Q: Many schools and camps provide “early bird” discounts if payment is made ahead of time. Is this practice allowed?

A: We learned that prepayment discounts for merchandise are generally not allowed, whereas prepayment discounts for labor are allowed if the work begins immediately.

Payment for school or camp is primarily for the service of teaching or providing summer activities. Therefore, if payment is required only at the beginning of the school year or summer season, there is no ribbis problem. Even if payment is required ahead of time, but it is only a small partial payment that can be attributed to the desire to secure the registration of the child, there is also no concern of ribbis. However, if a substantial payment is required before the beginning of the year or season, as is common, there is a potential ribbis problem according to many poskim (see Bris Yehuda 23:7; 26:3). Some poskim argue, however, that the payment to the administration is not only for the actual teaching or camping, but for making any necessary arrangements, such as hiring staff, developing curriculum and schedule, etc. Therefore, since this work is underway long before the school year or summer season begins, the “early bird” discount is permissible (The Laws of Ribbis, ch. 7 ftnt. 30).