Indian schools & colleges grow 14% as fees soar, parents struggle

Despite India's consumer price inflation remaining between 5-5.6% in recent years, education costs have escalated at a much higher rate of around 8-10%

Schools and colleges in India are set to witness a revenue growth of 12-14 per cent in the current financial year (FY25), according to a recent report. This increase, driven by higher enrolments and adjustments in fee structures, comes as students explore new course offerings. The report from Crisil Ratings, released on October 8, outlines the trends expected in the education sector despite a high base from previous years of robust growth.

 

The anticipated growth follows three consecutive years of high-teen revenue increases. Improved enrolments and improved asset utilisation will offset rising faculty salaries and ancillary costs associated with new courses. This trend should help maintain the operating margin at approximately 28 per cent, based on an analysis of 96 educational institutions that collectively generate nearly Rs 20,000 crore in fee income. However, this growth comes at a cost—one that is borne by desperate parents.

 

 

Strong cash flow resulting from higher revenue and timely fee collections will minimise the need for debt financing for these capital improvements, thereby supporting their credit profiles.

 

Why are enrolments increasing?

 

The K-12 segment, primarily composed of schools, is seeing rising enrolments for two main reasons: increasing demand for high-quality education and improved affordability as income levels rise.

 

“The Crisil report’s 12-14 per cent revenue growth forecast for schools this financial year signals an upward trend in education finance fuelled by higher enrolments and fee revisions. This will further enable institutions to strengthen their operational and capital expenditures,” explained Praneet Mungali, Trustee and Secretary of the Sanskriti Group Schools. He added that nearly 60 per cent of education costs are directed towards staff salaries, making these fee adjustments necessary to sustain growth in the sector.

 

Revenue grows, but at a cost

 

Despite India's consumer price inflation remaining between 5-5.6 per cent in recent years, education costs have escalated at a much higher rate of around 8-10 per cent, according to a BankBazaar report. This trend shows that education expenses could potentially double every six to seven years.

 

“As disposable incomes have grown from Rs 239.25 trillion in 2021-22 to Rs 273.99 trillion in 2022-23, parents are increasingly willing to invest in high-quality education,” Mungali noted. However, he highlighted the urban-rural divide, where rural households spend just 3.3 per cent of their income on education compared to 5.78 per cent in urban areas.

 

The Crisil report revealed that a substantial portion of income generation in educational institutions stems from fee revisions. Recent increases in educational costs have raised concerns among parents. A post shared on X (formerly Twitter) captured widespread outrage over exorbitant fees, including an Rs 8,400 “one-time” charge for a parents' orientation session.

 

Jagdish Chaturvedi, an ENT surgeon and entrepreneur, expressed his frustration on X, saying, “Rs 8,400 parent orientation fee! No parent will ever agree to pay even 20 per cent of this for a doctor's consultation… I am planning to open a school now.” This sentiment resonated with many social media users, who voiced their concerns that education is becoming a profit-driven enterprise.

 

Others chimed in, advocating for change within the education system. Comments such as “We need a revolution in the education system. Can startups create an affordable, quality education structure?” reflect the growing discontent among parents.

 

In August, Aviral Bhatnagar, an investor based in Bengaluru, raised alarms over the steep increase in lower kindergarten (LKG) fees in Hyderabad, where they have surged to Rs 3.7 lakh per year, up from Rs 2.3 lakh previously. Although Bhatnagar did not name the school, he pointed to this increase as indicative of a broader nationwide trend. He noted that, when adjusted for inflation, school fees have increased ninefold over the past 30 years.

 

While such instances may seem isolated to top-tier institutions, they illustrate a broader trend of escalating education costs across India. Between 2014 and 2018, the cost of primary education rose by 30.7 per cent, while fees for graduate and postgraduate courses increased by 5.8 per cent and 13.19 per cent, respectively. A 2020 report from the National Sample Survey Office revealed that average education expenses nearly doubled over the previous decade.

 

Regional disparities in education costs

 

The rising costs disproportionately affect families, particularly in economically developed states like Maharashtra, Karnataka, and Tamil Nadu, which have witnessed sharper fee increases compared to less developed states like Bihar, Uttar Pradesh, and Odisha. For example, in Maharashtra, particularly in cities like Mumbai and Pune, average tuition fees for engineering courses have jumped by 70 per cent over the last decade, primarily due to the state government's push towards privatisation.

 

Karnataka has also experienced significant increases. A report from 2019 by the Centre for Budget and Governance Accountability revealed that average tuition fees for professional courses in private institutions rose by 60 per cent over the past ten years. Meanwhile, states with lower per capita incomes have not seen such dramatic hikes, although the quality of education remains a pressing issue.

 

Impact on families

 

These escalating costs pose significant barriers to upward mobility for middle-class and low-income families. A 2021 survey by the National Council of Applied Economic Research found that while most parents view education as essential for a better future, they are increasingly concerned about its affordability. Approximately 60 per cent of respondents expressed dissatisfaction with rising costs, often feeling that private institutions charge disproportionate fees compared to the quality of education provided.

 

“The University Grants Commission (UGC)’s push for higher education institutions to diversify revenue streams through private-sector partnerships, fundraising, and IP commercialisation is an important strategy for financial resilience,” Mungali said. “However, to truly leverage this momentum, there must be a concerted effort to address the urban-rural divide, where rural households spend just 3.3 per cent of their income on education, compared to 5.78 per cent in urban areas. The Centre’s ability to invest in schools and vocational centres, particularly in underserved regions, will be critical to achieving equitable, inclusive growth and driving the projected $313 billion market by 2030.”