Dear Reader,
When embarking on the journey of financing your education, one of the most crucial decisions you’ll face is whether to rely on parental funds (Arthik bhaaar) or opt for student loans (Atmanirbhar). Here’s why choosing student loans may offer a more advantageous path:
Arthik Bhaaar (Self Finance):
- Liquidity Challenge: Utilizing parental funds may strain their liquid reserves, potentially impacting their ability to handle emergencies.
- Credit History: By relying on parental savings, you miss out on the opportunity to establish your credit history, which is essential for future financial endeavours.
- Cost Fluctuations: Fluctuating costs in education can make securing additional funds challenging, leading to potential financial strain.
- Upfront Payment: Self-funding often requires a significant lump sum payment upfront, which can impose financial pressure.
- Parental Future: Depending solely on parental funds may limit their ability to secure their financial future, hindering their long-term financial well-being.
Atmanirbhar (Student Loan):
- Flexible Funding: Student loans eliminate the need for high upfront funds, providing flexibility in financing your education.
- Credit Building: Timely repayments on student loans offer an opportunity to build a favourable credit history, essential for future financial endeavours.
- Cost Coverage: Student loans often cover fluctuations in education costs, offering stability and peace of mind.
- Payment Flexibility: With manageable EMIs over an extended period, student loans ease the burden of immediate financial obligations.
- Financial Responsibility: Opting for student loans fosters independence and financial responsibility for both students and parents, empowering them to prioritize their financial goals.
Moreover, student loans offer tax benefits, effectively reducing the effective ROI and making them a smart choice for education funding.
TAX benefits (reduced ROI) from student loans: For instance, if you take a student loan of 1 lakh @ 11%, your interest will be 11,000 p.a. This interest amount can be deducted from your taxable income, reducing your tax liability by 3,300. Consequently, your net interest on the student loan comes down to 7,700 (11,000 – 3,300), effectively reducing the ROI by almost 3.3% due to tax benefits.
For further inquiries or assistance with student loan options, feel free to reach out.