Education Fee Financing: How it can empower students and multiply income for parents? Expert explains

Education fee financing, How it is different from education loan: As the cost of education rises rapidly, it can make it difficult for parents to afford to send their children to quality schools — especially if they have more than one child, or are facing financial challenges. In such a scenario, education fee financing is a facility that can make education more accessible for both parents and children.
 

What is fee financing in the education sector?

Fee financing allows parents to spread out the cost of tuition over time, instead of having to pay a large sum of money upfront. This can make it easier for parents to budget for their children's education and avoid taking on too much debt.

What is the difference between education loan and fee financing?

a) Education loans have multiple requirements, like specific education institutions, courses, etc., while fee financing has minimal conditions.

b) In case of education loans, the repayment starts after the completion of the course, but in fee financing the repayment happens within the academic year. 

c) Education loan is generally taken for higher studies, but fee financing can be availed even for K-12. 

d) Tenure of education loan payment is generally 60 months, but in the case of fee financing, the tenure is 6-to-12 EMIs.

e) One requires a healthy CIBIL score, guarantee and several other documents to avail an education loan, but minimal documentation is required in fee financing.
 

Fee financing: Spreading the burden

Rohit Gajbhiye, Founder & MD of LEO1,says fee financing represents a significant departure from traditional lump-sum payments, allowing parents to distribute the cost of their children's education over time. He elaborates, "Choosing installment payments allows parents to redirect their freed-up funds into various assets, enabling their investments to grow progressively. This forward-thinking approach not only provides financial relief but also harnesses the potential for investment." 

He adds that this strategy can generate a multiplier effect, as parents may earn additional income from their investments, which can be reinvested to further amplify their financial stability and secure their future. 

Fee Financing: Education funding of the future

He says fee financing is not just about making education more affordable — it is also a comprehensive approach empowering parents to secure their financial future while ensuring their children receive a quality education. "Fee financing marks a revolutionary transformation in the realm of education funding. It alleviates the immediate financial pressures on parents, taps into the potential of intelligent investments, and ultimately paves the way for a more secure and prosperous future for both parents and their children. As this innovative approach gains momentum, it promises to revolutionize how we invest in education and safeguard our financial well-being. It is a catalyst for change with the potential to empower generations to come," Rohit adds.

In an era where the cost of education is a growing concern for families, he says that fee financing offers a path forward that not only makes education more accessible but also leverages the power of investment to create a brighter financial future. "As parents and educators alike embrace this transformative solution, we can anticipate a paradigm shift in the way we approach education financing, ultimately benefiting families and society as a whole," he opines.

Fee Financing: Income multiplier effect

The founder & MD of LEO1 says that by choosing installment payments for education, parents can not only spread the financial load, but also free up capital that can be put to work elsewhere.

"This newly accessible capital can be strategically invested in various assets, such as stocks, bonds, real estate, or even starting a small business. As these investments mature, they have the potential to generate additional income streams for parents. For example, a well-constructed investment portfolio can yield dividends, interest, or capital gains. This supplementary income not only enhances the financial stability of the family but also opens doors to new financial opportunities," he adds.

He believes that the income generated from these investments can be reinvested, creating a compounding effect. Over time, this can lead to exponential growth in income, significantly multiplying the initial investment's returns.  

"Also, the income multiplier effect extends beyond the immediate family. Parents who benefit from fee financing and experience increased income can provide better support for their children's educational and extracurricular activities. This, in turn, enhances the overall quality of education and opportunities available to the younger generation," he avers.

Additionally, the financial empowerment gained through fee financing can foster a culture of financial literacy within families. "As parents learn about investment strategies and financial planning, they can pass down these valuable skills and knowledge to their children, setting them on a path to financial success from an early age," he sums up saying.