I suppose there are worse things to go into debt for?
Aussie families are now going into hock to pay their private school fees, and one big bank is betting on that becoming an even bigger trend.
NAB’s annual report was released today and tucked away inside it was the revelation that its “venture arm” had invested yet more into school-fee lender Edstart, which puts families into debt to cover private school costs.
No prizes for guessing the pioneering lender is having a good year with the rising cost of living. Families with private school fees are also often saddled with a mortgage, meaning they are getting squeezed on all sides.
“We get high-earning parents on $200,000 to $300,000 a year coming to us.” Said Edstart CEO Jack Stevens in 2017.
I bet there are even higher earners on his books now.
Edstart began in 2016 and branded itself as “fintech” — an online lending platform with clever technology. But at its heart it is a finance business, making unsecured loans for what can be a very large expense.
Australia is the most private school-obsessed country in the world, and fees can be very high.
Melbourne Grammar School fees are $38,940 for a local Year 12 student — higher for boarding and for overseas students. But to be fair, schools like that educate a relative handful of kids. The bulk of private schools charge far less. The median school fee in Victoria is $12,940.
Still, it’s no wonder Australia is leading the world in lending for secondary schools. We are far above the OECD average for the share of students attending non-government schools.
The government sector educates the most students in Australia, but its importance is shrinking. The independent school sector is growing fast and closing the gap. Over one-third of all school students are now at non-government schools:
It’s a kind of pathology in our country: public schools are increasingly for people who can’t afford private school, plus the true believers. Now this lender is picking off people from that first group.
The above chart shows the overall trend, but there are fascinating differences in the details. People are far more likely to attend a public primary school, but as high school approaches, the private schools begin to beckon.
By the time you look at Year 12, there are almost as many students in non-government schools as in government schools, especially in NSW and Victoria:
SA likes private early primary, while the ACT takes the crown for most private schooling through the middle years. But the ACT’s peculiar system of Year 11 and 12 colleges syphons students back into the public system by the end of high school — leaving Victoria as the state with the most private school students by the end of Year 12.
Cost rising faster than inflation
The cost of education has risen far faster than inflation in Australia over the past few decades. One theory is that schools know families will draw on more than just their salary to pay school fees, so fee rises are more akin to property price rises than wage inflation:
Right now, a lot of families are looking at the commitments they made to the bank for their mortgage and to the school for school fees, and getting worried. It’s a perfect time for a company like Edstart.
Edstart is run by a man called Jack Stevens. He didn’t respond to my questions before deadline, but his LinkedIn suggests he went to Bond University (a famously high-fee institution!).
The company lets parents pay back school fees as much as five years after the kid has left school, charging interest rates of 5.9% to 12.9%. That’s better than a credit card, but not as cheap as taking money out of your mortgage offset account.
NAB has invested three times into Edstart as the company has done multiple funding rounds.
Lending for consumption is rising, and have no doubt this is consumption, for the parents, not an investment. An investment would lead to income for them, or appreciate. It’s more like a car loan than a mortgage from the financial perspective of the parents.
It’s also different from our more familiar kind of education loan: HECS. HECS is paid off by the person who gets the income bump, and only if they get that bump. Some kids could be racking up HECS debts while their parents still owe Edstart for their secondary education.
And the reason many parents would be paying for a private secondary education they can barely afford? University entrance is skewed toward private school graduates. This time of year is exam time for final-year students, and if the results of previous years are any guide, the best Year 12 marks will be taken home by students of non-government schools.
The top performing Victorian school in Year 12 last year was Ballarat Clarendon College (fees $22,470 for a Year 12 student in 2024). Over half of the entrants to Melbourne University come from private schools.
No wonder parents are willing to stretch themselves to get what they hope will be the best education. And no wonder big financial firms are investing in lending to those people. It’s potentially an enormous growth area.
Are you feeling the pinch of private school fees? Or do you think Australia’s obsession with non-government schools is unhealthy? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
Thanks @JaseMurphy for this article throwing light on the ticket-clippers at Edstart and NAB profiting off the hopes and fears of middle class parents. I just want to draw attention at the end of the article “No wonder parents are willing to stretch themselves to get what they hope will be the best education.” I do think you’ve fallen for the same assumption that middle-class parents are making themselves which is to confuse correlation for causality. The fact that private schools have a disproportionately high number of school leavers getting university offers could lead the casual observer to believing that private schools are offering extra value to the education of their students. THEY AREN’T. Most of the extra money is spent on showboating that bamboozles prospective parents: swimming pools, expensive camps, fancy classrooms for art and IT, and worst of all glossy brochures and well paid public relations staff.
Yet the reason that students going to private schools are more likely get in to university is because the parents themselves are university educated (and hence they have higher incomes and can afford private secondary schools) and they have books in the house and encourage and esteem learning for their children from a young age. Another way of putting it is that paying for your kid to go to a private school is just like paying a fee to join a prestige ghetto. There’s no evidence that private schools value-add in any way. It’s like a tax on stupidity which the stupid are only too willing to pay.
