Ways to plan, manage finances to fund your child’s higher education abroad

Every year, lakhs of Indian students plan to go abroad to pursue of higher education. According to data provided by the Ministry of External Affairs,  7.52 lakh Indians are currently studying abroad across 90 countries. While the US, Canada and the UK remain their top preference, Australia and European countries such as Germany, France and Ireland are now also emerging as favourite study destinations for young Indians looking to add a foreign degree to their resume. However, higher education in all these countries can be a really expensive affair. In addition to the tuition fees, the cost of living also needs to be taken care of. And, the recent depreciation of the rupee has only added to the misery of students heading abroad, or already enrolled in overseas universities.

While it varies depending on the country as well as the university, sending your child abroad to study will cost you an estimated amount of Rs 25-30 lakh annually. Therefore, if your kid dream of studying abroad, you have to plan your finances accordingly in advance. From making a budget to arranging for an educational loan, the entire process can be a little mind boggling. Here’s a quick look, then, at how you can plan your finances smartly as your child gets admission into a foreign university.

Before getting started, it’s important to know how much money you will need during your child’s stint abroad. As mentioned earlier, expenses will vary depending on the country, currency exchange value, the university and the course. First, you have to consider the tuition fees for the course your child wish to opt for. Then comes the cost of living that includes housing, transportation, insurance, books and supplies, and your personal expenses. For example, if your child is going to the US, you will end up spending about Rs 70,000-75,000 per month for living expenses. In the UK, you will have to shell out more money as the accommodation cost here is relatively higher. Living expenses in the UK range anywhere between Rs 80,000 to Rs. 90,000 per month.Other than that, there are additional expenses such as application fees and cost for entrance tests (GRE and TOEFL). Each application to a university in the US costs around Rs 3,500-7,000. Whereas, the registration cost for GRE and TOEFL are respectively about Rs 14,515 (approx.) and Rs 12, 744 (approx.).

In many cases, this figure adds up to roughly about Rs 30 lakh, out of which Rs 20-22 lakh go for tuition fees and the rest for living expenses. However, it’s good to arrive at an accurate figure and start planning ahead accordingly. Once you are done with this step, you can start making a rough budget.

Since you will need to accumulate a large sum of money to meet the costs of your child studying overseas, it’s advisable to start saving from as early as possible. You can invest in long-term financial schemes such as equity, balanced mutual funds, fixed deposits and unit-linked insurance plans. If you prefer low risk plans, monthly mutual funds are the best option for you. However, it’s for the best that you take help of a financial expert.

Sometimes, your savings may not be sufficient to fund your child’s education abroad and therefore you need to consider various funding options. It’s advisable to look for education loans which can the majority of your expenses. Typically, Indian banks offer education loans of up to Rs. 20 lakh at an average interest rate of 12-14 percent per annum. In case, your kid is going to the US and you have a family member who is an American citizen, you can apply an education loan through the university if he/she agrees to be a guarantor. University sanctioned educational loans have a relatively lower interest rate of around 7 percent. However, the loan-payment tenure is longer in the US.Make sure you do extensive research before you apply for an education loan so that you can get the best possible rate and reduce your repayment burden later on.

A number of foreign universities also offer attractive scholarship programmes for international students. Check the websites of all the universities your child has applied to and see if they give scholarships. Besides universities, you can also look out for external agencies and trusts that provide scholarships. However, bagging a scholarship is not an easy process as thousands of students will aim for the same. Your child will have to sit for a number of exams that will determine if he/she is eligible for a scholarship. Hence, if you are confident with your child's ability, you should not let go of such opportunities.

Part-time work can pay for your child’s living expenses, thereby helping you reduce the loan amount you have to take at the onset. In many universities, international students are offered teaching or research assistant jobs. While these opportunities are usually provided to postgraduate students, there’s no harm in trying. Your child can also look for part-time jobs on or outside the campus that won’t compromise his/her university schedule. Most of these jobs don’t require much effort and pay well. You can ask for additional information from your relatives and friends who have already been in those foreign countries.

The cost of education in overseas countries is on the rise. But, it doesn’t necessarily mean your kid has to say goodbye to his/her dreams of studying abroad. With a little planning, you can manage your finances and help him/her get a fancy degree from a foreign university.

Source: Moneycontrol