Disclaimer: Welcome to this episode of the Kairos Podcast! Kairos is a podcast on Financial Planning, about doing the right thing at the right time. This audio content has been made available for information and educational purposes only. Nothing contained in this audio shall constitute or be deemed to constitute advice. Always seek the advice of a professional with any questions you may have regarding your financial decisions.
Samyuktha: Today, Srimathi and I are going to talk about something that’s on every young person’s mind – higher education. This topic is familiar to all of us. At some point, all teenagers think about going to college and what they’re going to do with their lives. 10th standard seems like a major milestone which leads to selecting an education stream. Then, once you’re done with school you have to settle down on a college that will decide your career trajectory. This is a pretty big decision for a 16-year-old or 17-year-old to make. And it’s great that most of us have friends and family who help us through these decisions.
Sometimes this decision can be more complex as it may involve taking on student debt. For instance, someone who wants to be a doctor might need to spend somewhere between ₹ 50 Lakhs to ₹ 1 Crore just on their undergraduate course. And parents may not have enough time to plan this expense because this clarity emerges only in the last 2-4 years of their child’s schooling. I am talking to Srimathi today and I’d like to hear your thoughts since you’ve seen both sides of the story. As I understand, you’re currently repaying your student loan and you’re working as a financial planner. So for someone who is in a similar situation, what’s the best way to approach such a case?
Srimathi: Thank you for the introduction, Samyuktha! I agree with you that parents might not know just how much to save for their child’s higher education because you have a waiting period of 2 to 4 years before the child knows what s/he wants to pursue. So the obvious action that the student/child can take is to opt for scholarships or Government-sponsored education. The best way is to look for colleges within the city so it reduces the cost to a greater extent – you don’t need to worry about accommodation or paying the hostel fees.
When we look at this from the parent’s point of view, most of them have education as a priority when compared to other goals such as the child’s wedding. So, if they have a good amount saved up for their child’s wedding, they can use the money to fund education, giving it more priority. The idea behind this thought is that qualification in medicine or even in management will pay back in time. That is, you will earn a lot more. This is how we look at it.
Samyuktha: That makes a lot of sense. But there’s another section of students that I’d like you to take a look at. Let’s say you finish your under graduation and are looking to do your masters. A lot of us dream of going abroad or studying at a premier institute here in India. The cost of attendance is going to be much higher than what we’ve earned with a few years of work experience. And many of us believe that another degree to our name is going to get us that next promotion or raise. How would you tackle this?
Srimathi: There are two sides to this story. Firstly, in today’s time, I feel that skill sets are more important than the degree that you hold. Even Elon Musk has recently spoken about how you don’t need to be a graduate in order to secure a job at Tesla. So, the skills that you have is going to get you the job. Even if you look to qualify yourself, there are a lot of online certification options available. Websites like Coursera, or even Udemy where you can pick a course of your choice and get qualified in it.
As a Financial Planning professional, I am aware of the CFA course that is prevalent and is considered equivalent to MBA Finance. You don’t have to study at an institute to become a CFA (Certified Financial Advisor). You can do it on your own.
Samyuktha: That’s a very practical way of looking at it. You are saying that there are professional qualifications and standards in each industry and that one could still attend a great school and take up a great course – all this done online. But for many of us, Masters is an aspiration. It is about the experience of living abroad or even attending the best college in person. And the loan feels like it’s worth it. So how would you address this aspiration?
Srimathi: I agree with this. From my experience, I feel that the loan was worth it. Many people wouldn’t want to ask their parents for money especially once they have completed their undergraduate degree. They would want to explore on their own. Many would also feel that they were putting a burden on their parents for their education. Today there are so many deals available for student loans, and many institutions giving out these loans. Loans are definitely a good option to consider, but we need to evaluate the pros and cons before we sign up to it.
Samyuktha: This was something that I wanted a little more clarity on. Of course, it is important to be sensitive to our parents’ needs and their financial situation. But on the flip side, if you have a loan so early in your career, it can put a lot of financial pressure on the career choices you make after you graduate. So, can that be avoided and if not how would you deal with that?
Srimathi: You are trying to address an aspiration here, right? You need to be in a position to deal with what comes with it. If you decide to take a loan, you have to deal with the circumstances. If you have opted for a loan, you cannot settle for a job which is not going to cover your basic expenses and your EMI. One way to look at saving more money after graduation is to look for a job in your own city, especially if you plan on staying with your parents. This will help you save more money and close your debt quicker. Also, consider this if you live in a city like Mumbai where the standard of living is also high, you might end up spending most of your money managing your living expenses alone. Like I mentioned earlier, it is always better to evaluate the costs before you settle for something.
Samyuktha: While you are studying, is it feasible to work part-time? This is a very prevalent practice abroad. However, I am not sure how well it would work in the Indian context.
Srimathi: Yes, this is true. It is famous abroad. You can choose a part-time internship and still pursue a very good masters course, but this is still new in India. There are certain institutes that provide you with an opportunity to work with start-ups or corporates for their projects, for which you can get paid an amount. Another way to look at this is to pursue your hobby or market your skill and earn money through it. When I was doing my post-graduation, I used to be an online tutor – I used to solve math problems on Chegg and I used to get paid for it. There are a lot of ways in which you could make money. But, the internship opportunities that are available, there is still more to explore.
Samyuktha: That is very interesting. I think in today’s day of social media it is very easy for someone to turn a hobby into an income source. You could market yourself or your skill very well through your network. Now my most important question of this discussion would be, What did student debt teach you? I fell that you have come out better from this experience.
Srimathi: Definitely! The most important thing that debt has taught me is patience. I keep paying my EMIs month on month, and I still see that there is a lot of money I need to repay back. Because of this, I postpone many of the other goals I have for the future. It doesn’t bother me too much because I know that once my debt is off, I will be able to get back on track.
The value of hard work. For most of us in India, we are always supported by our parents when we do our schooling and undergraduate degree. We don’t really give importance to the amount of hard work our parents put into earning that money. So once you are on your own and start repaying your debt, calculating the interest rate that you are paying every month, you begin to realise the value of hard work. And also the value of money. You will start thinking about how you should use the money – should it be towards the expense, towards repaying your debt, or saving? This would always remain at the back of your head – it has, at least for me. It has changed my perspective on money. It has made me more responsible and practical. This is going to stick with me throughout life. It is the biggest lesson I learnt through opting for student debt.
Samyuktha: That is a lot that you have gotten from this experience. It is really great that you got to learn this very early. For every millennial, it’s important to evaluate how they want their higher education and career to pan out. Student debt isn’t necessarily something to avoid. It could be the nudge to handling money better right from the start. There are options to smoothen the journey as well – like internships and part-time income. It is only about getting creative and putting your skills to use so that you earn while you learn.
Thanks for sharing your story with us today!