Parents risk losing hundreds of thousands investing in international schools

This agreement was meant to return her investment upon her children's graduation, with no collateral offered by the school and payment required upfront.

Seduced by the school's impressive infrastructure yet financially stretched, Ly financed this investment by selling her apartment and taking out a bank loan.

"I did not have enough money, so I borrowed from a bank and sold my apartment to lend the money to the school," Ly said. "The institution seemed large and distinguished, so I did not think much [of the risks]."

Since studying abroad is well beyond Ly and her husband's budget, an international school in Vietnam is the next best option, and this investment package was the only way for middle-income families like hers to afford tuition at such institutions for their kids, she said.

However, the school she lent money to declared it was facing financial difficulties last September, resulting in students not being able to go to class as teachers went on strike and refused to show up due to unpaid salaries.

Ly, whose children are now in the sixth and eleventh grades, then demanded her money back, but the school has consistently delayed any payments.

"I have been asking for my money back since a year ago. The school wanted to postpone payments until August 2023 but even then, they were unable to refund me," she said. "It has been extremely stressful for me. My children’s education is uncertain and I fear that I will lose everything should the school go bankrupt."

"My children have been asking me, ‘Mom, is there any news about our school?’ and ‘Mom, will we be going to school next week?’" she tearfully said.

Ly is but one of many parents who lent money to this international school and are now at risk of losing billions of dong as the facility is unable to ensure consistent operations due to financial instability.

Tam, 40, let the same school borrow VND2.3 billion a few years ago for her son to start the sixth grade there.

Having seen the school’s infrastructure and heard its claims that it was the most invested international school in Southeast Asia, she considered this a lucrative investment and trusted the institution.

"I never would have thought it could go bankrupt or cease operations," she said.

"My son is now in the ninth grade. He has been emotionally drained over the last six to seven months as his teachers quit and his friends gradually transferred to other places while his school constantly made headlines with parents showing up to demand their money back," she said.

The risks faced by Ly and Tam have raised concerns among many parents who pay their children’s tuition through these "education investment contracts," which many schools use as a ruse to "borrow" money from families.

This method has been commonly employed by numerous international and private schools in HCMC and Hanoi over the last 15 years to raise capital, especially during their early stages.

HCMC boasts 35 schools utilizing foreign capital, predominantly employing curricula from North America and the U.K., supplemented by Vietnamese subjects. Tuition fees at these schools can reach up to VND1 billion per year.

Schools also have an easier time getting off the ground because they do not need to provide collateral and are not limited in how they use the money.

Nonetheless, when the school's financial health declines, parents might not be able to recover their investment.

An example is the American International School Vietnam (AISVN), where approximately 900 parents collectively invested VND3.6 trillion ($145 million) through education investment contracts, enabling their children's education from first through 12th grade.

The school has around 1,316 students from kindergarten to 12th grade, and a faculty consisting of 130 foreign teachers, 26 Vietnamese teachers and over 100 other employees.

It has been facing financial challenges since 2018 and was recently rendered financially incapable. Since September last year, teachers' salaries have been delayed, resulting in a huge strike.

By March, over 50% of the teachers had quit, causing classes to be shut down.

This situation left parents unable to recover their investments, while also requiring them to contribute an additional VND22 billion to keep the school operational for their children's sake.

With the contributions from parents, the school has managed to pay the teachers and continue operations for the time being.

These transactions are not forbidden or restricted in any capacity under current regulations, lawyer Dang Ba Ky said.

But parents often place their trust in these schools solely based on their prestigious infrastructure and give them money without collateral or any conditions, making them vulnerable to exploitation, he explained.

Since schools are free to do as they want with the money, they can use it for purposes other than their operations, potentially leading to bankruptcy, he added.

Should this happen, the lenders are at risk of losing their money.

Parents do not have much to go on when evaluating a school’s credibility either, as pointed out by Truong, a parent who lent money to an international school.

"They [the school] did not present their financial reports when they borrowed money [from parents]. They also did not disclose what the money was used for, only vaguely claiming it was for their operations," he said.

After receiving numerous reports from parents, on March 28, the Ministry of Education and Training ordered local authorities to review and inspect international schools.

Through these inspections, the ministry discovered that some international educational institutions have not been complying with legal regulations, negatively affecting the learning processes of students and posing high risks for parents.

Regarding schools taking loans from parents under the guise of "education investment packages," Ho Tan Minh, office chief of the HCMC Department of Education and Training, said these deals are civil transactions between the two parties and do not fall under the purview of education authorities.

Hence, the department cannot scrutinize or manage these transactions, he said.

As a solution has yet to be found for their investment and their children's interrupted education, the parents who lent money to these schools can do nothing but wait.

"I have spent my entire fortune for my son to study at an international school only to be stuck in this situation where I have to wait for an email (from the school administrators) every night to know whether my child will go to school tomorrow or not," Tam shared. "We [Tam’s family] cry all the time, knowing that the possibility of recovering our money is slim to none."