School fees are one of the largest long-term financial commitments a family can take on. At current day school fees of approximately £18,000 to £22,000 per year including VAT (with the ISC census average at the upper end of that range), a seven-year secondary education costs well over £140,000, and the figure rises with annual fee increases. A HELOC offers a way to manage this cost that mirrors how fees are actually paid: termly, in stages, drawing only what is needed at each point and paying interest on the drawn amount rather than borrowing the full multi-year total on day one.

This guide covers how to structure a school fee funding plan using a HELOC, including how the phased drawdown works with termly payments, how to plan for years that extend beyond the draw period, what the total cost looks like, and how a HELOC fits alongside other funding sources such as savings, bursaries, and school payment plans. All figures are illustrative and reflect typical conditions at the time of writing. This guide does not provide financial planning advice. Families planning for school fee funding should consider speaking to a qualified financial adviser.

How the phased drawdown suits termly payments

School fees are paid termly, three times per year. A HELOC lets the borrower draw each term’s fees as the invoice arrives, rather than borrowing the full multi-year total on day one. Interest is charged only on the amount drawn at any point, which means the interest cost during the early terms is lower than it would be on a lump-sum loan for the same total.

Consider a family paying £6,000 per term in year one. After the first term, the drawn balance is £6,000 and interest is charged on that amount. After the second term, it is £12,000. After the third, £18,000. With a lump-sum loan for £100,000 (to cover several years of fees), interest would be charged on £100,000 from completion, regardless of when the fees are actually paid. The HELOC borrower pays interest on an average balance of approximately £12,000 in year one, while the lump-sum borrower pays interest on £100,000. The interest saving in the early years is substantial.

This phased advantage is the same structural benefit covered in the guide to using a HELOC for home improvements, but applied over a longer timeline. The draw period (up to five years) provides the window for this phased approach, and families who time their draws to match each term’s invoice maximise the interest saving by keeping the balance as low as possible for as long as possible.

Planning beyond the draw period

The HELOC draw period covers up to five years of termly payments. For shorter school careers (sixth form, or entry at Year 9), this covers the entire duration. For longer careers, the draw period covers the first phase and a second funding phase picks up where it leaves off. The table below shows how different entry points align with the draw period.

Year 7 is the most common entry point for private secondary education. The HELOC covers the first five years, and a two-year Phase 2 picks up for years six and seven. When the draw period ends, the HELOC transitions automatically to repayment terms (no action required) and the family moves to their planned Phase 2 funding. This transition is a normal, expected event, not an emergency, provided it has been planned for from the outset.

For families entering at reception or Year 3, Phase 2 is longer and more significant. A 14-year school career with a 5-year draw period means the HELOC covers the opening years and a longer-term funding plan covers the remainder. In these scenarios, families often use the HELOC as the initial funding vehicle while building savings, securing bursaries, or growing income that can take over the fee payments in later years. The draw period provides a structured window to establish the financial pattern before transitioning to other funding sources.

Worked example: seven-year secondary career

The table below shows the year-by-year cost of a seven-year secondary school career at a conservative illustrative day school fee of £18,000 per year (below the current ISC census average of approximately £22,000 including VAT, but representative of many schools outside London and the South East), with annual fee increases of 4%. Phase 1 covers years one to five (within the HELOC draw period). Phase 2 covers years six and seven (funded separately). Families at schools charging above this level should adjust proportionally.

On top of the fees themselves, the cost of borrowing adds to the total. HELOC fees on a £100,000 facility (sized to cover the five-year Phase 1 with a small contingency) are approximately £10,800 at current fee levels, comprising a lender product fee (approximately £2,300 at 2.3%), a lender arrangement fee (capped at £3,000), and a broker fee (approximately £5,500 at 5.5%). These fees can be added to the balance but will then accumulate interest over the remaining term. Families applying through a school that has partnered with a HELOC provider may benefit from reduced or waived arrangement fees. See the HELOC fees and costs guide for the full breakdown.

