Why Sydney and Melbourne private school fees are going to $200K a year

It is that time of year again.

Private school fee letters are arriving, and for many families the numbers are confronting.

Many schools appear to be lifting fees by something between 5 - 7%. For financial advisers, these costs have shifted from being background noise to a central conversation in financial planning.

As fees rise faster than wages, grandparents are increasingly involved, bringing wealth management directly into the household conversation.

For fund managers, this matters because a growing share of portfolios are now being constructed around education liabilities.

Why do private school fees rise so much?

There has been plenty of commentary about fees rising faster than CPI or wages. But that misses the underlying drivers. 

Understanding what’s happening requires looking at the marginal buyer and how the market has changed.

A global elite

The first major change is the globalisation of education and the rise of competitive ranking tables. Schools such as Scotch College, Sydney Grammar, and Melbourne Grammar have become globally recognised “brands,” competing in a facilities arms-race.

For internationally mobile families, these schools offer high-quality English-language education and pathways to top-tier universities. Once a service competes for global demand, pricing tends to anchor to global purchasing power rather than local wages.

Recent currency movements reinforce this: a weaker Australian dollar makes fees easier for families with offshore assets but adds no relief for families reliant on local wealth.

The bank of grandma and grandpa

A growing proportion of school fees are funded by grandparents. 

This reflects both household balance sheets and demographic trends: Australians are having fewer children, meaning fewer grandchildren. With fewer people in the inheritance chain, accumulated family wealth can more readily support education costs.

Asset prices, not salaries

Private school fees increasingly reflect the value of accumulated wealth rather than annual salaries. Families paying from property, equities, superannuation, or business interests create a system where fees rise in line with asset prices, largely independent of wage growth.

This explains why fees are ‘sticky.’ Apart from the temporary freeze in 2021, the trajectory has been consistently upward. In effect, the willingness and ability of families to pay, what economists call "price elasticity of demand", is largely determined by property and stock market performance.

The $200k projection

If current trends continue, the numbers are sobering. 

A private school charging $45,000 today, inflating at 6% per year, will see Year 12 fees reach roughly $145,000 for a child born today. Adding boarding or extracurriculars, annual costs could hit $200,000 within a generation.

What families and advisers can consider