Thursday, July 15, 2010

We have enough family savings. Is it better to fund higher education through the family savings or it’s better to take the education loan?

A lot of parents bury their entire life’s savings into funding higher education for their children. This is not exactly the right practice because the burden is felt by both. The parents are now depending on their ward’s to support them in their old age and the ward’s in turn feel `guilty’ about using their parent’s savings for their own purposes. We need to support children by giving them the right advice, providing them a support system and being for them in their good and bad. We should not be emotional, physical or financial burdens simply because we contributed to their growth. Bringing up children is the duty of the parents and that is what needs to be done. Similarly for children who have utilized their parent’s savings there is a feeling of guilt especially if he or she does not perform well, grades drop or the course itself is not suitable. The child continues to suffer silently and then spends the rest of his or her life worrying about the `poor’ parents. Love should be unconditional and not something which ties and binds the child to his or her parents.

Having said that, an educational loan immediately places a responsibility on the ward and he or she knows that there is a performance requirement which is mandatory to obtain a job which is necessary to start repaying the loan. This onus and sense of responsibility is the gift the parents are bestowing on the child as he or she lives in the real world where there will be many similar responsibilities. This is the first step in learning ownership and commitment and this is a great gift.
If, however, the parents wish to help the student, then they can opt for a part payment and partial loan scheme which will work well for all concerned.



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