ITS EDUCATION ASIA ARTICLE

SCHOOLS DEBENTURES IN THE '852 ZONE'

By Anne Murphy

Navigating the school application process in Hong Kong can be an arduous task and the confuse the situation even more, a word parents hear repeatedly is “debenture” – and this is usually followed by a mind-blowing figure. School debentures are a one-off, upfront payment towards financing a school’s community. The money is used by the school for building improvements, campus facilities and other capital costs. Most schools offer both corporate and individual debentures and, in most cases, the debenture is refunded when the student leaves the school.

For Hong Kong schools, parents need to be aware of the following names (an explanation of each type is outlined below):

1.  Capital Note:  A capital note is non-interest bearing, non-refundable and fully transferable.
2.  Corporate Debenture:A holder of a corporate debenture is entitled to nominate one child to a school at any one time. Nomination accelerates a child’s place on the wait list - but does not guarantee a place. At some schools, a Corporate Debenture is transferable and refundable while others have a life span of eight years from the date of issue and will depreciate to zero over that period.
3.  Individual Nomination Rights: The Nomination Rights is a means for students to gain a “fast track” entry to schools. It is non-refundable. An Individual Nomination Right is the name used by The English Schools Foundation (ESF) and ESF Private Independent Schools (Discovery College and Renaissance College). The Nomination Right guarantees priority on the waiting list and a place subject to interview.
4.  Individual /Personal Debenture:  Only mandatory at certain schools and all students must be nominated under this debenture if not already nominated under another.
5.  Premium School Development Levy (PSDL): This is a means for a child to gain a “fast track” entry to the Kindergarten (Nursery and Reception) and Primary (Year 1 to Year 6) sections of Discovery Bay International School (DBIS) only. The PSDL does not confirm sibling rights. Once the named child has commenced enrollment at DBIS, the PSDL is non-refundable and non-transferable.

Pull-out quote: Most schools offer both corporate and individual debentures and, in most cases, the debenture is refunded when the student leaves the school

How much is a debenture?

The range varies. Some schools expect parents to pay between HKD30,000 and HKD500,000. A few schools reduce the price for the second and third child while other schools have a one child nomination policy and siblings must be covered under a capital levy.  It differs from school to school so it’s important to understand the financial implications before a school offer is accepted.

Debentures may also be purchased on the second-hand market. This means that the school has ‘sold out’ and existing holders can transfer them to others. The price of this transaction is set by market demands or the school may cap it. This trade is usually done by agencies which specialize in buying and selling school debentures. The fees range from HKD2.5milliion to HKD6.5million. The prices for these debentures have fallen by as much as 40 per cent over the past 2 years. 

What do you need to think about?

It certainly can be quite confusing, and it can be difficult to figure out what fees are required once you accept a school offer. Be sure to speak with someone in the finance department of any school which requires an up-front debenture payment, so you fully understand their system and how it operates. You should ask lots of questions about refund polices, and other fees which might incur during the time your child is at the school. You can also contact us to arrange a consultation. If in doubt about any part of the school admissions process, please send us an email: [email protected] to arrange a call with one of our school placement experts.