By Sanjay Matai

HIGHER education in India, especially professional courses, is becoming expensive by the day. The good old days of government support is practically over.

With minimal Government funding, institutes have been forced to increase their fees. And if a child has to go abroad to study, there will be additional expenses like traveling, lodging and boarding etc, apart from high fees.

Besides, with inflation, the cost of education will only increase further. For example, assuming 6 per cent inflation, 10 years later, the fees at Indian Institute of Management may be around Rs 3.5 - 4.5 lakhs, up from about Rs 2 - 2.5 lakhs today.

Therefore, while earlier a single income was more than sufficient, today even with two incomes we may not be able to finance our children's higher studies. Hence, it is important to plan for your children's education well in advance. Here are some available options:

Scholarships
Since government support has been reduced suddenly, there has been a sharp jump in fees in the last the few years. Therefore, many of those who didn't save much money earlier are caught on the wrong foot. For them, trying for a scholarship can be one option.

Mostly educational institutes have programmes for awarding scholarships to the needy and deserving students. Many philanthropists and alumni also donate money to help such students.

Therefore, lack of money need not always be a constraint for a truly deserving student. One can, therefore, check with the institutes about such scholarships. If you find that you meet the eligibility criteria, you can apply for such scholarships. If approved, such money will substantially ease your financial requirement.

Education loan
Loans from banks are fast becoming a preferred way of financing higher education, in case scholarship is not available. The banks have become more market-oriented, making it convenient to avail such loans. Also the interest rates and repayment terms are quite feasible and attractive.

Further, the Government has extended tax benefits, which reduces the effective cost of such loans. Depending on one's particular situation, the education loans can be availed either by the students or their parents.

Insurance
Insurance companies offer policies like money back or endowment, which give a defined payout at a defined period. Herein, one keeps paying a premium every year and gets a lump sum amount when the child has grown-up and is ready for college. Such policies can be used to plan for the higher studies, if you have time on your side.

Besides, if something unfortunate happens to the parent, not only does the child still get the sum assured on maturity, but the interim premiums are also waived off.

However, the return from such policies is relatively quite low, barely covering the inflation. So it is possible that you may end-up with some shortfall in case the education expenses move higher than the average inflation levels.

Photograph: Vipurva Parikh

Next page: Where do I invest?

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e-mail: Sanjay Matai

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