Having a higher education is one of the essentials these days, but a college degree doesn’t come cheap.
As a result, parents have to devote a larger part of their earnings/savings on the higher education of their children.
There are even cases where parents get financially overburdened by the higher fee structure of the colleges. From touching their retirement funds to unmetered FD withdrawals parents arrange for funds in different ways just to fulfil their child’s dream of studying in a prestigious college.
To avoid such a situation you’ll have to look for other ways to fund your higher education that does not stress your parent’s finances.
Student loan
This is the most common financial tool which helps millions of students to fund their higher education. As the name suggests the loan is specially designed for students and hence comes at affordable rates. The best part about this loan is – the repayment of the loan doesn’t start soon after taking the loan. Students get a time frame depending on the course under which they are enrolled, and the repayment starts once the course is completed or when the students get the job. However, there is one more thing to consider – which is getting approved for a student loan is not that simple as the loan is offered only to those who are getting admitted to a good college or to those who have good ranks.
Personal loan
Using a personal loan to fund your higher education makes sense if you don’t need a huge amount of money. As borrowing under your repayment capacity and without affecting your parent’s finances always makes sense. Also when going for a personal loan you have multiple options that too at pocket-friendly rates. The eligibility criteria to qualify for a personal loan is minimal as it doesn’t need a tire A college or a very prestigious college admission letter.
Few banks even offer extra incentives to get you to take out a personal loan. For example, you can take a personal loan for education at a low-interest rate, for which the EMIs can be taken care of by the parents. This way parents don’t even touch their savings and your fees and all are taken care of by a personal loan. Once you get the job you can easily contribute to your parent’s finances and help them gather the funds which they have paid towards the personal loan EMIs.
Another advantage that comes along with this is – your parents can claim the tax- benefits as the loan is used for educational purposes. As per section 80C of the income tax act a deduction of ₹1.5 lakhs can be claimed for this. However, several other investments also come under section 80C.
A brief comparison between student’s loan and Personal loan
- If you’re looking to fund a huge tuition fee then you may not qualify for a personal loan but there is a higher probability that you will qualify for a student loan for the same.
- Student loans come with some built-in protections. For example, if you’re having trouble making your payments once you graduate you can get some relief through deferment or forbearance programs. But, this is not possible with personal loans.
- Student loans also come with income-based repayment options, so that the payments can be adjusted to fit your budget. Once you complete your higher education, you typically have six months to a one-year grace period before any payments start. With a personal loan, you don’t have such options and the payment towards the loan starts soon after the disbursement.
- You can easily qualify for a personal loan as there are no end-use restrictions whereas qualifying for a student loan can be difficult if your college is not good.
- Personal loans provide you instant funding whereas getting funding from a student loan may take some time.
From using personal savings to parent’s retirement funds and from taking a student’s loan to a personal loan there are several options to fund higher education. However, it depends on the preferences and requirements of the individual as to which option will suit them the best.
