Top 3 strategies for dealing with unpaid school fees

*Top 3 strategies for dealing with unpaid school fees*
1. Address Defaults Early with Parents

Parents are almost always able to meet Private School Tuition Fees at the start of a student’s enrolment. However, the circumstances of parents can change very rapidly, and may not occur with any malicious intent of the parent.

A default in Tuition Fees may arise out of other difficult family circumstances, including an unexpected redundancy, family law proceedings or increased medical expenses to address a serious illness. These circumstances usually also have an effect on a student’s education.

Picking up on a default early, and maintaining open and frank discussions between the School and the parent, allows for alternative suitable agreements to be put in place.  These documents do not prejudice the strict legal rights of the School or College if they are conducted on a “Without Prejudice” basis.

For example, if a parent is in default due to increased legal spend as Family Law Proceedings are afoot, it may be possible to reach agreement for alternative suitable arrangements (e.g. School Fees are deferred and paid out of a Family Property Settlement).

Engaging early with parents may not just prevent unpaid School Fees from “spiralling out of control”, but allow a School to pre-empt any future legal issues that may arise out of the family’s changing circumstances (e.g. it is common for Schools to get unnecessarily caught in the middle of Family Law Proceedings).

In our experience, un-addressed defaults are the ones at risk of “spiralling out of control”. A parent’s capacity to repay is reduced as additional costs are added to the debt, or other debtors commence recovery action against the parent.

2. Involving a Lawyer

Retaining a lawyer has a number of added benefits over retaining a debt collector.

Receiving a Letter of Demand from a lawyer on their letterhead is usually a firm reminder to the debtor of the seriousness of an unpaid debt. Such a letter will usually remind the debtor that an unpaid debt gives rights to the School to commence Legal Proceedings.

In the event the Letter of Demand is ignored, a Lawyer is able to assist the School in escalating legal proceedings in pursuit of the debt. A debt collector will need to engage Lawyers to do this.

Lawyers are also highly regulated by strict ethical duties (although Debt Collectors are also highly regulated). This assists in the preserving the reputation of the School.

A Lawyer also has a better understanding of associated legal risks, and are able to advise you on preparing enforceable agreements if alternative payment terms are agreed upon with the parent.

3. Enrolment Contract Review

Having a clearly worded and enforceable Enrolment Contract can be an effective deterrent against potential defaults.

For a School, it is important to review the Enrolment Contract from an enforcement perspective. Steps should be taken to ensure that an Enrolment Contract is able to be relied upon to enforce matters such as (without limitation):

Payment of up-front monies;Termination in event of un-remedied default;Payable notice in the event of early termination by parent;Interest payable on unpaid monies; andPassing on additional costs of recovery (i.e. legal fees).

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