I was talking to my son's friend, Jitendra, who was contemplating studying in a foreign university. He was in two minds, as the course fee was quite high, at Rs 12 lakh. He could get a loan of Rs 10 lakh and planned to pay the balance from his savings. He was not sure whether it was wise to take an education loan for this course. He was hesitant to ask his father to be a guarantor and also mortgage the house they stayed in as a security for the education loan. After all, if something went wrong and he was unable to pay the education loan on time, he feared the only real asset his parents owned would be jeopardised. He was confused and sought my advice.
I remembered a conversation I had had some time ago with Prasanna, who had come to me through a common friend. In his early 50s, Prasanna had a job with a decent income. His family consisted of his wife, a homemaker, two children and his aging parents. He had managed to put his children through good schools and enabled them to get professional education. He had just managed to finish paying off the home loan for the house he had the foresight to buy when he was still in his early 30s. His elder son had started working, reducing the family's expenditure. That's why Prasanna was looking to build a retirement corpus. His son had secured admission in a prestigious foreign university and wanted to take a loan to fund the expenses. Prasanna would have to mortgage his house for securing the education loan. He was also concerned that if something went wrong and his son was not able to pay the loan his treasured home would be in jeopardy. He sought my advice.
Prasanna and Jitendra's dilemma was the same, though each was from the other side of the glass.
Prasanna's case was a little different. There was no doubt the cost of education would be more than justified by the increase in his son's earnings. But a little prodding revealed his real concern was whether his son would return to India ever after the course, and if he did not, whether he would remember to pay off the education loan.
Prasanna did not have the resources to pay the education loan himself and his home would be in jeopardy if his son did not pay the loan. At the same time, as a proud father he wanted his son to get access to the best education possible. It was a difficult decision for him. His son already had a legal obligation to pay off the loan, except if he chose to stay back overseas, it would not be enforceable on him and the bank would naturally seek recourse from Prasanna. The only advice I could give him was to sit his son down with another elder family member who had a good equation with his son. And, in his presence, clearly tell the son how important it was that he paid off the loan after the course got completed. The presence of his maternal uncle would add considerable social pressure to the already existing legal obligation on him to pay off the loan. I lost touch with Prasanna thereafter and wonder what he eventually decided to do. Do you think it was the right advice? What would you have advised?
Writer is CEO, Apnapaisa.com
I remembered a conversation I had had some time ago with Prasanna, who had come to me through a common friend. In his early 50s, Prasanna had a job with a decent income. His family consisted of his wife, a homemaker, two children and his aging parents. He had managed to put his children through good schools and enabled them to get professional education. He had just managed to finish paying off the home loan for the house he had the foresight to buy when he was still in his early 30s. His elder son had started working, reducing the family's expenditure. That's why Prasanna was looking to build a retirement corpus. His son had secured admission in a prestigious foreign university and wanted to take a loan to fund the expenses. Prasanna would have to mortgage his house for securing the education loan. He was also concerned that if something went wrong and his son was not able to pay the loan his treasured home would be in jeopardy. He sought my advice.
Prasanna and Jitendra's dilemma was the same, though each was from the other side of the glass.
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Advice to Jitendra was easier. I spoke to him at length. I first tried to know his objective behind doing this course. It was a subject he loved and the university where he had been offered the course was renowned for this subject. The course would add tremendous value to him, personally and professionally. On the prospects of earning once the course was over, he mentioned his existing firm itself would be very happy to offer him a better position and he would have a choice of a number of such companies. I checked with him on the likely salary he would earn. It was clear the jump in initial salary alone would justify the investment in the course and it was fairly easy to advise him to overcome his doubts and talk to his father regarding the loan.
Prasanna's case was a little different. There was no doubt the cost of education would be more than justified by the increase in his son's earnings. But a little prodding revealed his real concern was whether his son would return to India ever after the course, and if he did not, whether he would remember to pay off the education loan.
Prasanna did not have the resources to pay the education loan himself and his home would be in jeopardy if his son did not pay the loan. At the same time, as a proud father he wanted his son to get access to the best education possible. It was a difficult decision for him. His son already had a legal obligation to pay off the loan, except if he chose to stay back overseas, it would not be enforceable on him and the bank would naturally seek recourse from Prasanna. The only advice I could give him was to sit his son down with another elder family member who had a good equation with his son. And, in his presence, clearly tell the son how important it was that he paid off the loan after the course got completed. The presence of his maternal uncle would add considerable social pressure to the already existing legal obligation on him to pay off the loan. I lost touch with Prasanna thereafter and wonder what he eventually decided to do. Do you think it was the right advice? What would you have advised?
Writer is CEO, Apnapaisa.com