Top private schools send debt collectors after parents as families feel the crunch

Victorian families are facing debt collection services for unpaid private school fees, with many high-earning families facing financial pressure for the first time.

Parents went bankrupt paying unpaid fees to De La Salle College in May 2022, Federal Circuit and Family Court of Australia reports show.

Trinity Grammar launched bankruptcy proceedings against parents in 2021 and Scotch College recouped $7470 from a family through bankruptcy in February 2020. Wesley College also pursued families for fees through bankruptcy in November 2016, 2017 and 2014.

Trinity Grammar is among some of Victoria’s top-tier private schools to pursue parents for fees through the courts.Credit:Joe Armao

The tactic has been criticised as “incredibly aggressive”, with financial support services arguing parents are facing unprecedented pressure from the rising cost of living.

But those who work with schools say it is a last resort for frustrated education institutions facing their own spike in expenses while asset-rich families repeatedly refuse to pay fees.

Beyond Debt Australia’s Ben Paris, a financial advisor who supports people through personal insolvency and bankruptcy, said debt collection of school fees was an increasing issue as household bills, interest rate rises and tuition fees all surged at once.

“School fees are an increasing issue and for some reason particularly in Victoria,” he said. “Victorian schools are incredibly aggressive with their debt-collection practices.

“A lot of parents didn’t see how a Zoom meeting once a day and some leaflets were worth the $35,000 they were paying in fees – some of the fees relate to that [pandemic] period.

“I’d probably see someone once a week and the fees are not trivial either. They are in the tens of thousands.

“Kids don’t want to leave schools where their whole friendship group is. So when it goes bad, they generally have a credit card with the last year’s fees on it and they owe this year’s fees too.”

Private school fees have increased by between 4 and 10 per cent in 2023, with 23 schools charging upwards of $35,000 a year for senior school and two charging above $40,000 in Victoria.

Victoria’s 23 highest-fee schools reported a combined surplus of about $127 million in 2021, analysis of their reports to the Australian Charities and Not-for-Profits Commission reveal.

Paris said some families might be asset rich, but they don’t have cash.

“If the school forces them into bankruptcy, the house will get sold and they get their money. It seems at odds with the faith-based values most of these schools allege to have,” he said.

He said some schools stopped children from graduating or prevented them from going to their school formal.

Credit Clear co-founder Lewis Romano, left, and CEO Andrew Smith.

But Credit Clear chief effective officer Andrew Smith said schools pursuing unpaid fees through bankruptcy was “very, very rare”. Credit Clear represents about 40 independent and Catholic schools in Australia, with Victoria its second-highest client base. He said the current economic climate was an “unprecedented situation”.

Smith said schools pursued other forms of legal action over bankruptcy, with the bankruptcy threshold changing to $10,000 in January 2021. This means the minimum amount of debt a creditor can rely upon to trigger bankruptcy proceedings is $10,000, up from $5000 previously.

“In some instances, the only option is to take legal action from schools and we do facilitate that from time to time,” he said.

Smith said while schools had been more lenient over COVID-19, they were starting to take more directive action.

“I’m hearing complaints from schools that see their parents drop their students off in very expensive vehicles and are behind on their school fees,” he said.

He said independent schools saw pastoral care and the well-being of students as very important and often saw the students as the “innocent individuals” in a challenging situation.

Smith said embarrassment and stigma often resulted in avoidance from high-earning families and expected the situation to worsen as parents and carers face a mortgage cliff.

“I definitely see there is going to be some movement of kids being taken out of private school this year, because you probably prefer to pay the mortgage than pay the private school fees,” he said.

Educational financial services Futurity group director Kate Hill said they had seen a 100 per cent increase in families needing support with educational loans.

Hill said schools were experiencing a high level of inflation and increasing business costs as well, so it was understandable they needed to increase their fees.

“I definitely see there is going to be some movement of kids being taken out of private school this year, because you probably prefer to pay the mortgage than pay the private school fees.”

De La Salle principal Peter Houlihan said their policy was that no family had to leave the school because they could not pay the fees.

“The only time we would refer a family to a debt collector is if they don’t engage with us,” he said.

“We would never force a family to leave because they can’t afford to pay fees.”

The De La Salle College.Credit:Paul Jeffers

He said a small percentage of families would be on financial assistance plans. He encouraged families with financial troubles to contact them so they could “make sure they can stay in school”.

Michelle Green, chief executive of Independent Schools Victoria said when parents enrolled their children in an independent school, they were aware of fees and committed to paying them.

“School leaders are always open to discussing arrangements to support families when they face financial difficulties,” she said.

Green said this support depends on the circumstances of individual schools and families, but it could involve deferring fees, offering instalment plans, or other arrangements.

“Like any service providers, schools are entitled to take legal action to recover unpaid debts. This is usually a last resort.”

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