Independent and Catholic schools are working on their budgets for September 2021 approval.
In our article “Budget time for schools” Cecelia and Amanda have set out key areas schools should be across as they plan for the 2022 year. In addition to the issues which come about in relation to tuition fees in that article, we also note some further considerations for schools when managing outstanding accounts and debtor parents.
For instance, it made the news when Melbourne Private School Wesley College offered parents discounts of 20% on tuition fees, waived costs and made a $5 million transfer to its scholarship fund in 2020. Yet, it also made the news when a number of Melbourne Private Schools initiated court proceedings against families for unpaid fees with the suggestion schools forcing parents to sell family homes to cover the tuition debt.
We appreciate that schools need to balance their commercial recovery rights with their relationship to families and reputation amongst the community. For that reason we have set out some tips and traps to keep in mind.
Recovery tips
- It is important for schools to get ‘on the front foot’ when managing the accounts. Where there are signs that a family is struggling to make payments or have indicated this is the case, schools should ensure there is an open and transparent dialogue with the family so that it can:
- make any necessary decisions quickly (i.e. offer a carefully drafted payment plan, a financial hardship discount etc.); and
- mitigate the risk that the debt escalates to an overwhelming amount – if this occurs, it is likely families will go ‘underground’ or the school will need to take more formal and forceful recovery steps.
- Review the Enrolment Agreement to ensure you know what you can and cannot do in respect of fee recovery.
- Review any court orders / parenting arrangements that may impact fee collection.
- Record in writing any agreements made with parents including:
- clear dates when payments are due; and
- any discounts applied to the account.
- Be clear about what happens when there is a default of the agreed payment plan including reserving the School’s rights to take further steps to protect its interests.
- Be proactive in following up any missed payments under an agreed payment plan.
- Consider the tone of all correspondence – while it can be frustrating to chase/deal with a challenging debtor parent, ensure that all correspondence is civil, balanced and reasonable. Imagine if that needs to be provided in court proceedings.
- Keep up to date records of all recovery attempts (formal or informal) and phone discussions with parents.
- Carefully consider when to refer the matter to a debt collector or lawyers for formal collection – use debt collectors that are familiar with the way schools operate. If you think you need legal advice, reach out earlier rather than later.
- Take the time to reflect on a debt recovery matter and learn from what was done well/could have been done better. Consider whether there needs to be a review or update to the Enrolment Agreement (i.e. is it clear who is liable for school fees, was the contract signed, can you recover your legal fees etc.).
Things to watch out for
- Non-compliance with the Enrolment Agreement.
- Family court proceedings/orders.
- Offering arrangements to non-payment parents which are contrary to consumer and credit laws (i.e. be careful about entering into payment plans that could be seen to be a loan to parents).
- Ambiguous payment plans or terms of agreement which can make recovery challenging.
How we can help
Please do not hesitate to contact us if you have any questions on the above.