Korean Job Discussion Forums

[wylies99]

Hagwon Nervous On Stricter Fee Rules

http://www.koreatimes.co.kr/www/news/nation/2008/09/117_31581.html

By Kim Tae-jong
Staff Reporter

Officials of hagwon, or private cram schools, are concerned over the government's move to strictly apply regulations on fees. Education authorities are sending warning signals to hagwon that they will take stern action in the event of overcharging of fees, tax evasion and other illegal practices.

Concern in the private education market was fuelled Tuesday as President Lee Myung-bak asked his Cabinet to set up measures to address rising household spending on private education. The anti-trust Fair Trade Commission is moving to look into hagwon that failed to report tuition hikes to the authorities and allegedly dodged taxes.

Hagwon officials are denouncing the move, claiming the crackdown will only put many hagwon out of business. Then fees will have to rise on strong demand against a smaller number of hagwon.

``The crackdown will only boost illegal expensive private group lessons and help invigorate big corporate-like hagwon since many small hagwon will be out of business,'' an official from the Korea Association of Hagwon said.

The government, however, is committed to regulating the fees more strictly.

According to the Ministry of Education, Science and Technology, it has disciplined 2,423 hagwon nationwide for overcharging tuition since 2005. Under the current law, all private academic institutes should report their fees to local education offices. But many hagwon charged more than they reported to authorities.

Of the total violations, 1,516 cases were reported in Seoul alone with 220 in Gyeonggi Province, 196 in Gwangju City and 107 in South Chungcheong Province.

In Gangnam-gu in southern Seoul, where a large number of hagwon operate, 515 violations were reported. About 120 hagwon charged fees twice as high as what they reported and 19 hagwon overcharged four times higher than reported.

An English hagwon in southern Seoul was found to charge six million won for a month of classes, almost 13 times higher than the 450,000 won it reported to authorities.

Also, many hagwons were found to increase other expenses to avoid regulations on tuition hikes by local education offices, such as extra textbooks and special classes.

``Education authorities' regulations do not reflect reality,'' a director of a hagwon in southern Seoul said, critical of the government's current move. ``Each hagwon has different operating systems, hiring different levels of teachers and paying different rental. The fixed rules on tuition means we should stop running hagwon.''

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[wylies99]

Hagwons think the law is for everyone else to follow.

[Juregen]

What I can see is that small hagwons will actually benefit from this.

Smaller hagwons cannot sell their "names" to push up prices and sell overpriced textbooks.

Smaller hagwons have difficulties pushing tuition fees for the same reason.

In other words, the big names will suffer.

ergo sum, some of you might who work for hagwons might have to consider their options.

Unless of course the ones who do follow the regulations more strict will be able to pick up the slack.

[hari seldon]

This is asinine. If the ministry doesn't permit the market to set the fees then how are hagwon owners supposed to cope with the rising costs?

And hagwon owners face different cost structures. Some owners pay large franchise fees. Some pay high rents. Some spend extra on resources like books and computers. Others spend extra to attract and retain better teachers.

Schools compete against one another for students. In most communities there are many schools and the competition is cutthroat. Parents visit different schools to compare facilities, resources, teachers and fees. There's no need to control tuition prices. Supply and demand sets appropriate prices. Why would a parent choose a more expensive academy when a competing academy next door offers the same quality at a lower price?

If the government is worried about low income families affording hagwon fees, then they should provide assistance in the form of cash vouchers or tax breaks, not try to pretend that they are smarter than the market. They aren't.

[mnhnhyouh]

No mention of what the max fee is?

h

[CPT]

It seems to me that the issue is not that Hagwons are charging too much, but that they are not reporting enough to the government for tax purposes.

[bassexpander]

Virtually every hagwon must cheat on taxes in order to stay in business. The rules on their legal income are purposefully strict, in order to keep them from overcharging (and arguably, to drive them out of business). Every school keeps 3 sets of books -- one for the tax people, one for the business, and one true book that the owner only looks at.

The government wants to kill of the hagwons. Everyone knows this. For the hagwon owners to whine about it falls on deaf ears, because they gov't here has pretty much point-blank said that they want to get rid of the expenses of hagwons.

My wife remembers a time back in the 80s when hagwons were declared illegal. I'm not sure why they came back, or how the gov't let them back in. Maybe they figured they just couldn't stop it or something, or a change in power brought about a change in rules.

[marlow]

Seeing as hagwons are desperate for teachers, and public schools are meeting quotas, maybe that'll force them out.

What's going to happen is hagwons are going to want to raise fees and pay teachers more, and the government is going to pinch them.

The losers? Teachers stuck in public school pay scales or hagwon crappiness.

[Yu_Bum_suk]

While I wish that hagwons (like many businesses in Korea) would be honest about taxes, it's stupid not just to let the free market decide. Because my county is rural there are many tight restrictions on fees. The result is that hagwons have to keep class sizes large and can't offer extra lessons. They also can't afford to hire the best teachers, and in some cases hire teachers without degrees on the cheap.

A much better system would be to give hagwons credits for tutoring low-income students for free. Smaller hagwons are eager to attract the top students, at least for MS and HS, because this really builds up their reputations. If they said that a hagwon could charge whatever it wanted so long as 1/20 seats were for students from low-income families getting free tuition, it would benefit everyone and help reduce economic-related education disparity.

[hari seldon]

Hagwons fill the demand for education. It would be antithetical for a democratically-elected government to prevent its citizens from buying private educational services in whatever quantity desired.

Instead of forcing schools to operate on a shoestring budget, making it impossible for them to furnish essential learning resources or talented teachers, they should be raising standards and subsidizing poor students through cash vouchers or tax breaks.

[wylies99]

Everyone knows that hagwons charge whatever they can.
Mothers pay big money, in most cases over a million per month, for kindy.

The fact that the government may actually start ENFORCING laws about hagwons should be seen as a threat to get them to start actually paying taxes.

[hari seldon]

[afsjesse]

I wonder if this were to be inforced what the affect on salaries in hagwons would be?

[hari seldon]

[SHANE02]

90 percent then Hari?