Interest on the drawn balance during Phase 1 adds further to the cost. Because the balance builds gradually (starting at £18,000 and reaching approximately £97,500 by the end of year five), the average balance during the interest-only draw period is approximately £57,000. At an illustrative rate of 8.5%, the approximate interest cost over the five years is £24,200. For comparison, if the full £97,500 had been drawn on day one and held on interest-only terms for the same five years, the interest cost would be approximately £41,400. Both figures are interest-only comparisons on the same basis; the phased drawdown structure delivers a meaningful interest saving during the build phase because the average balance is lower.

Options for Phase 2: after the draw period

When Phase 1 ends, the HELOC transitions automatically to repayment terms. The outstanding balance enters a structured repayment schedule, and the family moves to their planned Phase 2 funding for the remaining school years. Several options are available, and the right choice depends on how the family’s financial position has evolved over the preceding five years.

Rolling the HELOC balance into a remortgage is one of the most common transitions. If the existing mortgage deal is ending at around the same time (which can be timed when planning the original mortgage), the family remortgages to a new deal that absorbs the HELOC balance, and uses income or savings to cover the remaining two years of fees. The HELOC products currently available in the UK have no early repayment charges, making this transition cost-free on the exit side. The remortgage consolidates the borrowing into a single first-charge mortgage at a lower rate. See the HELOC vs remortgage comparison for more detail.

Taking a new HELOC with a fresh draw period restores revolving access for the remaining school years. This involves a new application, a new valuation, and a new set of fees. For a two-year remaining period, the fee burden relative to the amount borrowed is higher than during Phase 1, so this route works best when the remaining amount is large enough for the phased drawdown saving to justify the fees. The refinancing a HELOC guide covers the full analysis.

Funding Phase 2 from income is possible if household earnings have grown over the preceding five years. A family that could not afford to pay fees from income at the start of the school career may find that promotions, salary growth, or reduced costs elsewhere (a younger child starting state school, a car loan paid off) have created capacity to cover the remaining fees directly. This is the cheapest option because it involves no additional borrowing costs.

A combination approach is often the most practical. One route might be to cover years six and seven through a mix of income and a smaller personal loan, using any HELOC balance repaid during Phase 1 as a buffer. The key is to have a Phase 2 plan in place before the HELOC is taken, even if the plan is adjusted as circumstances evolve. Families who plan both phases from the outset are never caught without a route forward when the draw period ends.

As with any secured borrowing, the HELOC is secured against the family home, and maintaining repayments across both the HELOC and the existing mortgage alongside school fees and living costs requires careful budgeting. Families should ensure the total monthly commitment is sustainable under a range of scenarios, including the possibility that the HELOC rate rises or that household income changes. The HELOC risks explained guide covers the risk considerations, including variable rate exposure and affordability, in full.

The total cost picture

Beyond the headline fee and the HELOC interest and fees, the total cost of a private education includes several categories that are easy to underestimate when planning. Uniforms (including sports kit, which many schools require in specific branded items) can cost £500 to £1,500 per year. School trips, both domestic and international, can add £500 to £2,000 per year depending on the school and the year group. Extracurricular activities, music lessons, and specialist coaching are often charged as extras. Exam fees for GCSEs and A-levels are typically included in the termly fee but not always.

Annual fee increases are the most significant additional cost over the duration. UK school fees have historically risen at 3% to 6% per year, and the introduction of 20% VAT on school fees from January 2025 has accelerated recent increases. Some schools absorbed part of the VAT cost, but many passed on increases of 10% to 20% in the first year. A fee that starts at £18,000 per year and increases by 4% annually reaches £22,776 by year seven. At 6% annual increases, it reaches £25,534. The difference between 4% and 6% annual increases over a seven-year career is approximately £9,000 in additional total fees.

Families planning to use a HELOC for school fees should build their projections on fee levels that include realistic annual increases, not on the current year’s fee multiplied by the number of years. The ISC (Independent Schools Council) publishes annual fee data that provides a useful benchmark for planning. Building in a contingency of 10% to 15% above the projected total is prudent given the history of above-inflation fee increases.

Other funding sources alongside a HELOC

The most effective school fee plans use multiple funding sources rather than relying on any single route. A HELOC provides the structured borrowing component, but combining it with other sources reduces the drawn balance, lowers the interest cost, and shortens the effective borrowing period.

