Jayant and Kajal Kulkarni (an illustrative profile) of Kothrud, Pune, are both 40 and take home ₹2.4 lakh a month together. Their son is 10. Some weeks he wants to be an engineer, other weeks a game designer, and lately he talks about studying abroad. They have ₹6 lakh in a savings account "for his education" and no idea whether they are saving for a ₹20 lakh degree or a ₹2 crore one.
That uncertainty is normal at this age, and it is not a reason to wait. This chapter shows how to build an education budget from the ground up, price course choices side by side, weigh savings against a loan, and set a timeline to the first fee.
In this chapter
- How to build the full cost of a course, line by line
- How different course choices change the target and the SIP
- How to weigh an education loan against your own savings
- A year-by-year timeline from age 10 to the first fee
Build the cost up, line by line
Families often budget for tuition alone, then find that hostel, food, books, travel and one-off costs add as much again. Start with today's prices for one year of a realistic course, broken into parts.
| Cost item (one year, today's prices) | Private engineering degree in India | Master's programme abroad |
|---|---|---|
| Tuition and college fees | ₹2.5 lakh | ₹24 lakh |
| Hostel or rent, and food | ₹1.3 lakh | ₹11 lakh |
| Books, laptop, projects | ₹0.4 lakh | ₹1 lakh |
| Travel, phone and personal costs | ₹0.6 lakh | ₹1 lakh |
| Health insurance, visa, flights | n/a | ₹3 lakh |
| Pre-admission costs averaged over the course (coaching, entrance tests, applications, deposits) | ₹0.2 lakh | included above |
| Total per year | ₹5 lakh | ₹40 lakh |
Then inflate each year's total to the year it will be paid, using a cautious education inflation rate such as 8%. For study abroad, two effects stack: fees rise in the foreign currency, and the rupee has tended to weaken over long periods. At an assumed 5% fee inflation abroad and 3% a year rupee depreciation, the combined rise is 1.05 × 1.03 − 1, about 8.15% a year in rupee terms.
Course choice changes the number most
At ten, nobody knows what their child will study, yet the choice moves the target more than any return assumption. So price a few realistic scenarios, not one. Assumptions for the Kulkarnis: undergraduate study starts in 8 years and a master's, if any, in 12 years; Indian costs rise 8% a year and overseas costs 8.15%; investments earn an assumed 12% a year while the goal is far away. The SIPs below aim to have each stage's full cost in hand by its first fee, which is slightly cautious because later years' fees are paid later.
| Scenario | Total cost in future rupees | Monthly SIP needed from now |
|---|---|---|
| A: four-year degree in India (₹5 lakh a year today) | about ₹41.7 lakh | about ₹26,600 for 8 years |
| B: A, plus a two-year master's abroad (₹40 lakh a year today) | about ₹41.7 lakh + ₹2.13 crore | about ₹26,600, plus about ₹69,200 for 12 years |
| C: four-year degree abroad (₹40 lakh a year today) | about ₹3.38 crore | about ₹2.15 lakh for 8 years |
Scenario C would take almost their whole take-home pay, so it could only happen with large loans and scholarships. Scenario A is affordable on its own. Scenario B sits in between, and that is where the planning effort belongs.
Worked example: a base-plus-stretch plan
A sensible approach when the course is unknown is to fund a base scenario fully and a stretch scenario partly, then re-price every year as the child's interests become clearer.
- Fund the base fully: an SIP of about ₹26,600 a month for 8 years targets scenario A's ₹41.7 lakh.
- Put the idle ₹6 lakh to work for the stretch: invested for 12 years at an assumed 12%, ₹6 lakh × 1.1212 ≈ ₹23.4 lakh. Left in a savings account, it would barely keep up with inflation.
- Set a partial stretch target: they decide to fund ₹1 crore of the master's from savings. After the ₹23.4 lakh from the lump sum, the remaining ₹76.6 lakh needs an SIP of about ₹24,900 a month for 12 years.
- Check the budget: ₹26,600 + ₹24,900 ≈ ₹51,500 a month, about 21% of take-home pay. That is a lot, but it leaves room for retirement saving, which the family must not drop.
- Name the gap: if scenario B happens, about ₹1.13 crore of the master's would come from an education loan, scholarships or an assistantship. If their son studies only in India, the stretch money is redirected to retirement or another goal; nothing is wasted.
