Every year, thousands of Indian parents make one of the biggest financial commitments of their lives: sending their child abroad for college. After all, a foreign degree can provide access to global universities, new experiences, and potentially better career opportunities.
But there is a financial question that often gets overlooked: How much of their own financial future are parents willing to sacrifice to fund it?
The cost of foreign education is much more than the tuition fee. Accommodation, food, insurance, travel and other living expenses can make the actual cost substantially higher. But universities can increase fees every year, while accommodation and living expenses rise with inflation. Flights home, health insurance, laptops, books and other expenses add further to the bill.
For an Indian family, currency depreciation creates another layer of uncertainty. Even a modest annual depreciation can significantly increase the rupee cost of the final years of education. A degree that looks affordable when the child receives admission can become considerably more expensive if the rupee depreciates.
The numbers are sobering. According to HSBC’s 2024 Quality of Life Report, Indian parents spend an average of $62,364 annually (approximately ₹52 lakhs) on a child’s overseas education. For the US, it can exceed ₹1 crore per year in many private colleges. More importantly, the report estimates that funding a three-year foreign degree could consume 48% of an Indian parent’s retirement savings, while a four-year degree could consume as much as 64%. And this is only for one child.
The real question, therefore, isn’t whether you can afford your child’s foreign education. It is whether you can afford it without jeopardizing your own retirement.
Savings or education loan?
Using savings avoids the burden of an education loan, but it can mean liquidating investments that have been compounding for years. On the other hand, taking the entire amount as a loan preserves investments but can create a substantial repayment burden for the family.
A combination of savings and an education loan may therefore be more appropriate for most families. The right balance depends on the family’s income, existing wealth, the parents’ ages, overall financial goals, and the expected cost of education.
HSBC’s research shows that 90% of affluent parents globally take full responsibility for funding their children’s international education, with 53% using dedicated education savings and 51% using general savings. About 22% are considering loans and 20% would sell assets to meet the cost.
The danger lies in allowing the education goal to consume money that was actually meant for retirement. The retirement corpus should not become the education fund!
This is where parents often make the biggest mistake: when education costs exceed expectations, parents frequently redeem mutual funds, break fixed deposits or divert retirement savings to meet the shortfall. The immediate problem disappears, but the lost compounding cannot easily be recovered.
Parents often assume that their child will graduate, get a well-paying job abroad and repay any education loan. However, the plan should also work if the child returns to India after graduation, takes longer to find a job, or earns less than expected.
An education loan can be repaid over time. Lost retirement compounding cannot.
One of our clients, a Gurgaon couple, both 47, told us they wanted to fully fund their son’s four-year undergraduate degree abroad, estimated at around ₹4 crore in today’s terms (about ₹5.4 crore by the time it is actually paid, factoring in fee inflation and currency movement). They had a solid financial base and assumed they could simply pay for it from their investments.
We modelled two identical scenarios — same savings, retirement, and returns – changing only how much the parents covered for education:
| Path A: Fund 100% from savings | Path B: Fund 40%, student loan for the rest | |
| Education cost borne by parents | ₹4 crore (full) | ₹1.6 crore |
| Remainder funded by | — | Education loan, repaid by the child |
| When their investment portfolio runs dry | Age 68 | Lasts through their lifetime (age 90+) |
| What retirement looks like | Investments exhausted with 20+ years of life left; forced to lean entirely on illiquid property | Retirement corpus stays intact and independent |
One decision moved their financial independence by more than two decades.
Same family. Same goal. Same degree. The only difference was who carried the final 60% of the cost – and it changed whether the parents ran out of money at 68 or stayed financially independent for life.
The loan in Path B is not a burden the child cannot handle – it is spread across the 40-year career ahead of them. The shortfall in Path A, by contrast, lands squarely on two people with only a decade left to earn. And note what happens to the parents in Path A even before their money runs out: on paper they still look wealthy, because they own property. But that wealth is illiquid. They have an impressive balance sheet and no cash to live on. That is the trap.
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Parents should therefore establish a clear boundary before the child leaves for college: which investments can be used for education and which are non-negotiable retirement assets.
Views expressed by: Gautam Bhasin, Founder & CEO at Prospurts Wealth
