How to fund your studies
Work out the gameplan in advance and explore all available options.
By Ajay Bohora, Co-founder & CEO, HDFC Credila Financial Services, Mumbai
For an Indian student going abroad, in addition to an increase in fees and living expenses, depreciating rupee makes the cost of education beyond their means. Constraints on international students for employment abroad due to visa regulations coupled with uncertain economies, need to be examined by students while deciding on the destination country for higher studies and related funding for it.
Know the total cost This includes tuition fees, living costs, cost of travel back and forth to India, and other expenses such as mobile phones, laptops and transport. Plan for annual increase in cost of attendance and potential depreciation of the currency. Assess your return on investment and payback period Parents and students should keep in mind that after graduation, there are different expenses related to shifting to a new place for job, deposit on rent and marriage. If education loan taken is short-tenured then cash crunch can result in missing EMIs thus negatively affecting credit score of the student.
So, students should learn from their global peers about the systems and processes of their country of choice. Evaluate funding options All options such as scholarships, teaching and research assistantships must be explored first. Part family savings can also be used, if available. All available family savings should not be used as the margin money. Parents and students should reserve some funds for unforeseen expenses and emergencies. It’s best if students can find education loans which do not require any margin money.
Ask for other loan benefits Interest paid on education loan is tax deductible if taken from a notified lender. Income tax benefit is available only for education loan, which means that if education gets funded with loan against property or through personal loan, then income tax benefits are not available to either students or parents. Plan early to stay ahead With the skyrocketing costs of higher education, parents now start saving right after the birth of their child.
Out of a pool of over two crore students who are pursuing higher education in India, all lenders put together, only less than 10 lakh students could get education loans last year. Parents and students need to be careful about deciding future work plans as lenders are increasingly cautious and prudent in approving education loans due to large number of defaulters. While preparing for your entrance exams, also prepare for funding options and the required financial documentation.