What will my child’s degree cost in 15 years, and what do I need to save every month?
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A four-year programme costing ₹8 lakh a year today does not cost ₹32 lakh when your child reaches it. This model inflates each year of the course separately, discounts the later years back, and tells you what the gap really is.
Why Education Planning Goes Wrong
Three mistakes account for almost every education funding shortfall, and none of them is a failure to save. The first is using general inflation. Private engineering, medical and management fees in India have risen considerably faster than headline CPI for well over a decade, and using a 6 percent assumption where 9 or 10 percent applies understates the target by a wide margin over fifteen years.
The second is treating the course as a single payment. A four-year programme is four annual payments, and the fourth is paid three years after admission at three more years of fee inflation. That raises the total, but it also means you do not need the whole amount on day one: the money for the later years keeps earning while the earlier years are being paid. Ignoring both effects can push the estimate out in either direction.
The third is forgetting that the horizon shortens. Money for admission in fifteen years can sit in equity. Money for admission in three years cannot, because a drawdown in the wrong year is unrecoverable when the payment date is fixed by a calendar rather than by choice. The corpus below is a target; the glide path from equity to debt as the date approaches is the part that protects it.
Education Funding Model
How to Read the Corpus
The total fees at then-prices is the sticker shock number and the least useful one. It is the sum of four separate payments made in four different years, so quoting it as a single figure overstates what you must have on the day of admission. The corpus needed at admission is the number to plan against, because it correctly credits the later years with the returns they will earn while waiting to be spent.
The funding gap is what your existing earmarked savings do not cover, and the monthly SIP is that gap converted into a monthly commitment. Note the leverage of time: the same gap over fifteen years and over eight years does not need roughly twice the monthly amount, it needs closer to three times, because the compounding is doing much less work in the shorter case.
One caution on the return input. The model applies the same return through to admission, but the money should not be invested the same way throughout. A sensible glide path holds equity while the horizon is long and moves progressively into short-duration debt in the last three to four years. That lowers the average return slightly, so if you plan to glide, enter a return a little below your equity expectation rather than the full equity figure.
What Changes the Answer
The fee inflation you assume
This is the input the answer is most sensitive to, far more than the return. Private professional course fees in India have historically risen faster than general inflation. Running the model at 6 percent and at 10 percent will produce corpus figures that differ by a very large margin over fifteen years, and the honest planning answer is the higher one.
Whether the course is in India or abroad
An overseas programme adds currency movement on top of fee inflation, and the rupee has depreciated against the major currencies over most long periods. For a foreign degree, either raise the fee inflation input to cover the expected currency drift or hold part of the corpus in a foreign-currency-denominated fund.
Living costs, which are not fees
Hostel, food, travel and equipment often add 30 to 60 percent on top of tuition for a residential programme, and they inflate too. Either add them to the annual fee figure or accept that the corpus above funds tuition only.
An education loan as a deliberate part of the plan
Funding the entire cost from savings is not always optimal. Interest on an education loan is deductible under Section 80E without a cap for eight years, and a loan taken by the student shifts part of the burden to a period when they are earning. Planning to fund 60 to 70 percent and borrow the rest is a legitimate strategy, not a failure.
How We Calculated This
The Decision Framework
Frequently Asked Questions
What education inflation rate should I use?+
Should the corpus cover living costs as well?+
Is Sukanya Samriddhi Yojana a good education vehicle?+
Should I plan to take an education loan?+
What if my child chooses a cheaper course?+
Where should this money be invested?+
Sources and Method References
- Ministry of Education — higher education statistics and fee structures
- Income Tax Department — Section 80E deduction on education loan interest
- National Savings Institute — Sukanya Samriddhi Yojana rules and rates