How to fund children's education abroad without parents going bankrupt
Giving a lift up is fine but it should not be at the cost of their own future.
Children occupy center stage for parents - that is well known and understandable. As a parent you would want to do everything to give them the benefits of good education and help them start life with an advantage. That is reasonable of course.
The only thing that the parent has to guard against is overreach. Today, many parents are guilty of this overreach, in their enthusiasm to confer the advantage of a high quality education. Most students today have the aspiration of going abroad for education. Parents do not want to stand in the way of this ambition - for the parents themselves see this as a passport to a good life ahead.
One of the major problems with education abroad is the cost. The median cost for education in the US could be about Rs 35 lakh per annum. If the student were to pursue graduation, which would be a four-year course, the cost would be Rs 1.4 crore, in today’s terms. The inflation on education is galloping away and it can be considerably costlier in future. After that, post-graduation would cost Rs 70-80 lakh. That is about Rs 2.2 crore per child! We are able to see that the amounts involved are astronomical & funding even one child’s education fully is going to be a huge challenge for all, but the really rich.
Supporting the child in its aspiration is fine. But the parent has to be realistic and can be pragmatic when it comes to the child’s education funding.
Firstly, sending the child at graduation itself is not just costly; they also run the risk of the child going astray in a foreign land as they may not have the maturity at the tender age of 17-18 years. It may be far more desirable and financially prudent to send the child abroad, at the PG level. At the PG level the child would be between 21-23 years and potentially more mature to handle the rough & tumble in an alien land.
The parent needs to consider other ways of funding, apart from self-funding, as a prudent practice. Parents should start talking about all methods of funding to their children, well in advance and prepare them to be more aware & responsible when it comes to their education funding. Parents should not be seen as ATMs & it is important that parents talk about how much they are willing to spend and about how the child can fund the rest.
The first mechanism of bringing down the costs of education abroad is to seek scholarships for the courses being pursued. There are some colleges which are more liberal in offering scholarships as compared to others. The top-of-the-line colleges may not offer scholarships. The child should be prepared to look at second rung colleges which offer scholarships & not be fixated with Ivy league schools alone. This sanity has to be driven into their heads by the parents.
The other way to bring down the cost of education funding for parents is to ask the student to take a certain level of education loan. Apart from bringing down the funding from the parents side, the loan also brings in a certain level of responsibility on part of the student. The parent can pay the interest till the student goes for a job, after which the student has to take care of the loan servicing. This has to be clearly communicated to their child.
The last way of defraying the costs is for the student to actively look for a part-time job when they are studying abroad. They could work as research assistants, as assistants in the library or in other capacities in the university and earn some money. Often this money would be enough to take care of their personal needs.
All these are ways to ensure that the child’s ambition is not squelched and at the same time the parent is not stretched to the breaking point, in their quest to fund their child’s education. Often parents dip into their retirement kitty in their overarching ambition to launch their child into the hallowed orbit. Giving a lift-up is fine but it should not be at the cost of their own future. If one follows these simple rules, the child education funding can happen without much problems. A good compromise would then be achieved, where the parent is happy & the child’s ambition is taken care of too.(The writer is founder of Ladder7 Financial Advisories)