearly 24% to stand at around EGP 19.54.<\/p>\n

There have also been other sources of greater cost burdens for school operators<\/strong>, including an increase in ins. pay at a 15% annual rate for five years starting January 2020 \u2014 a total increase of 75% \u2014 as stipulated by the Social Security Act, school operators said in a letter to officials that was seen by Enterprise. The operators also cited an 833% increase in the cost of renewing expat work permits, a 25-fold increase in the price of new work licenses for non-Egyptians, a 300% increase in fees charged for renewing permits for international school books, and an obligatory 1% of annual revenue<\/a> that schools now need to pay to the government\u2019s Support Education fund.<\/p>\n

Schools still recognize that it\u2019s tough times for everyone and have been more accommodating to parents:<\/strong> Schools are allowing parents and guardians more flexibility with their payments, several sources we spoke to said. \u201cWe don\u2019t give them a hard time like we used to when it comes to following up on fees,\u201d which are paid in installments, Rogers said. Under government regulations<\/a>, private schools are required to collect fees over four equal installments starting September, with no penalty or interest for late payments. The Education Ministry has also warned private schools against collecting additional fees under different guises, such as enrollment or acceptance fees, or charges for school uniforms, supplies, or \u201cdonations.\u201d<\/p>\n

But at the end of the day, schools have bills to pay, while parents can opt for cheaper schools:<\/strong> \u201cWe have to fulfill our own financial commitments,\u201d Rogers told us. Since El Alsson moved to its new campus in 2017, it has yet to breakeven, he said. The bottom line is that private and international schools are private businesses, which are designed to create financial returns, Mostafa said. \u201cWe pay our taxes, and we pay ins.,\u201d he said, contrasting private education providers with players in other sectors that get government support or more leeway to adapt to market dynamics. \u201cWe have not received support when we bought our lands and built our schools, much like restaurants or hotels,\u201d he said. \u201cThe Tourism Ministry would not force a price cap on room hotels, and if their running costs increase, they have flexibility to implement the prices that work for them. We need to be treated like other sectors. If a real estate developer faces rising building costs, the company has the right to increase its prices accordingly.\u201d<\/p>\n

Private school owners are entitled to <\/strong>15% of their earnings<\/a><\/strong> under the Education Act<\/strong>, which is designed to encourage investment in education. But the ministry\u2019s decision to implement the cap is essentially blocking the law from taking effect, Mostafa points out, with private school margins rarely reaching 15%.<\/p>\n

In a bid to make ends meet, operators have already been cutting costs, but that\u2019s only going to go so far:<\/strong> \u201cWhat expenses can we eliminate? We can't turn off electricity or water, and we're spending our money on salaries, books, and education supplies,\u201d Rogers said.<\/p>\n

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