In 2018, the American International School Vietnam (AISVN) in HCMC for the first time borrowed between VND2 and VND5 billion from students’ parents in exchange for free education until they graduate from high school. secondary school or move elsewhere.
The agreement is that the loan will be repaid in full within 90 days of the student’s graduation. There will be a 90-day grace period during which interest at Vietcombank’s deposit rate will be paid.
According to information published on the AISVN website, the tuition fee for 12 years is VND6.95 billion.
So, a loan of VND5 billion gets a return of 139% if based on simple interest, or 11.58% per year. If compounded, the yield is just over 7 percent.
The rate exceeds the annual returns of currencies, gold, real estate and bonds in 2011-2021, and is inferior only to stocks, according to investment firm Dragon Capital.
But the risks are high since these are unsecured loans, guaranteed only by the credibility of a school.
Many private schools, such as the Dewey Schools system, the US Vietnam Talent International School, and the International Schools of North America, use such borrowing under the name “education investment programs.”
It has been around for more than a decade and has become increasingly popular in recent years, said Bui Khanh Nguyen, an independent education expert specializing in international schools.
Setting up a private school requires more than 500 billion VND, but most are established by medium-sized or small businesses with few financial resources and few assets that can be used as collateral for bank loans, he explained. .
Bank loans also carry the risk of fluctuating interest rates, which could easily exceed 10%, he explained.
If a private school had borrowed VND500 billion from a bank in early 2018, when the average loan interest rate was around 10.5% for a 10-year term, it would have had to pay VND4.375 billion per month per month. first year.
This is a real challenge for private schools because they typically spend a lot of money up front while earning little in the first five years, Nguyen said.
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The American International School Vietnam (AISVN) in the Nha Be district of HCMC. Photo by VnExpress/Le Nguyen |
About 20 international and bilingual schools in HCMC and Hanoi follow this model of advance payments instead of several years of schooling, he said.
But not the top three international schools in HCMC, he added.
An employee of a large education company, who asked not to be identified, in the southern region said: VnExpress that 10 years after their launch, private schools begin to make enough profit to easily reimburse parents.
But they need to do thorough research into the parents’ backgrounds, they said.
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Parents come to American International School Vietnam (AISVN) to claim their money on September 21, 2023. Photo provided by parents |
A school run by their company took out these loans only after ensuring that most parents had high incomes and viewed their children’s education as an investment.
Parents are guaranteed an education for their children in an international school even if they go bankrupt or if tuition fees increase over the years, they stressed.
“As businessmen, they are well aware of the risks.”
Nguyen said there are risks since the private school model is relatively new in Vietnam and many institutions are still amateur in their operations and management.
“As it is an unsecured loan, parents are at high risk.”
