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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  1. My friend joined MD recently. Very talented girl. Inspite of high marks, she did not get merit seat because of the OC category. Now, Annual Tuition Fee is 3 Lacs.

    Theirs is a middle Class Family. Her father is about to retire in couple of years. His retirement kitty is around 15-20 Lacs. Only other assets are house and personal jewellery.

    She is going to get married in less than a year. It should cost them 5+ Lacs. They have saved this money for her separately.

    Now, they want to sponsor her for PG. And, obviously, it should come from their retirement fund. They don’t like the idea of her getting an educational loan. They don’t want their daughter to take the loan burden to her (new) family. They fear that it might bring any problem to her because of this loan.

    She paying back after marriage depends on how her husband and new family is going to be. Very difficult to convince them not to touch the retirement fund.

  2. The problem here isn’t the touching of the retirement fund.

    The problem is that they/she should find a partner(/family) who will understand her parents’ situation and allow her to earn and repay her loan to her parents.

  3. Vince, that is very true. Obviosuly, they will look for a good partner and family. But, selection works to a certain extent. 🙂

    And, at any time, they don’t want this to be a reason for problems.

  4. lets face it. MD education is a luxury thanks to the Medical / Education mafia. She should take an education loan with a moratorium of 3 years, take up a job with a big hospital (she cannot afford to practice, right? ) and repay the loan. With 20L of retirement corpus (and assuming no pension) they will soon be dependent on her financially.

    Nor is a MD degree going to land her in a Rs. 20L job. Sadly it will not, so why the degree NOW? LET her work for a couple of years and then do her MD. Easier said than done?

  5. MD degree at 3 lakh per year! Vishnu, Subra – that is cheap at current prices. Definitely she is not going to get this chance after 2 years; she may not get is after 6 months. It has to be NOW.

    She has to do it even if all the money has to come from a bank. Anyway days of practicing in own hospital are coming to an end anyway. She will have to look for a job.

    If she borrows the money from the parents, she has to pay it back. You know, this condition will be a test for her future partner. Any guy who agrees to this condition is worth much more.

  6. He will get Pension… Not sure how much. However, the retirement corpus will get over if they continue the same (moderate) lifestyle.

    After two years of hard work preparing for the MD, scoring a very good rank, but still not enough to get sepcialization what you wish. Every year, the competition only gets intense. You are left with the choice of either “Try one more Year” or “Choose what is available”

    At that point, the third option “Why Now?” goes for a toss and you d up choosing the paid seat. Medical Students (especially those who are not from rich background and OC) have to be damn lucky to get in.

    Even to get a paid seat, the mark threshold is so high and it is scary. Or, Wish for parents who can afford few crores for the management quota.

  7. True.. That is real test. And, it is inhuman that you want the girl as well as her income, but do not want to take the burden of educational loan.

    My friend’s friend getting engaged. As a part of dowry formalities, the girl’s parents have to pay the fees for the guy for the remaining years. 😀

    Good part is that they agreed. They are happy that they did not ask for a hospital to be built.

  8. I feel Sachin is on the dot here.

    @Vishnu: I feel something is wrong. In Mumbai at least, there is a stipend for PG students, around 25-30K per month.
    So i really don’t think that paying off the loan would be difficult.

  9. @Vince..

    In Govt Colleges, they get around 25k per month. In private Colleges, either they don’t give or they give very minimal like 3k per month (my friend gets 3k per month from 2nd year. First year – ZERO).

    I heard these private colleges swallow these money which is supposed to be given. This was told by the students. I am not sure whether Colleges are requried to pay the stipend or not?

  10. @Vishnu: Well, someone ought to protest against those private colleges then. This usually won’t happen as most private colleges have many management students, and hence most won’t be inclined to protest.

    That aside, if an MD seems too expensive, a DNB degree would be something cheaper.

  11. Are you sure your niece got Harvard scholarship waiving the tuition fee. This is the first such case that I came across. To the best of my knowledge, I have not heard Harvard waiving of tuition fee to anyone at least in the first academic session.

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