Althea Fernandez started working in a Singapore-based merchant banking company soon after finishing her postgraduation from a university in Singapore about a year ago. The 24-year-old secured a part-scholarship where the university paid for 20% of her tuition fees; the rest was funded by her parents. Though the funding doesn’t seem too much, to have even 20% of your foreign education funded means a lot of money saved.
A falling rupee and rising education cost is a double whammy for aspiring overseas students. No wonder less than a quarter of those who apply manage to go abroad for higher studies. We bring you some ideas on how to gather the money for your stint abroad.
Count your costs
The first step is to know how much you need and for that you need to count your costs.
“Mark costs on an excel sheet,” said Aditi Singh, educational adviser, United States-India Educational Foundation, speaking at a seminar organised by the American Center in Delhi on June 26 for students preparing for foreign education. Some of these costs include the tuition fees of the course, the cost of attendance (that is the cost of living, insurance, books, transportation and so on) and miscellaneous expenses that could arise when you are living there, said Singh.
Then there are additional costs such as application fees. For instance, each application to an American university can set you back by about $50-100. Then there’s the cost of entrance tests. For instance, TOEFL (test of english as a foreign language) costs around $165. Then there is a cost to send your scores to the university. And multiply these sundry costs as usually one applies to multiple universities and not just one.
Arun Jacob, an overseas education expert, suggests that one should earmark at least Rs. 30 lakh a year for foreign education, irrespective of the country.
Planning and saving
Now that you know how much you need roughly, it’s time to start preparing and saving to meet the costs. Financial planners advise aspiring students to count their costs at least a year before their course starts.
Planning by parents: Suresh Sadagopan, a Mumbai-based financial planner, says that ideally parents should start planning for their child’s education from an early stage. “Since the amount that one has to accumulate is a large amount, the earlier you start the better. You can start the planning from when the child is, say, 4-5 years of age; so you will have another 15-20 years to accumulate the money.” If you start this early, Sadagopan suggests to be aggressive with your planning and invest a majority (80-100%) in equity products.
So you can invest in systematic way in equity large- and mid-cap mutual funds (MF). As your income increases, you can increase the amount that you put into the MF schemes. “Investing systematically will give you the benefit of compounding. Equity over the long term gives you better returns than debt products. You can also put some of your savings into a Public Provident Fund,” says Sadagopan.
As the time comes nearer for your child to go study abroad, you can gradually start moving the money from equity into debt products such as a short-term bank fixed deposit (FD) or debt funds.
Planning by students: Some students even take the initiative of saving for themselves even when they are studying. Take Sagar Agarwal, who did his graduation from Christ University in Bangalore. While he was in college, he regularly invested his pocket money in the stock market. By the end of his three-year course, savvy investing and soaring markets had given him enough returns to fund his masters in the US. While we do not suggest investing all your money in the equity market over a short term, you can look at multiple avenues as mentioned above.
Factoring in exchange rates: A year ago, the rupee was Rs. 56.02 against the dollar; now it is hovering around its all-time low of Rs. 60. So in a year it has gone down 7%; that means, you will have to pay 7% more just because of the exchange rate. So keep at least R1.5 lakh as buffer for future exchange rate fluctuation.
While saving is important, you also need to explore other funding options because your savings may not necessarily match up with the costs.
Personal funding: One of the most popular ways of funding in India is personal funding from family and relatives. According to the Institute of International Education’s study of how international students financed themselves in the US during the academic year 2011-12, out of the total 764,495 foreign students, 36.3% opted for personal and family finances as their primary source of funding.
Bank loans: Indian banks give education loans of up to Rs. 20 lakh at an interest rate of 12-14% per annum.
Within loans, an option is to take a loan through one of your relatives or friends who stay abroad; usually, the relative or friend needs to become the guarantor of the loan. That will work cheaper. For instance, if you have a relative in the US, you can get an education loan at 3-4% a year.
Scholarships/fellowships: Check the websites of the universities that you are applying to see whether they offer scholarships.
Other than the universities, even external agencies such as Erasmus Mundus run by the European Union, companies and trusts offer scholarships to study abroad (see table).
Assistantships: Some institutions offer teaching or research assistantship jobs, especially for postgraduate students. However, sometimes the payment is in the form of fee waiver, as is the case in certain universities in Malaysia.
Discounts: You can also check with the university if they will let you pay your fees in one shot and give discounts against that.
In all probability, you will have to use a combination of the options mentioned above to fully fund your study abroad. To make some of them work, you need to plan in advance, so start now.