If you're paying for education in another country, you have one of the most forecastable currency requirements there is.
You know the amount. You know the dates. You know how many years it runs for. The institution published all of it before you enrolled.
Which makes it slightly odd that almost nobody plans the exchange rate, and most families convert each payment at whatever rate applies the week the invoice lands.
The size of it
A degree at a US university might run $60,000 a year across four years. An international school in Dubai or Switzerland, €25,000 to €40,000 annually for however many years the child attends.
Over a full course, that's a six-figure foreign currency commitment, settled in instalments across several years.
A 10% adverse currency move over a four-year degree is £15,000 to £20,000 on a $240,000 total. Currency pairs move by that much within a single year on a regular basis, so across four years it's not a pessimistic scenario — it's an ordinary one.
Set against the care most families put into choosing the institution and funding the cost, the exchange rate gets remarkably little attention.
Why it's a good hedging case
Three features make education fees unusually suitable for forward cover:
The amounts are published. Institutions publish fees in advance, often with indicative increases. You're forecasting against a document, not a guess.
The dates are fixed. Termly or semesterly, on dates set by an academic calendar that doesn't move.
The commitment is real. Once a child is enrolled, you're paying. This isn't a maybe.
A forward contract — or a series of them matched to each payment date — fixes the sterling cost of a year, or several years, of fees. The number becomes known, and it stops being a variable in your own financial planning.
For families budgeting carefully around a significant long-term commitment, that certainty is usually worth more than the possibility of a slightly better rate.
How much to cover
Hedging the entire course from day one is one approach, but it isn't the only sensible one.
A layered structure is often more practical:
The coming academic year: cover a high proportion. It's committed and imminent.
The following year: cover a substantial part. Still highly likely.
Years three and four: cover less, or leave open. Circumstances change, courses change, students transfer.
That mirrors how businesses hedge forecast exposure, and for the same reason: certainty is highest nearest to hand.
Where fees aren't the whole cost
Worth including in the plan:
Accommodation, whether institutional or private rental, often paid locally and monthly
Living costs and allowances, which for a student abroad are a recurring small-transfer problem — and small transfers are priced worst of all
Health insurance, frequently mandatory and locally denominated
Flights, variable but recurring
Deposits and registration fees, paid well before the first term
For the regular, smaller payments, a currency account funded in larger conversions and drawn down locally is considerably cheaper than a series of monthly transfers at retail rates.
Practical points
Check what the institution accepts. Many universities and schools have specific payment arrangements, sometimes through third-party platforms. Some offer local currency payment options; some apply their own conversion if you pay in the wrong currency, at a rate you didn't agree.
Pay in the institution's currency where you can. If fees are in dollars, pay dollars. Letting the institution or its bank convert a sterling payment means a rate chosen by someone with no interest in your getting a good one.
Watch for deductions. International wires can be reduced in transit, which creates an underpaid fee account and an administrative problem with a bursar's office. Local payment rails avoid it.
Leave time. Fee deadlines have consequences — enrolment holds, late penalties, in some cases visa implications. Converting and paying in a hurry on a deadline is both expensive and risky.
The conversation to have
If you're at the start of a multi-year commitment, the useful question isn't "what's the rate today?"
It's: what will this course cost me in sterling, in total, if I fix it now — and am I comfortable with that number?
If you are, you can stop thinking about the exchange rate for several years. That peace of mind is the actual product.
William Fuller, Co-Founder of Orbis Exchange Group contact on 0203 918 5622
Ben James, Co-Founder of Orbis Exchange Group contact on 0203 918 5621