Best way to fund your child’s education

In this era of a knowledge economy, quality education plays a pivotal role. It is a personal long-term investment that has the potential to generate returns like none other.

That said, quality education is not cheap. Good schools and colleges levy higher fees and other administrative costs. Additionally, there are other expenses such as a special coaching class fees, and if you are pursuing education in another country, state, city, etc. there are other ancillary expenses such as on travel, accommodation, etc.

In general, inflation in education has increased at a far greater pace than the headline CPI inflation. Given that, even if you have financially planned well, there are chances of falling short of funds to meet education expenses because, at times, the return on your investment may not be enough the build the desired corpus. In such a case, to bridge the shortfall -- or even to reduce your own funding for education expenses -- an Education Loan is a sensible option.

Who can apply for an Education Loan

An Education Loan is available at an attractive rate of interest for career-oriented courses like medicine, engineering, management, etc., for graduation and post-graduation programmes in India and abroad. An education loan covers the cost of the tuition fee, books, lab tools/equipment, laptop/computer, travelling expenses and hostel charges, among others.

As the applicant or co-applicant, you need to be a citizen of India, over 18 years of age, should have secured at least 50% marks during HSC/ graduation, and the co-applicant, i.e., parent/s or guardian, need to have a regular source of income. To know the eligibility and the documents required to be furnished in entirety, click here.

But before you apply for an Education Loan as a prudent loan planning exercise, assess how much will be your Equated Monthly Instalment (EMI). Use Axis Bank’s online Education Loan EMI Calculator, an automated tool, that will quickly help you know the EMI and plan your future.

The Education loan can be worked out to suit your needs at a competitive interest rate. You will not have to borrow from friends and relatives or utilise your existing investments assigned for other important financial goals such as children’s marriage needs and your own retirement, among a host of others. Moreover, availing of an Education Loan would entitle you to a tax benefit.

Also Read: [Eight benefits of taking an education loan]

Tax benefit on an Education Loan

The interest paid (which is a component of your EMI) on the Education Loan is allowed as a deduction under Section 80E of the Income Tax Act, 1961 for a maximum of 8 years or till the interest is paid, whichever is earlier.

This deduction will be available from the year you start paying the interest on the education loan and the succeeding 7 financial years, or until the interest is paid in full, whichever is earlier.

There is no maximum limit on the amount of interest that can be claimed as a deduction. However, the conditions are that the Education Loan must be availed from a bank or approved financial institution, or an approved charitable institution, it should be taken to pursue higher studies (does not matter whether abroad or in India), and only an individual assessee can claim this deduction.

To know how much tax benefit you can get by availing an Education Loan, use Axis Bank’s Education Loan Tax Benefit calculator.

Get competitive education loan interest rates and reap the returns over the long term. So, apply for Education Loan today, and fuel your dreams.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.