I know that in Perth houses in the areas of successful public secondary schools attract a premium price because those schools have high rates of school graduates going on to university. The clever people who buy in to these areas – mostly Asian migrants and school teachers – know that their kids will have a strong chance of getting into university without having to pay the stupidity tax / private school fees. Sure they have to pay more for the house they live in, but that’s both a consumable and an investment because the price will stay strong.
So please @JaseMurphy, don’t fall for the hype. The high rate of university offers to private students is based on the demographic of the parents, not the value-adding of the private schools. If these parents had any sense they would send their kids to the local public school knowing that the chances of their kids getting a uni offer are just the same, without having to go even further into debt in the process.
Private schools also skew their teaching towards university entrance. I don’t know whether it is still the case but it used to be that publicly educated first year university students generally performed better than those from private schools who are used to being cosseted.
When I am dictator, private schools will go back to be private schools ie no government money.
Well said. I once had a professional acquaintance with a nice man whose daughter attended an elite private school here in Perth. He was lamenting one day that her grades were hopeless. I suggested he pull her out. Shocked, he said her only hope was to be able to hook up with a male with potential which could only happen through their private school connections. Go figure!
My understanding of private schools is that they are about networks rather than education.
That artificial ATAR bump you get for your $40k is now not worth as much as it used to, at least in the case of Melbourne Uni. This is because access to high-prestige courses (medicine, law and other professions) is now restricted to postgraduate masters degrees.
Which is a good model – sorts out the sheep from the goats and gives kids a chance to think about what they are really interested in.
Good comment. There’s also a fear factor with many parents, particularly right-leaning parents, and that’s the belief that public schools only teach kids how to sell drugs, become communists, and steal cars. Read some of the education articles in our more up-market media and papers, and this slant crops up now and again. ‘If your children are in a public school, you’ve failed them,’ ‘I chose my mortgage over my children’s future,’ ‘the generation whose parents abandoned them to Satan.’ Okay, I’m exaggerating, but you get the idea.
Agree, education researchers have established many times that coming from an educated background (cultural capital) plus valuing education (this is probably more important) are strong predictors of success. The private schools to some degree agglomerate students with these factors. Perhaps even, the higher the fees the more so. That said at least one very high fee “elite” school I know of has a lot of students from builders and construction and real estate developer backgrounds.
In general terms, if you can find a public school where the balance of students come from homes valuing education you are on a good thing and probably without the negatives of religious unctuousness or money grubbing found in private school homes. If your child is academically challenged, an investment in them of your time and probably some tutoring will be as effective and cheaper than a private school, if your aim is for them to get into a major university.
The actual social sorting these days depends far more on which degree and from where, than what school you attended. The latter wears off about halfway through first year uni. One can’t help but think of the parents going into debt for private schooling as having much in common with crypto investors in the Hawking article in this edition.
Think there is a direct relationship with socio economic policies of the past generation starting with Howard to weaponise private education under the guise of quality and encouraging Christianity e.g. resourcing many existing private schools inc. Catholic system. continuing on from Menzies.
Much of the parental need for private schooling is simply pretentious, nouveau and ignorant of education, but assuming high social status ‘fairy dust’ will sprinkle down on them; also reflect some cohorts with higher incomes like how the AFL is now joined at the hip with private schools.
Many state or public schools are fine, while often parents (NESB &/or skip) are the issue on children’s outcomes, but simply need to take interest, monitor children, participate and trust educators; worked out fine for millions inc. NESB families.
Other concern, see US where it’s more extreme, where ‘anti-woke’ Koch ‘owned’ GOP and their Christian base demanding more religious and charter schools for their curricula etc. choices, while denigrating and threatening state schools.
The strategy is about strangling public education budgets/schools and dumbing down future youth to support white Christian nationalism and <1%, probably fossil fueled….. ditto attacks on universities.
That’s all pretty spot on solasaurus. I went to a quite dreadful state high school in Perth in the early ’70’s, but my own child went to a private school in Melbourne. (I got no choice in this. My wife’s family went to private schools, and that was that. What’s more, before being married to my Catholic wife, I signed a piece of paper to say I would not prevent my child from being brought up Catholic. I don’t regret that.) I was surprised at how ordinary the academic eduation was at the private school, and there was plenty of the showboat stuff you mention. What you’re actually paying for is: the exclusion of disruptive students – the serial offenders and shockers do get chucked out – and the exposure your child gets to the other kids parents. When they visit school friends, they see lots of parents in highly responsible well paid jobs, in academia, medicine, law, finance, construction, and all sorts of businesses, and this tends to widen your own child’s scope and raises the bar for what they aspire to. And of course, those high achieving parents tend to have high achieving kids, and their presence passively drags your child up their standard. The whole thing is self reinforcing.