Loan or savings? Weighing the trade-off
Many parents see an education loan as a failure of planning. Often it is the opposite: a deliberate choice to protect other goals, especially retirement, which no lender will fund. A worked comparison on ₹50 lakh of a master's bill, using illustrative rates:
- Loan route: a ₹50 lakh education loan at an assumed 10% repaid over 10 years has an EMI of about ₹66,100 and total interest of about ₹29.3 lakh. The graduate usually repays it from their own salary, often after a moratorium period.
- Savings route: the parents, now 52, take ₹50 lakh from their retirement savings. Had it stayed invested for 8 more years at an assumed 10%, it would have grown to about ₹1.07 crore by 60, money they cannot borrow back in retirement.
- The real comparison: about ₹29 lakh of interest over a decade of the child's earning years, against about ₹1 crore less for the parents' retirement. For most families, savings for the base and a loan for part of the stretch is the balanced mix.
Interest on an education loan from an approved lender has been deductible under the old tax regime for up to eight years of repayment; the new regime does not offer it, and section numbers changed under the Income-tax Act, 2025. Fees sent overseas go under the RBI's Liberalised Remittance Scheme, and loan-funded education remittances attract no TCS, while self-funded ones attract TCS above a yearly threshold. The limits, rates and how to get TCS back are covered in LRS and TCS.
Sukanya Samriddhi and mutual funds
If you have a daughter under 10, Sukanya Samriddhi Yojana (SSY) is a government small savings scheme for her future, with the rate reset every quarter: 8.2% for October to December 2026. If you deposited ₹1.5 lakh at the start of every year for 15 years and the rate stayed at 8.2%, ₹22.5 lakh of deposits would grow to about ₹71.8 lakh at maturity in year 21. Rates will change, so treat this as illustrative.
SSY locks money in until 21 years from opening, with partial withdrawal for education after 18, so it suits the stable core of a daughter's plan; equity funds add growth and let you use money on your own schedule. SEBI discontinued solution-oriented children's funds for fresh investment in February 2026; you do not need a dedicated product, only a dedicated plan.
A timeline from age 10 to the first fee
| Child's age | Years to first fee | What to do |
|---|---|---|
| 10 | 8 | Price base and stretch scenarios; start SIPs; invest any idle education savings |
| 13–14 | 4–5 | Re-price with the child's emerging interests; raise SIPs with income; begin the glide path on the base fund |
| 15 | 3 | Set aside a separate safe pot for coaching, entrance tests and applications; move the base fund towards 40% equity or less |
| 16 | 2 | Shortlist courses and countries; research scholarships and education-loan terms and collateral |
| 17 | 1 | First year's fees fully in liquid or money-market funds; apply for loan sanction if needed; gather remittance paperwork for overseas fees |
| 18 | 0 | Pay first-year fees; keep years two to four in debt matched to each fee date |
| 21 | 1 (master's) | Repeat the final-year steps for the stretch fund |
Common mistakes to avoid
- Budgeting for tuition only. Living, travel and pre-admission costs can double the bill.
- Waiting until the course is decided. By then the time for compounding has gone; plan a base and a stretch instead.
- Using the retirement corpus as the backup. As the loan example shows, it is usually the costliest source.
Try this yourself: Take one course your child might choose and fill in the cost table above with today's prices. Add a second, more expensive scenario. Inflate both to the year of the first fee, decide which you will fund fully and how much of the other you will fund from savings, and calculate both SIPs on the tools page.
Frequently asked questions
Is Sukanya Samriddhi better than mutual funds for my daughter's education?
They do different jobs. SSY offers a government-set, tax-free return but locks money in and limits deposits; equity funds offer potentially higher growth with market risk and more flexibility. Many parents use SSY for the stable core and funds for growth.
How do we plan when our child has not chosen a course yet?
Price two scenarios: a realistic base, such as a good degree in India, and a stretch, such as a master's abroad. Fund the base fully and the stretch partly, then re-price every year; money not needed for the stretch can move to another goal.
Should I take an education loan even if I have savings?
Often, yes, for part of the cost. A loan in the student's name builds their credit history and protects your emergency fund and retirement savings. Compare its interest cost with what the same money would grow to in your own long-term goals.
Do coaching and entrance exam costs belong in the education goal?
Yes, but in a separate short-term pot. These costs fall in the last two or three years of school, so they should be in safe, liquid debt rather than in the long-term equity fund meant for college fees.
Read more in our study abroad planning guide and SSY vs mutual funds for education.