For Indian parents, sending their children abroad for is increasingly becoming an emotional decision with massive financial consequences.
To put things in perspective, the cost of foreign education today — roughly ₹2.5 crore — is comparable to buying a decent apartment in cities like Bengaluru or Hyderabad. And if current trends continue, the same course could cost nearly ₹5 crore by 2036 due to rupee depreciation and rising global tuition fees.
‘Parents dipping into retirement savings to fund children’s overseas education’
“Today, a full foreign education in a Western country can easily cost around $250,000 — or nearly ₹2.5 crore. And despite this staggering number, nearly 90% of Indian parents surveyed by HSBC said they still want to send their children overseas for higher studies,” explains Saurabh Mukherjea from Marcellus Investment Managers
According to the HSBC survey, they are taking two methods to achieve this goal:
- Many Indian parents are dipping into 50-60% of their retirement savings to finance overseas education.
- Others are turning to loans from NBFCs, often at steep interest rates of 12-14%.
In fact, a Parliamentary Standing Committee report showed that outstanding education loans in India rose from around ₹52,000 crore in 2014 to nearly ₹1.4 lakh crore now.
Why has foreign education become so expensive for Indian families?
“The biggest reason for this is the falling value of the rupee. In simple terms, the rupee has historically lost nearly half its value every 12 years against the dollar. That means even if tuition fees abroad remained unchanged, the cost of studying overseas for Indians would effectively double every 12 years,” Mukherjea pointed out
“Since 1991, the rupee has lost nearly 73% of its value against the US dollar. As a result, a foreign degree that may have cost around ₹26 lakh in the early 1990s would now cost nearly four times more — roughly ₹1 crore — even if university fees had stayed flat.”
But tuition fees did not stay flat.
“, especially in countries like the US and the UK, have consistently increased tuition costs by around 4% annually. Over 25 years, that alone doubles the education expense,” he further added.
“When currency depreciation and rising tuition fees are combined, the total cost of overseas education has increased nearly eightfold.”
And, 10 years down the line, the cost for the same course would increase by 1x or 1.5x, that is, the ₹2.5 course would cost ₹5 crore.
How parents can plan for their children’s education from an young age?
Over the last 10, 20 and 30 years, the has delivered annualised returns of more than 10%, that too in conservative terms.
“So, if parents invest around ₹50 lakh in the S&P 500 when their child enters primary school, the investment could potentially grow to nearly $200,000 by the time the child turns 18, assuming similar long-term returns continue. In other words, a large part of the overseas education corpus could already be taken care of through disciplined long-term investing,” he advises
That kind of long-term compounding can significantly reduce the financial burden of overseas education for parents.
And, rest can come through SIPs, education loan and other sources.