Education expenses in India are increasingly becoming a financial burden for families. Over the past decade, the cost of schooling has surged dramatically. Many parents prefer private, unaided schools over public ones due to better infrastructure, superior education quality, and a broader range of extracurricular activities. A Unesco study indicates that nearly 73% of parents choose private schools because they perceive public education as inadequate.
The high demand for private schooling and the limited number of quality institutions have driven up costs. To offer improved facilities and services, schools have increased fees. In addition, education costs now encompass private coaching, lodging, sports, music, books, and travel. These additional expenses can total between Rs.16-30 lakh throughout a child’s schooling, depending on individual choices.
The situation is exacerbated by rapidly rising costs. In Bengaluru, some schools have hiked bus fees by 50-60% in the past year, while Mumbai bus operators are seeking a 40% increase in transportation charges. A Local Circles survey in Bengaluru revealed a 30% rise in school fees over the last two years.
Changing family dynamics and modern parenting trends also contribute to the financial strain. With more parents joining the workforce, the demand for daycare services has soared. Daycare costs in India range from Rs.20,000 to Rs.1 lakh per month. As a result, many parents are considering boarding schools, which offer a structured environment that can enhance a child’s career prospects but come with a hefty price tag of Rs.6-12 lakh per year. High education costs may soon become the norm, and parents will likely accept these expenses as necessary for providing quality education to their children. To manage these rising costs effectively, a three-pronged approach is recommended:
Investing Wisely: Strategic investments in assets that outpace inflation are crucial. Mutual funds, especially those focused on equities, can provide significant returns over time, helping parents build a substantial corpus for their children’s education. Mutual funds offer diversification, reducing risk by spreading investments across various assets, and are managed by professional fund managers. They also provide systematic investment plans (SIPs), allowing parents to regularly invest a fixed amount and grow their corpus over time. Fixed-income options, such as the Sukanya Samriddhi Yojana and the Public Provident Fund, offer assured and tax-free returns. Note that the Sukanya scheme is available only for girls under 10, and both schemes have an annual investment limit of Rs.1.5 lakh.
Borrowing Wisely: If investments fall short, education loans can bridge the gap. These loans offer tax benefits, with the entire interest paid eligible for deduction under Section 80E. This can significantly reduce the effective cost of borrowing, particularly for higher income brackets. For example, a person in the 30% tax bracket taking a loan at 12% would see their effective borrowing cost drop to around 8.25% due to the tax deduction. This deduction is available for a maximum of eight years. Parents should carefully consider the long-term repayment implications before opting for such loans.
Exploring Funding Opportunities: Scholarships and grants can help lower education costs. Parents and students should actively seek out these funding opportunities. However, scholarships are not guaranteed, so families may need to adjust their financial plans to account for potential shortfalls.
As parents navigate these financial challenges, balancing immediate educational needs with long-term financial stability is crucial. A well-rounded financial strategy can help ensure that children receive the quality education they deserve without compromising the family’s financial future. With careful planning and prudent financial management, parents can transform the goal of quality education into a sustainable reality.
Parents’ Top Concern: Children’s Financial Security
A global survey by Brightchamps reveals that parents are increasingly concerned about supplementing education with additional skills.