Are private schools sending parents bankrupt? Unfortunately, they are.

Skyrocketing private school fees mean Australian families are paying the most in the world to send their children to high school.

Private schools are literally sending parents broke, with Financial Counselling Australia (FCA) labelling them as “emerging users of bankruptcy”.

Astonishingly, private schools and training colleges file more bankruptcy cases than banks, insurers, and local governments…combined, according to FCA’s data.

Over the last four years, private schools and training colleges filed bankruptcy proceedings in the Federal Court a total of 128 times.

By contrast, Australia’s big four banks – banks that account for 70% of the home loans in a housing-obsessed nation – filed just 39 bankruptcy proceedings during this time. Local governments – councils that charge rates on almost every property in the country – filed 29 proceedings. Banks other than the big four and insurance companies filed even fewer, 23 and 13 proceedings, respectively.

The continued increase of private school fees and the rigging of Australia’s education funding against public schools is described in Jane Caro’s recent essay Rich Kid Poor Kid.

It is important to note that the FCA data does not measure causes of bankruptcy, but rather the number of bankruptcy applications filed in the Federal Court. According to FCA’s report, roughly 40% of those applications result in someone formally being declared bankrupt by the court. The FCA has classified each Federal Court bankruptcy application by “sector” of the applicant.

The FCA finds that private schools and training colleges are the applicants for approximately 2% of bankruptcy proceedings, the eighth ranking sector behind Suppliers & Companies, Individuals, Financial & Insurance Services (driven by “non-bank lenders” that “offer fast approvals…and short-term credit to sole traders, SMEs, farmers and other businesses”), Legal Services, Strata, the Australian Taxation Office, Government (mainly State & Federal Government & Regulators).

The primary “cause” of any bankruptcy is not clear from the Federal Court data. For example, an individual who is unable to pay tax debts, strata fees and school fees does not designate which debt caused their bankruptcy – perhaps all three did. The data identifies only the sector of the applicant to the Federal Court, which in this case could have been the ATO, strata or a private school.

While it isn’t clear exactly how many bankruptcies are caused by private school fees, it is clear they are a major burden on families.

Research from Independent Schools Australia finds that 75% of private school families have adjusted their budget in response to school fees and other cost of living pressures, with 28% cutting back on groceries, medicine, and transport.

The clear alternative is public schools. By properly resourcing public schools, state and federal governments can protect Australian families from these ‘emerging users of bankruptcy’ and reduce Australia’s secondary schooling costs back down towards international averages.

Verdict: True