Education loan process to go to a good college
With the value of a foreign education increasing by the day, education loans for paying college tuition fees have become very common and easy to avail too.
Education loan disbursals from banks and various financial institutions to Indian students, studying in India and abroad increased to 92,711 Crores this year from 90,345 Crores last year.
However, this data hides an important issue – the number of students who are not paying their education loans back has also been increasing.
Banks have reported 7-9% of loans as bad loans over the past few years, by Indian students studying in India and abroad.
Such a high amount of non-repayment is being attributed to a general economic slowdown, changes in immigration policies by various countries, and a supply-demand mismatch in the candidate’s skills and jobs available.
Not repaying an education loan can get students into many problems and we are not talking about only the legal issues.
Here are some quotes from students who have completed their education and are now struggling to pay off their loans.
While education loans have been the answer for many Indian middle-class families to pursue their dream education since they are easily available from banks and other financial institutions.
However, they are not the best solution.
Is taking an education loan a good idea?
The rising cost of education has made taking loans to be a decision fraught with concerns.
Even payment for an average school abroad can set you back by 40-50 lakhs if you include your cost of living in that country. Quite a few colleges in India have become very expensive over the years.
This is quite obvious considering that college tuition fees have seen a steep rise compared to anything else – be it homes, vehicles, or computers – adjusting to inflation that happens in prices year on year.
And this is when salaries/wages have seen only a nominal increase.
Scholarships and grants are another way that allows students to afford expensive education. However, the sheer number of students who are aspiring to study in a young country like India makes it a formidable task to be eligible for a scholarship.
With loans being the only option in many cases to achieve a good education, fresh graduates are taking up jobs that do not match their skillset and with less promise, because good jobs are not on offer.
The job of their dreams can wait while the loan is repaid first. The huge EMI also makes them less eager to spend on a house and postpone many important purchase decisions. So how do we make education accessible to a vast number of students without them staring at a huge debt burden after graduating?
What’s the solution?
A little bit of planning, a few years before the time comes to apply for colleges is all it takes to not get into the system of loans.
Put away savings for education that you can use to pay for college.
These savings should be such that the money grows, while your child grows. While education goals may vary as your child grows and his/her interests change, the fact that he needs a good education will not change.
What do you do in this case?
There are apps like EduFund that allow you to plan for your child based on future goals. We have the expertise that can help you in understanding the financial goals you need to set, to send your child to a prestigious college abroad or in India.
Our college savings calculator is comprehensive and includes tuition and staying expenses in a particular city too. Investing in SIP mutual funds is recommended to ensure good returns in the long term. So, starting early adds a lot of value to your fund.
Is taking an education loan a good idea?
Education loan is a great choice for Indian students who wish to study abroad but it’s important to do your research before you avail of one.
There are interest rates that students must consider and the process of repayment. One must research whether the course is covered by the loan or not, if your bank is offering a low-interest rate, how much loan coverage should you opt for, and the ROI of your course.
Can you study abroad without an education loan?
Yes, it is possible to study abroad without an education loan. You can apply for scholarships, borrow money from your parents or use an education fund if your parents have started one for you.
If you are planning to go abroad for a master’s or MBA then you can start saving and investing for your education as well. To keep up with the living expenses, you can opt for a part-time job as well if your student visa permits it.
What are some good alternatives to education loans?
If you have a time horizon of 10-15 years, then considering mutual funds and investing in US stocks and ETFs is a great alternative. This option is brilliant for parents with children between the ages of 3-10 years.
Before you start planning for your child’s education, you must have a specific goal. And an education fund is paramount to reaching those goals
With this education = corpus, you can ensure that your child doesn’t start his/ her future career with the worry of paying back a loan. And that will be the biggest present you can gift your child, the gift of education!
Consult an expert advisor to get the right plan
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