Dos And Don’ts While Taking An Education Loan

By Saroni Chakravarti | December 2, 2020

Saving for your child’s higher education is a financial priority that is likely to make a huge dent in your corpus if you don’t plan judiciously well ahead of time. Here are some dos and don’ts you need to follow before taking an education loan.

A Simplified Guide To Educational LoansThe birth of a child may be one of the most joyous occasions in your life but it doesn’t come without its fair share of responsibilities and expenses! With the cost of higher education spiraling these days, planning ahead for your child’s education may be the only way. Despite this, you may still not have saved enough when your child is ready to leave for college owing to reasons like inflation, shifting career goals, etc.

Dos:

  1. Think Before You Opt For A Course

An additional degree does not guarantee a better job. Choosing a course that is in line with your future plans and interests is essential. Although STEM courses offer better job and salary prospects in comparison to arts or social-sciences-based courses, remember that your job is something you’ll have to do for at least a good 20-30 years of your life. These days, a lot of colleges offer curricula that combine the best of arts and sciences and even award joint degrees for such courses. Pick a course that suits your career aspirations but also ensures that you won’t have to financially depend on your parents till you’re 30.

Additional Reading: Get An Education Loan For Your Kid’s Higher Studies

  1. Keep Realistic Future Salary Expectations

Taking the maximum loan available and ignoring your repayment capacity is the next mistake that you should avoid like the plague. As a student, consider applying for a loan amount that your future salary will be able to pay off. Else, the co-applicant which is usually the parent will be forced to pay the remaining amount. When computing your future salary, it’s better to keep the expectations real.

Additional Reading: A Simplified Guide To Educational Loans

Don’ts:

  1. Opt For A Course Because Loan Is Available

Another mistake to avoid is joining a course just because the institute has tied up with financial institutions and will offer cheap and easily-available loans. In India, many colleges especially the ones offering education that is of poor quality most often try to attract students by showcasing their tie-ups with financial institutions. Students should decide on the institute and course based on their interest and not pick a course only because a loan is available for it.

Additional Reading: Mutual Funds: An Amazingly Effective Way To Fund Your Child’s Education

  1. Take Top-Up Loans

Many students who opt for an education loan for graduation avail a top-up facility in order to complete their post-graduation. This is a bad practice since this will only increase your liability further. It is always better to repay your education loan first and then take the second loan.

Additional Reading: Education Loan Moratorium Period: Why It Matters

Education Loan Vs. Retirement Planning

Foregoing their retirement savings to cover the shortfall in their child’s higher education expenses is a common dilemma faced by several Indian parents. Remember that your child can still avail an education loan but you can’t. Your retirement planning should take priority over your child’s higher education goals.

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Category: Money Management

About Saroni Chakravarti

Saroni loves all things quaint and old world- be it art, music or cinema. She has a special knack for spotting the weirdest traits in people and can't for the life of her understand why she attracts the worst co-passengers. Despite her cynical exterior, she still hopes for a world that will be free from discrimination and cruelty. When she's not spending her day commuting, she can be found watching funny videos, reading, and sending out needy vibes to strays around her.

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