Johannesburg - A series of consecutive interest rate hikes implemented to rein in spiralling inflation is putting pressure on consumers, with long-term debt like home loans and vehicle finance under greater pressure.
A number of banks have in recent weeks reported an increase in impairment charges as a growing number of home loan consumers struggle to make repayments on their home loans.
A recent TransUnion report reveals that one out of every three South African households say they are not able to pay their monthly bills and loan instalments in full, while a quarter reported a decrease in household income as a result of either job loss or wage cuts.
Many parents are also struggling to pay school fees. The cost of education – both at government and private schools – is rising, with fee hikes in 2023 ranging between 4% and 6%.
Estimations are that this trend is not likely to change any time soon, with education inflation expected to continue to outpace the consumer price index by up to 3%. The bad news for parents already struggling with the cost-of-living crisis is that the cost of education is expected to ultimately exceed salary inflation.
It’s not only school fees that add to the cost of education, but also all the additional costs that need to be factored in during a child’s educational journey: uniforms, books, sports equipment, and school trips and tours, among others.
TPN Credit Bureau says that more than 40% of school fee accounts were in arrears at the end of 2022. Even more concerning, TPN says 25% of parents did not make any sort of payment at all towards outstanding school fees.
A failure to pay school fees has implications for parents, including their credit score. Ashleigh Laurent, legal counsel at TPN, reveals that private school parents who are in default are sent a letter of demand and then given 20 business days to settle the outstanding balance. If the parents still fail to make payment, the school is within its rights to proceed with debt collection. As a last resort, because the best interests of the child are of paramount importance, the school can decide to exclude learners when their parents still fail to pay only after an extensive notice period passes. Non-paying parents at government schools are provided with a little more protection than parents at private schools, says Laurent.
“Government schools can only take action against non-paying parents once they have determined if the parents qualify for a full exemption, partial or conditional exemption from payment and are required to notify parents in writing if they have not applied for an exemption. The government school can send a letter of demand giving the parents three months to pay from date of receipt of the letter,” she reveals.
A poor credit history has a range of consequences, potentially impacting an individual’s ability to access loans, apply for credit and be granted competitive interest rates. The bottom line, says Paul Esterhuizen, CEO of School-Days, is that it’s not worth taking on debt that you are unable to repay as you will be negatively impacting your credit score and jeopardising your credit history.
School-Days is an innovative rewards and incentives programme that helps parents pay for their children’s school fees by shopping with partner merchants known as School-Days Earn Partners, while still earning their normal retailer loyalty points. While the initiative started with the idea of raising funds by earning Edu-Time Points (ETPs), to help families pay towards their family’s school, college and university fees, the focus of the programme has subsequently been extended to give the public the opportunity to assist others. As a result, Edu-Time Points can now be used to support up to two South African schools of the shopper’s choice as beneficiaries; support disadvantaged schools by choosing the non-profit Adopt-a-School Foundation; or, as originally intended, use their Edu-Time Points (ETPs) to pay towards their child's school, college or university fees.
“In a tough economic environment when household finances are constrained, it makes sense to utilise every possible avenue to help pay school, college and university fees,” says Esterhuizen. “It does not cost consumers anything to join the programme or impact their ability to earn their normal retailer loyalty points. It really is win-win.”