The old saying is: “there are only two reasons to send your kid to a private school. Because you went to one yourself or because you didn’t. I know my life would have been different if I’d gone to my son’s school.
I see a lot of one of my mate’s daughters. She teaches at a state primary school. She is a very strong personality and copes, but the horror stories she tells me about some of the students and some of the parents is hair-raising. And absolutely nothing is done about it. I’d borrow money to get my child away from that sort of education. Kids will not learn if they are frightened, or if their concentration is constantly broken by disruption. If all the teachers attention is taken by disruptive children, that is another handicap your your child learning.
However, if you are able to find a state school where you don’t have the issues of disruptive students or parents, go for it. I think the stats show that some state school kids do better at uni than private school kids because they’ve learned more self reliance.
Absolutely agree. Add in the issue of single sex education particularly for girls – effectively not available in the state sector in Melbourne. State school fine for primary, but not for the business end of schooling. One can (and I do) wish it wasn’t so. But it is.
There are several all girls state high schools in Melbourne.
Few. MacRob – select entry and only from year 9. Girls there are massively coached to get in. Otherwise 5: Melbourne Girls college – famous for battles to get in the zone I know. Others I don’t. So 5/6 out of how many? Not so much. And getting into the zone – challenges.
And the zones in turn default into de facto socioeconomic class sorting anyway, especially with the current and future housing and rental markets. Even young two income professional households will struggle to afford to live in the “right” zones unless they have parental wealth behind them. Better to move into an area with lots of migrants whose culture is likely to highly value education, eg from China or the sub-continent. Better food as well!
Yes. Migrants understand the framework very well & try to live in certain zones &/or get their kids coached from very young to get into select entry state schools or obtain scholarships to private schools. Or pull the pin & pay whatever it costs to go to private schools. We were zoned for Footscray High. We went private. My daughter gets to study Italian (part of her heritage), Latin (how many high schools offer that?) & she is off to Rome with school for 2 weeks in December. Then NE Arnhem Land in May & Borneo Dec2024. Ridiculous privilege of course. The state sector simply can’t offer these things.
I totally agree, but there is a problem with well-educated and well-informed parents steering their kids to the best state schools, which then leaves the other schools with a higher proportion of low achievers and problem kids.
Because the elephant in the room is that most state high schools are not terrific, many or some not even okay. And this stuff matters. So well educated and well-informed parents are a problem rather than the system?
Actually while there is clear evidence that many state schools are not being funded adequately I have seen little evidence that most state schools are not terrific, which seems a high bar anyway. There is certainly a lot of stigma and prejudice attached to state schools, it functions in inverse relation to the branding private schools spend so much on. The media of course plays pretty regularly to the stereotypes, reinforcing the prejudice, masquerading it as knowledge.
Migrants try to get into zones &/or get their kids coached from very young to get into select entry/good state high schools or pull the pin & find the $ to go private.
The elite private schools with their $40K plus fees operate like an auction for the PRIVILEGED. If parents fall behind in payments they are totally RUTHLESS in collecting debts. Howard made the whole regime much worse.
They turn out the odd murderer too, despite the high fees.
Private Schooling money not well spent, as shown by this…a study by Monash University which found students from public schools outperform those from private schools when they reach university.
A survey of 12,500 first year Monash University students revealed public school students who left Year 12 with lower marks than their private school rivals overtook them academically at university.
….Once on a level playing field, students from non-selective government schools tend to do much better…
NB non selective, so they come from the standard state schools.
…Private school students have an advantage at exam time in Year 12 because they have access to more resources. However, this advantage evaporates when they reach university…
It is called spoonfeeding which operates well before Year 12. I worked in an Academic Library and am aware of the disparity between the students from the different systems.
….Once at university, public school students performed better academically in their first year compared with private school students who received similar ENTER scores.
Again no spoonfeeding.
…on average, government school students performed about five percentage points better than students from independent schools…
The study confirmed that private school students generally received higher Year 12 marks than those from the public system but showed that any edge gained was lost in the first year of a bachelor degree.
Again no spoonfeeding.
‘Secondary schooling, tertiary entry ranks and university performance’
Dobson, Ian; Skuja, Eric: People and Place,Vol. 13 No.1 April 2005 pp 53-62
ISSN 1039-4788
Australian Forum for Population Studies (Monash, Swinburne) Clayton VIC
Victoria at that time was the state with the highest percentage of students in “independent” schools
Well said. Have already commented above to one of our readers. Forgot to add that another female university educated acquaintance of mine pretty much completed her daughter’s university assignments because her little darling had a breakdown when assignments were due after partying hard. I sometimes revel in the fact I have accomplished the things I have by attending public schools and not going to University. Having said that, might take on a new challenge at 68 and go. They won’t know what hit them.
On the one hand you read about people struggling to pay their mortgages and have a whinge about the RBA.
On the other hand you hear about stuff like this and think “crank up those rates”.