This is an issue that nearly every non-government school will face or experience and, in light of the recent economic downturn in some states and territories, it has become a common reality.
Families, due to a plethora of unfortunate circumstances, including bereavements, redundancies and family separations can fall upon harsh financial times and they may find it difficult or sometimes even impossible to continue to pay academic school fees.
Non-government schools provide a huge range of strategies for families who have legitimate reasons for being unable to pay their school fees. These include deferment of the fees for an agreed period, fee remission programs, bursaries, reduced payments over a set period of time and even, in extreme cases, the writing-off of the fees for that semester or the year. Schools that choose to offer any form of fee instalment arrangement must ensure that they enter into a new contract with the parents and that the contract complies with the Consumer Credit Code.
Some organisations such as the Catholic Schools’ Board Diocese of Sale have policies that assist their systemic schools to determine how to deal with families who are unable to pay their school fees. These are extremely valuable as they set out clear parameters for their schools to follow in these situations.
Generally, families who are experiencing financial stress are encouraged to meet with the school principal or business manager to discuss their situation and to make alternative arrangements for fees to be paid and thus ensure the ongoing enrolment of their child/children. Schools do not want to lose students, even if they have waiting lists, because they know that the disruption of a change of school for the affected children can be quite severe. This is even more crucial if a child is in one of their last two years at school.
However, some families, who for their own reasons, do not wish to speak with the school regarding their financial situation, will simply withdraw their children either with or without notice. Schools are aware that this does happen from time to time and they encourage the families to meet with them to discuss how an alternative arrangement can be reached.
The withdrawal of students without notice can place a financial imposition on a school and some schools say that they will charge one term’s fees if the school has a notice clause in its enrolment policy and contract. This is not an uncommon practice, as noted in this Sydney Morning Herald article. Although some schools may argue that having a fee imposition can encourage families to give the required period of notice, there are times, especially with an unexpected loss of income or a bereavement, where families may not be able to give the required period of notice. Schools will often take this into account when determining whether or not to waive the notice period.
However, on the matter of the imposition of a ‘penalty’ as noted in this article, according to David Ford of Emil Ford & Co in The Enrolment Contract, on the question of ‘Is this enforceable? The law says “No” if it is a penalty but “Yes” if it is for “liquidated damages”.’ Schools that have a contractual statement for fees in lieu of notice should seek legal advice before imposing any form of ‘penalty’ on any family that withdraws their children without the required notice.
According to Ford, a penalty is a ‘requirement to pay an amount of money to frighten the potential offending party into compliance.’ Alternatively, liquidated damages should be a genuine pre-estimate of the financial damage to the school of the family’s failure to give notice. Ford goes on to argue that: ‘To determine whether the term in the enrolment contract is a penalty or liquidated damages, one must look at the circumstances at the time the contract is entered into, not at the time of the parents’ failure to give notice which may, of course, be years later.’
However, according to Christian Schools Australia, ‘sometimes it is difficult at the time of making a contract to genuinely determine the extent of losses that may be incur [sic] if the contract is not fulfilled.’ Basically, any imposed fee should not be considered too harsh or extravagant.
There are circumstances where children are not withdrawn and families simply fail to or choose not to pay the fees. These situations often cause the greatest angst for the schools because there is usually an inordinate amount of time and effort that has to be taken to follow up and encourage the families concerned to either make their fee payments or meet to discuss some form of payment scheme.
Most schools employ staff who ‘chase up’ late fee payers by contacting them via formal letter, email, telephone or even face to face interviews. In addition, some schools choose to impose a ‘late fee penalty’ but as noted above, a penalty may not be supported if it is deemed to be extravagant or far in excess of the actual costs incurred by the school in attempting to recoup the outstanding fees. Schools go as far as employing debt collection agencies to assist in this process - this, of course, will incur further costs. As noted in School Governance, schools should be aware of all legal consequences that may occur when fee-deferral options are given to parents and understand how the credit reporting provisions apply to them.
One way to reduce the risks and costs associated with possible late or non-payers of school fees is to have a clear and fair enrolment policy and enrolment contract. Note that the enrolment contract is a separate document from the enrolment application form. The application is simply that - an application to attend the school. It is not a binding contract. In very broad terms, along with a number of other crucial matters such as agreeing to privacy issues, a parent code of conduct, schools discipline, and work, health and safety matters, enrolment contracts should determine who will pay the fees and what will happen if default occurs.
Schools often include terms or clauses that indicate that the parents are both jointly and severally liable for the payment of the school fees. Failure to have this type of clause or failure to have both parents (unless it is a single parent family) sign the contract of enrolment (acceptance form) could result in the school having difficulty to recoup outstanding fees. Remember that the school only has a contract with the people who sign to accept the offer. In addition, as previously noted in School Governance, unless stipulated in a Family Court Order, schools should not enter into any contracts with split billing arrangements for estranged parents.
According to Ford, before an offer of a place is made for a new student, schools must ensure that the:
- parents are able to afford the school fees and other expenses of their child attending the school;
- parents are familiar with the school's culture or ethos and are comfortable for their child to be educated within it; and
- school is able to make whatever reasonable adjustments are required for students with disabilities.
If the school is assured that it has a firm enrolment contract, it has several options that it can explore regarding families who choose not to pay fees or to reduce the number of families who withdraw children without notice. These include:
- sending out regular notices in school publications such as newsletters to remind all families that school fees are due and payable on a specific date;
- offering a discount on fees that are paid up front or in advance for the full semester or year;
- publishing an article or sending a reminder to families at the end of third term (or at other similar times) that they need to give notice now if their child will not be returning for the following year. Please note that discretion needs to be used here as it may encourage families who were hesitant or unsure to make the decision to withdraw;
- personal follow up (calls, letters, emails and interviews) of all late paying families that commences on the day following the due date for fee payments;
- imposition of ‘liquidated damages’ claims for lack of notice or late payment;
- using the services of a debt collection agency;
- seeking damages through the courts - including judgement debts, property seizure, or garnishee orders; and
- cancellation of the enrolment of the child or children - usually followed up with ongoing action to recoup the fees.
Legal advice should always be sought before cancelling an enrolment and all contact with the family should be documented. Families sometimes choose to ignore all of these avenues but schools should only use personal approaches and not use social media contacts as this may breach privacy provisions. It must be made clear that is a termination of the contract due to the parents' breach, not an expulsion of the child. In addition, if the family continues to send the children to the school whilst the matter is being resolved, the school still has a duty to care for those children.
In a debt recovery situation, the enrolment contract is the most important document as it establishes the obligations of each party. In summary, Ford encourages all schools to remember the following five points:
- Get the enrolment process right!
- Have a comprehensive enrolment policy.
- Understand your disability discrimination obligations.
- Keep your enrolment terms up to date by regular review.
- Get both parents to sign everything.