School fee payment plans are offered by some independent schools and by specialist companies such as School Fee Plan. These spread the annual fee into monthly instalments, typically at a modest interest charge or for a small administration fee. They can work alongside a HELOC: the HELOC covers the bulk of the annual fee, and the payment plan covers the remainder or provides month-to-month smoothing within each term.

Savings and investment strategies are the most cost-effective complement to borrowing because they reduce the amount that needs to be drawn from the HELOC. Junior ISAs, regular savings accounts, and investment portfolios built over the years before the child starts school can accumulate a meaningful sum. The earlier the planning starts, the less borrowing is needed. This is a financial planning topic that goes beyond the scope of this guide, and families considering this route should speak to a qualified financial adviser who can build a strategy that balances school fee funding with other long-term goals such as retirement provision.

Grandparent contributions, whether as regular payments or as lump sums, are common in school fee funding. These may have inheritance tax implications depending on the amounts, the regularity, and the grandparent’s overall estate position. The IHT treatment of regular gifts from income is different from the treatment of capital gifts, and the rules are specific enough that professional advice is worthwhile for families where grandparent contributions are a significant part of the plan. This guide does not provide tax advice; families with questions about IHT should consult a qualified tax adviser or refer to HMRC guidance.

Bursaries and scholarships are more widely available than many families realise. Over a third of pupils at ISC member schools now receive some form of financial support with their fees, and the total value of that support exceeds £1.5 billion per year. Bursaries are means-tested and can cover a substantial proportion of the fee (up to 100% in some cases). Scholarships are merit-based (academic, music, sport, art) and typically offer a smaller percentage reduction. A bursary or scholarship that covers 20% to 30% of the annual fee reduces the amount drawn from the HELOC by the same proportion, which compounds into a significant saving over five to seven years of termly drawdowns.

Frequently asked questions

How do I structure the HELOC to match the school fee calendar?

The most effective approach is to draw each term’s fees shortly before the payment date, allowing a day or two for the transfer to clear. This keeps the drawn balance as low as possible at every point and maximises the interest saving from phased drawdown. Most families set a reminder before each term’s payment date (typically September, January, and April) and make the draw request in the days before the invoice is due.

The facility amount should be sized to cover the total Phase 1 fees (five years at the projected fee level, including expected annual increases) plus a contingency of 10% to 15%. Sizing the facility closer to the realistic total rather than significantly above it keeps the combined LTV lower, which typically qualifies for a more competitive rate. The full facility limit is used in the LTV calculation regardless of how much has been drawn, so requesting a much larger facility affects the rate offered. See understanding LTV for HELOCs for how the facility amount affects the rate.

If the school offers a discount for paying the full year’s fees in advance (some offer 1% to 3%), the family can draw the full annual amount at the start of each academic year instead of termly. Whether this is worth doing depends on whether the discount exceeds the additional interest cost of holding the larger balance for two extra terms. On a £20,000 annual fee at 8.5%, the additional interest from drawing in September rather than in three termly instalments is approximately £520 for the year, so a discount of approximately 2.5% to 3% would be needed to justify the upfront draw.

What happens when my child finishes school?

The HELOC obligation continues regardless of whether the child is still in school. If the draw period has ended, the outstanding balance is being repaid over the remaining term with monthly capital-plus-interest payments. The repayment commitment remains until the balance is cleared, either through the scheduled payments or through early repayment (which carries no penalty on current UK products).

Many families use the end of school fees as an opportunity to accelerate repayment. The monthly amount previously allocated to school fees can be redirected to HELOC overpayments, which shortens the term and reduces the total interest cost. A family that was paying £6,000 per term in school fees and redirects even half of that capacity (£250 per month) to HELOC overpayments will pay off the balance significantly faster than the scheduled term.

Alternatively, if the existing mortgage deal is ending at around this point, rolling the HELOC balance into a remortgage consolidates everything into a single first-charge payment at a lower rate. This is the approach several families have described in published case studies: using the HELOC throughout the school years and then rolling the balance into the main mortgage once education is complete, with no early repayment fees on the exit.

Does the 20% VAT on school fees change the calculation?

