Free tuition for 12 years - higher than the interest rate on real estate, gold, and bond investments - makes parents willing to lend 3-5 billion VND to international schools.
In recent days, many parents have struggled to get back the money they lent to the American International School Vietnam (AISVN) but failed. In 2018, AISVN launched a loan contract for parents with an amount of 2-5 billion VND. These are interest-free loans, in return their children receive free education until grade 12 or transfer schools. The contract stipulates that when the student completes the procedure, the school will return the loan amount after 90 days. If payment is late, AISVN will have to pay additional interest according to the mobilization interest rate of Vietcombank Head Office. Maximum delay in payment is 90 days.
The above transaction is a way to help many private schools raise capital. Instead of accessing money from banks, the board of directors chose to borrow from students' parents. They do not pay interest in cash but with tuition at the operating school.
According to information published on the AISVN homepage, the 12-year tuition fee is about 6,95 billion VND. This is considered interest when parents lend money. Assuming a parent lends a maximum of 5 billion, the performance of the above investment is 139% for 12 years, an average of 11,58% per year.
Thus, this deal is more effective than investing in USD, gold, real estate and bonds in the period 2011-2021, based on Dragon Capital's statistics. The 11,58% interest rate when lending capital to AISVN is second only to investing in stocks (15,8%). Not to mention, if the board of directors effectively uses capital to build, upgrade and develop schools, parents will also benefit when their children have access to an increasingly high-quality educational environment.
Because there is no collateral, this is an unsecured loan, which is based on the borrower's reputation. Banks often verify income and credit history before granting unsecured loans, but for parents, they cannot do the same. According to some parents, they often rely on seeing more spacious facilities than regular schools, a team of teachers and administrators with many foreigners, or believe in the credibility of the educational environment.
Not only AISVN, many private schools also implement this activity called "educational investment package" such as Dewey school system, South American International School (UTS), ICS school system, North American International School ( SNA)... According to MSc Bui Khanh Nguyen - an independent education expert specializing in research on international schools, the form of borrowing money from parents to establish and develop has been around for nearly 15 years and in recent years. become popular. According to his statistics, there are currently nearly 20 international and bilingual schools in Ho Chi Minh City and Hanoi that have "education investment" packages through paying tuition many years in advance.
Although there are schools invested by large corporations such as Nord Anglia, Cognita, Inspired Education..., Mr. Nguyen believes that most international schools are currently established by small and medium-sized domestic companies. To build a private international or bilingual school in general, from 500 billion to several thousand billion VND is needed for building facilities, renting land, operating costs, mainly paying salaries for the executive team. and foreign teachers. Therefore, many school construction projects require loans.
"Very few private non-profit schools operate for the purpose of serving education and society. Most operate for profit with the highest goal of making money from education," the expert said.
American Vietnam International School campus in Nha Be. Image: Le Nguyen
"Education investment" packages boomed during the period of low interest rates and cheap money. From the beginning of 2018, lending interest rates for regular businesses at state-owned commercial banks for medium and long term are 9,3-10,3% per year and 10-11% per year at banks. Stock Commercial.
When a business needs capital, it often turns to the bank. But according to Mr. Nguyen, borrowing money from banks often requires mortgaging assets, which many school projects do not have because many schools start from the point of "fighting the enemy with nothing." Bank loans also have risks of fluctuating and unpredictable interest rates. Banks increasing interest rates to over 10% a year often happens and this is also the motivation for school projects to want to borrow capital directly from parents.
Suppose a private school needs to borrow 500 billion VND from the bank in early 2018, they can bear an average interest rate of 10,5% per year for 10 years. In the first year, the school had to repay principal and interest of more than 8 billion VND per month, gradually decreasing over time. Whether enrollment is good or not, whether they are affected by macroeconomic fluctuations such as epidemics or economic crises or not, they still have to spend billions of dong in financial costs every month. The total interest payable after 10 years will be nearly 265 billion VND.
Besides, private education enterprises often follow a roadmap, the first 5 years are the period of all-out efforts to expand - the most "capital-thirsty" period. According to sources of VnExpress At a large southern educational corporation, attracting capital from parents right from the beginning will bring great financial potential to the schools, much better than collecting tuition fees each semester. Usually after about 10 years, schools will enter a profitable stage, so they are confident and can easily return capital to parents.
Parents of the American Vietnam International School came to the school gate to collect debt on September 21. Image: Parents provide
Personnel at an educational business unit in the South said that when businesses implemented this model, they actually researched and analyzed parents' insight very carefully before implementing it. A private school under this group also implemented a similar "educational investment" package because it believed that the majority of parents were high-income earners and business people. They see their children's education as an investment. Although not earning direct interest, lending to the school helps them make a "profit" by ensuring their children can continuously study at international schools.
"As business people, they understand risk very well," this person affirmed. The commitment to let their children study continuously for 12 years at an international school gives them peace of mind. If there are future events such as an economic crisis, business bankruptcy or tuition inflation, your child's education will not be affected.
However, MSc. Bui Khanh Nguyen raised the opinion that the form of educational investment through tuition essentially contains a hidden credit relationship, in which the school "cuts the bridge" to the bank by working with parents. Because Vietnam's private school history is still young, especially international schools, international schools run by domestic companies are still very amateur. If the board of directors brings money to non-educational investments in the hope of quickly making a profit, the risk of losing money and going bankrupt is very high when the school is not a professional investment fund. According to his observations, the top 3 best international schools in Ho Chi Minh City do not have this form of capital mobilization.
"Because the loan is unsecured, there is no collateral, so parents take on a high risk," this expert said.
Siddhartha
