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How rising interest rates are affecting school fee payments


More families than expected are feeling the effects of economic pressures moving into the second half of 2023. With the country staring into a possible recession and living costs the highest they’ve ever been, Australians across all income brackets are having to make sacrifices and adjust their lifestyles.

Interest rates rise at record pace

Rising interest rates have been hitting home loan holders particularly hard. Rates are now at the highest they’ve been in 11 years after being lifted by the Reserve Bank 12 times in just over a year. Recent research found that close to 23% of home owners are using more than half of their income to pay their mortgage, and a further 11% are using upwards of 70%. Mortgage stress, defined as when someone has or is likely to miss a mortgage repayment, is at an all time high, topping the previous record set in 2008 in the midst of the Global Financial Crisis.

The looming mortgage cliff

Many families are only now starting to feel the true effects of higher interest rates as they come out of their lower interest ‘fixed rate’ mortgage agreements and have to readjust to the higher rates available. Known as the ‘mortgage rate adjustment cliff’, large numbers of loan holders come out of these agreements this May and June, with more than a million households still to be affected over the next year and a half. Some of these households were on ultra-cheap fixed loans offered by banks throughout the pandemic, meaning a significant rise in their repayments and serious adjustments to their spending.

How school fee payments are being affected

After analysing our data, we found families paying school fees and a mortgage have seen their monthly expenses go up over $2,000 in the last year, from $10,510 to $12,704. Higher interest rates on home loans is the main factor behind this, with school fees and general expenses also rising.

As a result of these added pressures, it comes as no surprise that we’re seeing an increase in families who want more flexibility with their school fee payments - 13% more families are opting to pay via instalments instead of upfront payments in 2023 so far.


Source: Edstart

Our customer data also shows more families are taking advantage of the flexibility Edstart provides with deferring some of their fee payments, with a 49% increase over the last 12 months. This affected families across the income spectrum, with around half of the families who deferred a payment in 2023 doing so for the first time.


Source: Edstart

New financial pressures and the family budget

With these increased financial pressures, sacrifices are having to be made on regular spending habits. Families have told us that dining out, grocery shopping and holidays have had to take a cut, and home renovations and repairs are being put on the back burner.

However with some planning and prudence you can take the edge off the situation. Creating a budget and sticking to it is the first step, and taking extra care and looking for more flexibility with contracts and payment plans will go a long way in making the situation more manageable.

For some more steps on how to ease the cost of living, take a look here.

About Edstart
Edstart is a leading technology and financial services company providing funding and payment services for education. We offer fee management solutions to schools and flexible payment plans to parents to help make school fees easier to manage.

To see how we can help you, visit our main website.

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