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Do you know the cost of educating your child abroad?

Our culture places a great deal of importance on education. We often place an even higher premium on overseas education. Educating your child in an overseas institution can be an expensive proposition. The costs of tuition, boarding and lodging are growing at a very fast pace. As parents, the last thing you want is to be surprised by the sticker shock of the cost of these expenses. Fortunately, with a bit of foresight and financial planning, you can feel secure that your child will have the adequate financial resources needed to complete his or her programme. You should start by asking the following few basic questions.

Where would you like your child to study?
What are the fully loaded costs?
What are the funding options you can use?

• Savings
• Financial Aid
• Loans
• Match your assets and liabilities
• Research and Teaching Assistants, Other On-Campus Odd Jobs
• Employer assistance

Where would you like your child to study?

First, you should identify where you would like to send your child to study. Narrow down on the country, the course of study and the duration of the programme. A four-year undergraduate programme in business in the US might be double the cost of a three year programme in hospitality in Australia. Understand that different courses and countries have different fee structures.

What are the fully loaded costs?

Secondly, do not ignore the costs associated with boarding, lodging and overseas travel. Understand the cost differentials between on-campus and off-campus housing. When calculating the full costs, don't ignore some costs that might seem hidden, but have to be incurred nevertheless. For instance, engineering programmes might have lab fees, just like architecture programmes might require you to buy special equipment. Build a buffer into your cost estimate.

What are the funding options you can use?

Finally, understand that in today's world there are numerous options for funding. Every university, financial aid office and bank will have their own criteria and sets of documentation for the purposes of funding. Make yourself familiar with what is needed. Don't be surprised.

• Savings: Ideally, you should start saving for your kids' education while they are still young. By saving a small amount on a regular basis, you can take advantage of the compounding of capital. Setting aside a small amount on a monthly basis might also be manageable compared to one big lump sum payment.

  Even saving Rs 5,000 per month for ten years can amount to approximately Rs 12 lakhs, assuming a modest return of 12% per annum on your capital. However, in order to really benefit from this kind of compounding, the trick is to start early. Additionally, you will be giving yourself a longer time horizon, and accordingly can afford to take slightly more risk by investing in higher yielding growth instruments.

• Financial Aid: Many programmes offer financial aid in the form of scholarships, bursaries, grants, stipends etc., depending upon the programme. These will either be based on merit (i.e., academic performance) or need (i.e., financial situation). Some, if not all, financial aid offices would like to see recent income tax returns of the parents as proof that there is a genuine gap in the family's ability to fund the child's education.


• Loans: Fortunately, there are many Indian banks (both PSU and private banks) that will sanction students a loan for study abroad, even before departure. Loan eligibility depends upon the parents' income and repayment capability. As a parent, you will have to be a guarantor to the loan as a co-signatory. Under section 80E of the Income Tax Act 1961, the entire interest paid on an education loan is tax deductible in the parents' tax return. An education loan can be useful as a last minute option, especially if you have done no planning or savings regarding educational expenses.

  Please do not take a "personal loan" for educational purposes, because a personal loan will be expensive in the range of 16%-18% rate of interest, but "educational loans" are in the range of 12%-13% interest. Tuition fees, books, travel expenses, stationery, computers can all be paid for using education loans. Loans up to Rs 4 lakhs usually do not require any collateral or margin money to be deposited with the bank. The lender will usually offer you a repayment holiday during the course period and for sometime thereafter before you need to start repaying the principal amount back. Check with individual banks for special terms and conditions. For instance, for girl students the rate of interest charged is usually lower. Top

• Match your assets and liabilities: Under RBI laws, every Indian can use up to US$200,000 per annum for investment abroad. If you have sufficient liquid savings, you might want to consider using this allowance to build some savings and investments in a foreign currency. This can help if you create a pool of wealth in the same currency that you will be incurring tuition and boarding costs, thus offsetting the impact of variables such as currency fluctuations and inflation.


• Research and Teaching Assistants, Other On-Campus Odd Jobs: Depending upon the local immigration and work permit laws, some universities allow overseas students to take up research and teaching assistant positions, as well as do odd jobs on campus like work in the local students union shop or supplies store. Again, until your child shows some entrepreneurship and asks around for these positions, nobody will just gift them a job.

  You might also encourage your child to do a summer internship with a company. Often these jobs pay decently and complement the academic learning in the classroom.

  There can be no assurance that these research assistantships, odd jobs or internships will be available. In fact, even if they are, the earnings from these jobs should only be used to supplement your main source of funding.

• Employer assistance: If your child is already working and is looking to go abroad for post-graduate education, ask him or her to check with their employer if the company has a facility to fund or subsidize the education expenses. If such schemes exist, the benefits will come with strings attached. For instance, the employee might have to give the company a bond, or commit to working for a minimum period of time at the same company upon graduation. Top

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