Who should pay for the higher education of our children?
Ideally somebody else. Like a scholarship. My niece is on her way to Harvard – and is being partly funded by a scholarship which is meeting about 50% of her TOTAL COSTS – and completely covers her tution fee. However not everybody gets admission and scholarship in a college of their choice, right?
So let us see who should pay:
1. The parent if and only if the parent has ENOUGH stacked away for his own retirement. If he has other open ended liabilities – he should keep the cash with himself. I am assuming that a man is 50 years of age and has a daughter aged 21, parents aged about 80 years. In such a case he should first set aside some money for his parents, for himself and if there is a surplus, he should use it for his daughter’s education.
2. The student: if he/she has worked for say 2-3 years and has saved / invested from that income that should be used up first, then the balance should be paid by the parent.
3. Bank loan – this is actually an expensive loan. So if the parent has his money invested at 8% , he might as well redeem that and pay the fees.
4. A potential employer or an employer willing to pay the fees. Big management schools give a good rate for the employees of big branded employers – so go and avail of the discount.
What, however is a MUST is that the parent / uncle should make an agreement about the repayment. The repayment terms of the loan should include EMI dates, interest rates, etc. and ENFORCE IT real tightly.
The basic assumption is that the kid deserves the admission and not because the father can write a cheque for a few million rupees!
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