Click picture for a demo

Progress Updates 06 Feb 2003

Thanks for all your feedback. Let me answer some broad questions. NO we are not selling eduoption. Only educational institution or providers should offer them. We are merely the technical enablers. Although some people had remarked this as a devious system for institutions to raise alternative funds, I beg to differ. I do not see any harm for legitimate institutions to have extra funds provided they use this funds wisely like in providing more scholarships, labs, teaching facilities or retain and attract top staff. I am sure these accusers have not worked in an education institution before otherwise they would not make such acid accusation so casually. In comparison to direct fund raising exercise, I would consider eduoption as more practical as it actually benefits future students directly rather than past students. One person commented that it is better to let his kids to work through college than to financially prepared them. He argued that it will make them independent. Well, I tend to think otherwise, working through college is a 'mature' thing if you really cannot afford it but it also has it dark side as this article reveals. Some people have voiced their impatience with my slow progress in convincing their institutions to use this system. There is currently nothing to stop those who are interested to lock in their own fees from contracting with their desired institutions directly. A contract to lock in a future fee is similar to a normal contract. You can see an example here. To calculate how much to pay click here.

There seem to be a misconception that eduoption is a prepaid instrument. Prepaid is a popular choice in the US and as far as we know but they do not exist in other countries. I stand corrected, I noticed some UK and Australian institutions are offering this now, some even at bargain basement prices aimed at foreign students but courses are limited. But if they are sensible, they should read the article about prepaid below under "Difference with prepaid". For locals in Australia, they have HECS which is basically a loan made by the government. However a prepaid instrument offered by most states in the US have strict qualifications including residency requirements, public universities only and in most cases do not include post-graduate studies. Prepaid are state-sponsored instruments so ultimately the states are subsidizing the full cost by attempting to invest the funds to yield a better return above the actual operating cost of the public universities. Eduoption is a private contract between the individual and the institution to lock in the future cost by costing the price risk as a premium. The institution takes all the risk by being rewarded with the premium. The main difference here is that said institution has some control over the final price unlike investing in the stock market where it is impossible to predict the future return such that it will cover current cost. Unless these institutions badly managed these premium or negligently forecast competitor's pricing or supply/demand and only then, we can see default risk. Naturally should these institutions invest the premium in the stock market and turned out short then the burden is on them to cover their obligations as the case with state-sponsored prepaid. However as these are only premiums and not full fees, the downside may not be that disasterous. Our estimates put these premiums to be around 6-12 percent of total fees for periods of up to 5 years before commencement of courses. For such amount, it will be better to invest directly into their own institutions rather than attempting to double the amount or risk losing all of it in the stocks market. For example, 6 percent increase in funding means at least 2 more full scholarships or to employ a full time lecturer from every 20 eduoptions written. Another well noted difference is that prepaid means paying in full for the fees either through an installment scheme or up-front while in eduoption, one merely locks in the fee. The purchasers still have to find means to fund the locked fee through the usual savings plan. However with the future fee known, these investment decision is now more focussed and one need not take unnecessary risk to beat the unpredictable fee as is the case now. In short, one can invest in safe investments like government bonds in greater percentage than focussing in equities. See this article when parents invest in the stock market. Here is another article about 529 if you are interested to see some pitfalls.