Dubai: The final year school results are coming through, and it’s time for parents in the UAE to put their kids through to college and beyond. With tuition fees going up across the board, it may be time for those parents owning property in the UAE to put it to good use.
This is where asset-backed loans come in handy, where in this case the property will be used to tap bank loans. Interest rates on these loans in the UAE are at 5.9 per cent to 6 per cent on a reducing rate per annum basis. Banks such as Emirates NBD finance up to 80 per cent of the property’s value.
The run-up in Dubai and UAE property values will be of particular help to these parents, offering them flexibility on the loans they plan to take for the college costs. (The downside is that the loans would carry a higher interest rate than would have been the case last year, after the 10 successive increases effected by the US Federal Reserve since March 2022 and reflected here as well.)
The other option is to take a loan against fixed deposits while ‘utilizing savings in their current account as collateral’. This can be quite feasible because interest is only charged on the remaining balance after considering the difference between the two accounts,” said Sandeep Jadwani at Habib Investment.
For example, if you have Dh100,000 in your credit account and the loan you seek is Dh200,000, one can negotiate with the bank to charge interest only on the differential of Dh100,000.
But there is a catch - such loans are offered to parents only if they have high credit scores to back them up. Which is why for many parents in the UAE, they are still in two minds about whether to sign up for this option.
“However, the first preference for parents in this high-interest rate scenario is not to take on additional costs and reduce their DBR (debt-burden ratio),” said Damodhar Mata, a Dubai-based financial advisor.
In some cases, parents are considering higher education destinations such as Germany, where college education is free
Partial college fee waivers?
Even those parents who have diligently set up systematic investment plans (SIPs) for their children’s higher education are among those seeking fee waivers of up to 40-50 per cent on the entire college fees, according to university officials.
This is where the succession of interest rate hikes would have hurt parents the most, especially those who have existing loans to take care of.
While some colleges have raised their fees by 3 per cent for the coming academic year, varsities are easing the path by offering generous scholarships and easy-to-pay monthly payment plans.
Basheer Daoud, Vice President of Operational Excellence and Financial Management at the American University of Ras Al Khaimah (AURAK), said, “We offer up to 70 per cent merit-based scholarships for high-achieving students, talent and skill-based scholarships as well as athletic scholarships.
Prospective and continuing students can also qualify for need-based financial aid, which goes up to 20 per cent.
These payment plans are gaining traction among parents.
For students hailing from the UAE, they can opt for a tuition fee instalment payment plan.
Startup offering scholarships
A UAE-based startup SecureMyScholarship has disbursed $5.7 million in higher education scholarships for students at UAE universities this year, up 98 per cent from last year. Nearly 400 students were covered for the September 2022 college intake.
Launched in 2021, SecureMyScholarship is gaining momentum due to the limitations of education loans offered by UAE banks, said the CEO Craig Fernandes. The app provides a fixed 30 per cent reduction in tuition fees to all applicants.
Many students from middle-income families desire to stay back in the UAE to pursue higher education but are unable to do so due to the high costs, which often forces parents to take out huge personal loans.
The platform offers up to 40-50 per cent off the entire tuition fee. While higher fee waivers are granted on merit, students can avail of a guaranteed discount on fees irrespective of their academic standing, said Fernandez.
Work while studying
Dr. James Trotter, Dean and Academic President of Murdoch University Dubai, said that some students opt for part-time study, allowing them to stagger their fee payments over the course of multiple semesters.
Rather than taking a full load of four courses, these students choose to enroll in only two, extending their time to graduation
“This approach results in a reduction in the cost per semester, providing a more manageable financial solution for students and their families,” Dr. Trotter said.