Unable to afford exorbitant school fees in one go, many parents are opting to pay in instalments to third-party non-banking finance companies (NBFCs) and fintechs.
These companies started partnering with schools at the start of the pandemic in 2020. An executive at a fintech firm said that high fees charged by schools and a lack of flexibility in payment prompted them to bridge the divide.
Deepa V (name changed) was shocked to learn that her daughter’s school had offered her data to an NBFC without informing her or obtaining her permission. “They just called me one day out of the blue this year and told me that I could pay in instalments if I was unable to pay in full,” she says.
Deepa had delayed the payment since the school had not followed the high court judgement of charging only 70% of the fees because of the pandemic.
Her family was still recovering from financial problems after job losses and increasing costs of essentials.
“They told me that if I paid in three instalments, there would be no cost. Otherwise, I would be charged an interest of 2.5%,” she says.
While some companies do offer zero interest rates, others provide zero interest to parents who opt to pay in fewer instalments or those who have a good credit history.
B N Yogananda, a member of the Karnataka Private School-College Parents’ Associations Coordination Committee, says the schools’ move to partner with fintechs is just another way to ensure that parents end up in debt because of education.
“Parents cannot afford to pay exorbitant school fees. They are already suffering because of the pandemic. Instead of being transparent about high costs, schools have now partnered with third parties,” he says. According to a survey by Local Circles in 2021, 63% of parents reported that there was an increase in fees; 33% of them reported there was a 20% increase in fees despite online classes. The parent of a student at a school in South Bengaluru, who was pressured to opt for instalments, believes that the very idea that schools are partnering with third parties to ensure that parents pay goes against the purpose of education.
Apps that provide EMI options with zero per cent interest generally charge schools for their services.
Instead, Mohammed Shakeel, president of Voice of Parents, says schools can provide small incentives directly to parents who can afford to pay school fees in one go. “They are partnering with these commercial entities instead,” he says. Responding to this charge, D Shashi Kumar, general secretary, Associated Managements of Primary and Secondary Schools, explains, “When the government is taxing us on every single aspect like a commercial entity, what is the trouble in partnering with registered fintech companies? It is at the discretion of parents.”
Commissioner of Public Instruction Vishal R said that such partnerships had not come to his notice. “The Reserve Bank of India is the regulatory body for such companies. How school fees are financed is not under the purview of the department,” he said.