Yes, materially. The VAT on private school fees, introduced in January 2025, has increased the cost of private education by 10% to 20% depending on how individual schools have structured their pricing. Some schools absorbed part of the cost from reserves, but the majority passed on most or all of the increase to parents. A school charging £15,000 per year before VAT now charges approximately £18,000 after VAT, and this higher base is then subject to annual fee increases that compound the cost further over time.

For HELOC planning, the impact is twofold. First, the total amount that needs to be borrowed is higher, which means a larger facility, a higher combined LTV, and higher total fees. Second, the annual fee increases now compound on a higher base, which means the fees in later years are further above the starting point than they would have been without VAT. Where a pre-VAT plan might have involved borrowing £80,000 over five years, the same school and period may now require £95,000 to £100,000.

The VAT change is one of the reasons many families are combining a HELOC with other funding sources rather than relying on borrowing alone. A bursary that reduces the net fee by 20% effectively offsets the VAT cost. Grandparent contributions covering one term per year reduce the HELOC draw by a third. Several independent schools have partnered with HELOC providers to offer parents reduced fees on the borrowing itself, such as waived arrangement fees, which can partially offset the increased cost. Families should recalculate their school fee projections based on post-VAT fee levels and current annual increase rates before committing to a borrowing plan.

Can I use a HELOC for boarding school fees?

The same mechanics apply, but the amounts are substantially larger. Boarding school fees at the time of writing average approximately £45,000 to £65,000 per year, which is three to four times the average day school fee. A seven-year boarding career at £50,000 per year with 4% annual increases totals approximately £395,000. The Phase 1 portion (five years) is approximately £271,000, which approaches the maximum HELOC facility available from most providers (typically £500,000 at the time of writing).

The combined LTV implications are also more significant. A £270,000 HELOC facility on a property worth £500,000 with a £180,000 existing mortgage would produce a combined LTV of 90%, which exceeds the typical 85% cap. The property would need to be worth approximately £530,000 or more to support this facility within the LTV limit, or the existing mortgage balance would need to be lower. See the HELOC eligibility guide for the full criteria.

For boarding school fees, a HELOC is typically one component of a multi-source funding plan. Savings, investment income, grandparent contributions, bursaries (which are often more generous at boarding schools), and potentially a remortgage or standard secured loan may all play a role alongside a HELOC. The scale of the commitment makes professional financial planning advice particularly important for boarding school funding. Families considering this route should speak to a qualified financial adviser before making borrowing decisions of this magnitude.

Should I take the full facility on day one or draw termly?

Drawing termly saves interest. If the facility is £100,000 and the first year’s fees are £18,000, drawing the full £100,000 on day one means paying interest on £82,000 that is not yet needed. Drawing termly means paying interest on £6,000 after the first term, £12,000 after the second, and £18,000 after the third. The interest saving in year one alone is approximately £7,500 at an illustrative rate of 8.5% (interest on an average balance of £12,000 versus the full £100,000).

The only scenario where drawing more than immediately needed makes sense is if the school offers a meaningful discount for paying the full year’s fees in advance. Some schools offer 1% to 3% for annual prepayment. Whether this discount exceeds the additional HELOC interest cost depends on the discount percentage, the HELOC rate, and the timing. At 8.5%, the break-even point is a discount of approximately 2.5% to 3% of the annual fee. Below that threshold, termly draws are cheaper.

The practical approach for most families is to draw each term’s fees a few days before the payment date, keeping the balance as low as possible at every point. This maximises the core advantage of the HELOC structure: interest on what you have drawn, not on the full facility. Setting up a calendar reminder for each term ensures the draw is made in time without maintaining a larger-than-necessary balance on the facility.

This article is for informational purposes only and does not constitute financial advice, tax advice, or education planning advice. Your home may be at risk if you do not keep up repayments on a mortgage or other debt secured against it. School fees, annual fee increases, and VAT treatment are subject to change. The figures shown are illustrative and based on typical conditions at the time of writing. Families planning for school fee funding should consider speaking to a qualified financial adviser. Tax implications of gifts and contributions should be discussed with a qualified tax adviser or confirmed with HMRC. Actual outcomes will depend on your individual circumstances.