How to fund higher education and manage the costs

Paying for higher education involves two financial decisions: how to fund a course without taking on an unmanageable debt burden, and how to access funding for research and innovation when a project’s commercial potential is not yet clear.

For students and parents considering an education loan, the interest rate, repayment terms and likely earnings after graduation are key factors.

For students pursuing research, access to small grants, mentors and facilities to test ideas can be equally important.

Education loans: When should you borrow?

Nalin Saluja, Co-Founder and CTO of Virohan, an Indian demand-led EdTech company, said parents should compare an education loan’s interest rate with the potential returns on their savings and investments before deciding how to fund a course.

He said borrowing at around 10% interest or lower could make sense if investments could generate comparable or higher returns. He considers around 12% an upper limit, beyond which using savings may be more attractive, provided the family retains an adequate financial cushion.

The decision also depends on household income, existing financial commitments and liquidity needs.

What should you check before taking an education loan?

Borrowers should compare more than the headline interest rate.

Saluja said they should examine the moratorium period, repayment tenure, total interest payable, processing charges, prepayment conditions and collateral or co-borrower requirements.

A longer repayment tenure may reduce the monthly equated monthly instalment (EMI), but increase the total interest paid. Students should also check their eligibility for scholarships and government support schemes before deciding how much to borrow.

How can you assess whether a course justifies its cost?

Compare the programme fee with realistic starting salaries and assess how long it could take to recover the cost, Saluja said.

For instance, a course costing ₹6 lakh against an expected starting salary of ₹3 lakh a year has a headline cost-to-annual-salary ratio of two years. The actual recovery period would be longer after accounting for living expenses, taxes and loan interest.

Students should evaluate the roles a programme prepares them for, demand for those roles and realistic entry-level salaries, rather than relying only on advertised placement figures. Internship-based programmes may also allow students to gain industry experience and earn while studying, Saluja said.

Why research funding matters beyond tuition fees

Access to funding can also determine whether students get an opportunity to experiment with new ideas.

Ashish Trivedi, Founder of DreamXec, a student-led research and innovation crowdfunding platform, said students at Tier-2, Tier-3 and non-premier colleges often struggle to secure small research grants because funding structures prioritise institutional credentials over a project’s merit.

Trivedi said early-stage research funding should give students access to mentors, facilities and modest budgets to test ideas, even when their commercial potential is not immediately apparent. Such funding, he said, should allow students to test assumptions, learn from unsuccessful experiments and develop original solutions without requiring every project to become a business.