Maths lesson by direct debit

PAYING school fees by monthly direct debit sounds an attractive proposition. There is a cautionary lesson to learn, however - you have to pay for the privilege.

SFS Group has just launched the innovative School Fees Monthly Payment Scheme, which it intends to have up and running for the next academic year.

The full cost of the year's fees is paid directly to the school at the start of the academic year. Parents then contract to repay the amount by direct debit over 12 months.

The minimum advance to a parent is pounds 500 per annum. There is no maximum. The annual charge for the scheme is linked to interest rates, currently 9.6 per cent annual percentage rate, which is competitive.

Funds for the scheme are being provided by the Co-operative Bank. Parents can only reap the benefit if the school their child or children attend joins up.

Schools receive a whole year's fees up front, which should be a big help for their cash flow. The other side of the coin is that the parent pays interest on the annual amount of the fees from the outset, instead of paying by the term.

The scheme brochure strongly advises taking out loan protection insurance. The insurance premiums for the year are added to the annual fees. Interest is paid on the whole amount from the beginning of the academic year.

More than 3,600 families have taken out insurance to protect their children's school fees, according to the Independent Schools Information Service. About 3,000 pupils' fees are insured under the Feesure scheme, where a premium of 2.3 per cent of the fees is added on by the school. The fees will be paid in the event of a parent's redundancy, disability or bankruptcy.

Another 600 families pay for the cover direct under the Future Term scheme.