Owing to recent advancements in Internet, access to information is now quite literally at the command of our fingertips. No matter which part of the world we are sitting in, we can now scroll through websites of countless universities, companies, and even hotels to set out of our geography to explore our potential.
Thanks to social media marketing, interested students can sift through the curriculum, check school rankings, access testimonials, view the campus, and seek admission to colleges through online applications by swiping up on an advertisement.
While all this sounds wonderful, overseas education can be a costly affair. Due to currency fluctuations, arrangements for tuition fees, hostel fees, student visas, and travel can add up to a large amount. One can apply for student loans and scholarships for admission, but those require a lot of formalities, and students have to keep paying back their loans until long after their education is over.
So, how do we plan our finances in a way that overseas education becomes a rewarding and seamless experience? The answer is planning Global Investments when your children are still young.
With the world making connectivity simple, you might want to upgrade your savings game and add avenues that will help you save and grow your money.
Let us look at some preparations that one needs to make before applying for an education loan.
Choose The Right Country: While selecting the right country to apply to, ensure that you select one that provides the best educational experience for your budget. You might want to consider choices that give you the best return on investment (ROI) for you to be able to pay your education loan seamlessly. As banks consider placements and probable salary before sanctioning the loan, ensure that you have vetted your options well and selected the best country.
Explore Financing Options And Scholarships: You might want to ensure that your financing strategy is a mix of savings, investments, and funding from family members. As most universities need anywhere between Rs. 80 lakh and Rs 1 crore for a graduation course, you should start by investing a certain sum in international markets every month, and at the end of 3-4 years, supplement the additional amount required through an education loan. This will help you decrease the interest you pay, and also reduce the burden on your child when he/she starts working. You can also apply for scholarships, where you can enrol in a curriculum at a relatively lower tuition fee based on your academic merits.
Invest In Right Investment Options: Once you have decided on a sum of money, it is time for you to chalk out assets that can provide you with stable returns. You can opt for a mix of low-risk investment vehicles with varied returns, such as fixed income products, low yield funds, and exchange-traded funds (ETFs). This would provide you with sufficient stability while allowing you to grow your money as you go. It is recommended that you invest in the above in a ratio of 75:20:5 to be able to maximize your savings and expedite your earnings to be able to fund the education at the right time.
Find The Right Lender: In India, a variety of banking institutions and non-banking finance companies (NBFCs) offer loans from Rs 20 lakh to Rs 40 lakh at interest of 12-14 per cent per annum. However, the interest amount can reduce significantly in case you have a family in the US, who can act as a guarantor for the loan. You can look for banks that offer banking loans for students at minimal interest rates and have partnered with global investment platforms to provide you with a variety of financing options under the same company. These banks can also make foreign remittance easier with minimal paperwork due to their partnership with leading investment platforms.
Consider Impact Of Inflation: While saving and investing for future expenses, one of the most important factors to be taken into consideration is inflation. Inflation and local currency depreciation might have a significant impact on your total fund generation. If you planned on spending Rs 50 lakh for your overseas education, and the cost inflate to Rs 60 lakh in seven years, then you might want to prepare for the additional Rs 10 lakh at the moment of investment. Also, if the local currency depreciates at the same time, the overall spending will get costlier than what you had originally planned for. Hence, for fund planning, it is always a great idea to factor in inflation for accurate calculations.
Here are some game-changing ways for you to invest in your foreign education.
Start Early: If you are looking to study abroad for your graduation, you might want to start at least 6-7 years before the year of admission. If the cost of your graduation sums to Rs 80 lakh, you can invest Rs 55,000 every month for the next 7 years at an annualised rate of 15 per cent. This strategy works better than investing in a lump sum and expecting it to grow, as the amount might be subject to a variety of currency fluctuations and inflationary tendencies.
Diversify Your Corpus: It is a natural tendency for Indians to save in real estate, gold, and bank deposits to prepare for their future expenses. While this is a time-tested strategy it might take years for them to raise a large amount, especially for a child’s education. Instead, if the individual invests in gold bonds, real estate stocks, ETFs, and mutual funds, the time spent on fund generation can be relatively lesser and cost-efficient.
Choose The Right Platform: While there might be a variety of investment experts and brokers in the industry, you must choose an expert who can offer a wide variety of ETFs and stocks for investment. As investment for large amounts can be expensive, choose platforms that offer the best subscriptions and student-friendly products. If you are looking to invest in the US, you might want to select a platform with partnerships with leading US brokerages to help you invest seamlessly, while all the paperwork is taken care of by them. As investment for education is goal-oriented, make sure the platform provides stocks of companies that you follow and understand to be able to make the best trading decisions.
Customised Funding Strategy: If you are a student or a parent, you might want to approach funding for foreign education strategically. Depending on your background and the financial assistance available, you can either choose to fund the amount by yourself or with the help of your family members.
A] Funding single-handedly: In case you are funding your child’s education and are the sole earning member of the family, you can use a mix of global investments and education loans to reduce the overall burden of the expenses. If you plan ahead of time as suggested above, you can finance the amount over and above the initial investment with the help of an education loan obtained against 100 per cent collateral. You might also avail yourself of a bank loan first, and choose to invest in global stocks to pay off the loan within or before the end of the term.
B] Joint funding with family members: If you are lucky to have joint funding for your education, you can avail yourself of personal loans from your family members to pay for your foreign education. In such cases, you can pay the education fee in a lump sum and avail yourself of about 3-4 per cent discounts from the universities for paying the tuition fees in a single instalment. Moreover, you can invest in high-performing global stocks to slowly pay back your family members with ease post your graduation.
The author is co-founder and co-CEO, Stockal
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)