Quality education is important for children to have a promising future but it comes at a massive price. A parent who paid Rs 12 lakh for an engineering course in 2022 may have to pay Rs 31 lakh in 2032 for the same degree. The cost of education has risen at an alarming rate over the last decade and shows no sign of slowing down. As a parent, you have no choice but to be prepared to tackle the rising education costs. This column will help you plan for your child’s education better.
Here are a few strategies to fund the cost of higher education:
Compare and choose the low-cost alternative
The course fee and other education costs differ among institutions and countries. As everyone knows, government colleges offer education at a meagre cost compared to private colleges. Also, students often wish to travel to the US, the UK, Australia, etc, to pursue higher education. It is worth comparing different institutions to get an education at the lowest cost.
For instance, medical studies are cheaper in countries like Russia and China. Education costs in countries like Germany, Norway, Switzerland, etc, are lower than in the US and the UK. Comparing the fee structure, scholarship options and living costs, etc, in different institutions or universities can help reduce costs. By comparing different options, students can select the lowest-cost alternative. However, low cost cannot be the only parameter for selecting a particular institution or university.
Check for scholarships
There are a variety of scholarship options available. In India, the government offers various scholarships for different categories of students to pursue higher education. Some examples include Fulbright-Nehru Master's Fellowship to Indian students in the US, National Overseas Scholarship to students belonging to the minority community to pursue a master's or PhD, etc. Students must conduct thorough research to find a scholarship that fits their needs.
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Invest wisely
It is crucial to invest wisely for funding education. Investments should earn at least as much as inflation in the country where a student aspires to study. Otherwise, it can be challenging to afford education.
Typically, investing in equities is the best option to beat inflation. However, it is crucial to understand the risks involved while investing in equities. Therefore, allocating the funds according to the risk appetite and desired time horizon, reducing the risk through diversification and balancing the portfolio from time to time can help the investors manage the risk systematically.
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Use education loans
Financing through education loans can be a good option, especially due to the tax advantages. Under Section 80E of the Income Tax Act of 1961, a deduction from income for the interest paid on an education loan is allowed.
This benefit is available for an education loan taken for the higher education of the individual, children, or spouse. And there is no limit for the deduction amount.
Utilise interest subsidies
In India, the government offers various subsidies on interest on education loans that help students to save their education costs. Some examples include the Central Government Interest Subsidy Scheme, launched by the Ministry of Human Resource Development to provide subsidies on education loans for inland studies only up to a maximum of Rs 10 lakh, or the Padho Pardesh Scheme to help students of the minority community to study abroad, etc. By taking the benefits of these subsidies, students can reduce the overall cost of education.
To sum it up, proper research and careful planning are required to minimise the overall education cost.
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