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Fee Financing To Help In Infusing Liquidity In Education Industry

With so much uncertainty prevailing and too many ongoing issues, the education fee financing model comes as the most suitable and viable solution.

The education industry in India has witnessed a major setback due to the pandemic. A lot of schools and educational institutions have been under tremendous financial stress to continue their business operations. This has majorly happened due to the fact that the other end of the education value chain i.e. parents have been finding it hard to manage a pre-pandemic level of education for their wards and thus have been looking for relatively economical options to get the education going. There have been reports of parents shifting their kids to govt schools from well-established private institutions because of the lack of affordability that has transpired due to covid induced financial uncertainties. Parents have been taking such a step because a lot of them suffered job loss and salary cuts and received a major blow due to subsequent lockdowns. Due to lack of students, the education institutions have not been able to generate ample funds which have eventually reflected in the revenue and subsequent inability to manage the overheads. In a lot of cases, the institutions have not been able to provide salaries to their employees from 3-6 months. Though online education helped a lot of schools in continuing their operations since survival became the real quest of life for most of the parents, coupled with insufficient infrastructure and limited penetration this couldn't become a sustainable solution for the institutions.

Low and inconsistent income has always been a hurdle in the way of education of masses at the bottom of the pyramid, however, the impact of the pandemic on jobs and income forced even the higher-class parents to reconsider the existing plan of their ward’s education. Various NGOs, parents’ associations and parent’s in individual capacity raised the demands for fee waivers during this period. However, such demands were also not justified as schools also had to bear their financial responsibilities. Waiving fees would lessen the burden of the parents however it could mean loss of income for the school staff like teachers, peons, and other support staff, thus creating a vicious cycle of fund flow crisis. Gradually most schools started online education thus justifying the fees charged.

As the economy is gradually opening and the government is announcing measures to revive various sections, the situation in most of the sectors has started to show some movement. However, with no date yet announced for the reopening of the schools and educational institutions, the clouds of uncertainty still loom over the education sector. Despite things gradually falling in line, it is still difficult to anticipate how parents will cope-up with ever-increasing education costs. Online education along with the new SOPs is likely to add to the increasing education cost, therefore, increasing the problems of a lot of parents not only to manage the funds but also to ensure their kids get exposure to all the elements of modern-day education. Hence, the education sector is in dire need of some new-age solutions which could help them in paying the fee in order to continue their wards’ education with quality school.

Various media reports have revealed that parents are unhappy with the schools as they are charging fees despite school closure while schools are battling the tough financial situation because parents are not able to pay fees on time owing to their professional troubles. Thus, the fee financing model acts as a bridge between the two so as to give them a sigh of relief. Since the fee financing companies pay the entire year’s fee in advance, the schools get ample funds for the whole academic session while parents get the benefit of low-cost EMI. Therefore, this new-age financing solution comes as the one-stop solution for institutions as well as parents.

With this model in place, the institutions can leverage the funds to plan out their expenses in a managed way whereas parents will not be forced to compromise with the education of their kids. This model not only helps in infusing funds in the education sector but also helps in lowering down the dropout rate and increasing the enrollments as parents are not burdened with the extra cost. Education Fee-financing model coupled with online education is likely to pave the way for the new education system across the country. Online education in the country has picked up in recent times. From schools to higher education institutes, all institutions are adopting it and are now working to enhance their digital infrastructure to provide continuous quality education to all their students.

The online education system is expected to get a major push through fee financing as it reduces the struggle of schools and institutions with respect to the shortage of funds. Schools and Institutions in even Tier 3 cities can leverage funds infused by the fee financing companies to strengthen their digital infrastructure and manage operations. The pandemic enforced the world to rethink the existing working methodologies and the education industry is still in the process of identifying the growth drivers where fee financing definitely emerges as one among them. In the crisis, the fee financing model creates a synergy effect in the education ecosystem and releases the pressure from both parents and educational institutions. In a country as big as India, where the majority of the population is currently under financial stress such socio-economic models of impact become more prominent to bail out the crumbling component of the social development index. 

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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Fee Financing liquidity education industry

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