Who doesn't want to get a higher education degree from a reputed institution? But, lack of finance is pushing many bright students backwards from pursuing their dream courses. Many times, parents have to sacrifice their retirement savings to fund their child's higher education, and at other times, students have to drop their dream of higher studies or study abroad.
In today's scenarios, education inflation is at its peak. The fees of Indian private institutions are touching the skies, and studying abroad is still a dream of the majority of students in India.
To avoid such a situation in your child's career, you must pre-plan it right after birth only. It will not only assist your child in getting deserved education but also help you in being financially stable in your life.
Ways of financing your child's education
There can be two ways to fund your child's higher or abroad education. The first is getting an education loan, and the second is making an investment dedicated to your child's education. Let's understand both of the scenarios separately
In the case of education loan
Evolving new-age FinTech platforms are making it easy to apply for loans. A good credit score and the educational performance of your child are all that matter to getting an education loan. You can get an education loan at an interest rate from 7.50% to 10%, depending on your credit score.
Applying for education is no more chaotic and doesn't require much documentation. It becomes an online process which would take a few minutes to complete.
Before pursuing such an option, here are a few things that you need to keep in mind:
- Your affordability of EMIs.
- You must re-adjust your monthly budget.
- Career opportunities after completion of the course. If there is no or less scope in the coming future, your budget might get disturbed at the time of your loan repayment.
Making an investment dedicating your child's education
To ensure the accessibility and availability of funds at the time when it is required (when your child is ready to pursue higher education) .
As a parent, you do not want any hindrance in your child's education journey. To ensure such smoothness, you must plan your investment ahead of time and inflation.
When choosing an investment scheme, here are a few things to keep in mind:
- Always estimate the amount you will need to fill the gap between finance required and finance availability.
- It would be best to analyse your affordability to invest in a particular scheme and the expected rate of return required to achieve needed maturity.
- As early as you start your investment journey, you will get more time to avail the benefits of compounding.
Depending on your child's goals, skills, and desires for higher education, this can range from ₹2.5 lakh to ₹1.5 crore or more. Starting a monthly SIP and compounding infrastructure plan is advised so that you may easily and effectively attain your fund goals.
Nowadays, every financial institution knows how much you earn and how much EMI you can afford. As long as your regular income continues, banks are available to give you loans. Still, any break in your regular income would lead you to a financially disturbing situation as your bank might deny extending you the loan.
It is always better to have a secure side and preferring investment instead of relying on education loans would be a better option to choose.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com