Personal finance experts advise taking education loans for funding child’s higher education rather than exhausting your savings as education loan offers various benefits.
Education has been getting costlier every year. Higher education in India can cost upto Rs 25 lakh while higher education overseas can cost up to Rs 1 crore and more. Earlier, most parents used to either dip into their savings to fund their child’s education or liquidate assets like gold, property etc. However, personal finance experts advise taking education loans for funding child’s higher education rather than exhausting your savings as it offers various benefits. You can take an education loan either from a bank or from an NBFC (Non-Banking Financial Company).
Here are five benefits of taking an education loan:
Savings protection: Taking an education loan means you will leave your savings undisturbed which will enable you to achieve your long-term financial goals like retirement corpus, children’s marriage, buying a house etc. As a benefit of education loan, it will ensure that you won’t be financially dependant on your children post-retirement.
Coverage: Education loan doesn’t just cover course fee, but it also covers other course expenses like hostel expenses, exam fee, library charges, lab fees. The loan also covers the cost of books, travel expenses as well. This reduces parents’ financial burden immensely.
Tax benefit: Under Section 80E of the Income Tax Act., the entire interest you pay on education loan qualify for income tax deduction. This income tax deduction can be claimed for up to eight years.
Moratorium Period: Moratorium period is like a holiday period given to the borrower during the loan term. During this time they don’t have to repay the loan. In case of education loans, the borrower gets a moratorium period ranging from 6 months to 1 year from the date of completion of the course, this gives the borrower enough time to look for a good job that pays well and save enough to start repayment of the loan.
Credit history: Timely repayment of education loan will keep the credit score positive which will help them to get a loan easily in the future.