Flashback: From 1970s uptil 1990, the lives of millions of middle class Indians were quite different. A middle-class person then aspired to own a TV, two-wheeler or washing machine. It was common for families to save part of their monthly salary for months in order to finance such purchases, in cash!
On the other hand, children’s education was far more affordable then. Private schools used to charge fees of Rs 30 – 200 per month. Some of us may remember our parents giving us cash to pay as fees to our school authorities!
Now, this situation has reversed. While the cost of television sets, two-wheelers and washing machines has seen a jump over decades i.e. Rs 15,000 – 40,000, they became a lot more affordable due to monthly payment/EMI plans. On the other hand, the cost of education increased almost 10-20X: fees increased 10-12 percent every year, with tuition fees reaching Rs 30,000 – 500,000 p.a. for private schools and colleges! This is just the tuition fee. The total cost of education – including coaching, books, extra-curricular activities, etc, is much higher.
What’s made the price rise worse is that education fees is payable upfront at the beginning of a quarter, trimester and not monthly. Most salaried parents fund their child’s education out of pocket, which affects their cash flow and gets in the way of their savings. Ironically, adults can pay for white goods in monthly installments, but have to pay education fees upfront!
Unfortunately, being a service, reducing the price of private education isn’t straightforward. Every institute needs to invest in real estate and trained teaching staff, which run into crores. Institutes have to deal with long gestation periods and low supply elasticity. They need to collect education fees, in advance and on time, to avoid an increase in the debt servicing at their end. Inability to collect fees on time greatly impacts their ability to refine their infrastructure.
Perhaps we could make private education more affordable by helping parents pay fees monthly, like the way it was pre-2000? While at a nascent stage, some market players are taking steady steps to help 150 million parents in the country by encouraging private educational institutes to collect fees monthly from parents who now have an option to pay their child’s school or college fees monthly. Market intermediaries and service providers like Payed have stepped in to facilitate this process across cities in India. Such facility is unique, and not offered by banks, who typically favor higher value loans and avoid segment of loans below Rs 4-lakh (without collateral).
Educational institutes and parents in India are fast adopting the ‘pay education fees monthly’ solution, as it is a win-win situation for them. Parents can pay fees monthly, affordably – and also handle their household expenses, plan their investments better. Education institutes can collect fees on time, in full – releasing their time to focus on pedagogy and other academic matters.
I believe that education fees paid monthly can not only create great value to our society but also can create sustained value over time.