{"id":6297,"date":"2025-09-05T23:55:05","date_gmt":"2025-09-05T18:25:05","guid":{"rendered":"https:\/\/1finance.co.in\/magazine\/?post_type=blog&p=6297"},"modified":"2025-10-29T14:23:58","modified_gmt":"2025-10-29T08:53:58","slug":"education-loan-in-india-rising-cost-of-education-why-you-need-a-financial-plan","status":"publish","type":"blog","link":"https:\/\/1finance.co.in\/1f-dashboard\/blog\/education-loan-in-india-rising-cost-of-education-why-you-need-a-financial-plan\/","title":{"rendered":"Education Loan boom: Rising cost of education in India and why you need a financial plan"},"content":{"rendered":"

Over the past decade, the cost of education in India has shot up dramatically, changing the way parents think about investing in their child\u2019s future. It starts right from school\u2014especially in big cities\u2014where tuition fees keep climbing by about 7% to 15% each year. By the time a child finishes school, the fees may reach as high as \u20b91.68 crore in some elite schools. The highest average tuition cost for an elite school is \u20b976.2 lakh for KG-12, according to 1 Finance Research<\/a>.\u00a0<\/span><\/p>\n

And higher education isn\u2019t any easier on the pocket. Today, the cost of higher education really shows how wide the affordability gap has become.\u00a0<\/span><\/p>\n

For example, a 5-year MBBS degree at a government college costs around \u20b91.9 lakh. But in a private college? The same degree can cost as much as \u20b982 lakh\u2014that\u2019s nearly 42 times higher.\u00a0<\/span><\/p>\n

And it\u2019s not just medicine. Courses like B.Tech or B.Pharm follow the same trend, where private colleges charge three to four times more than government institutions, putting an ever-growing financial strain on families across the country.<\/span><\/p>\n

\"cost<\/div>\n

On top of rising tuition fees, families also have to pay more each year for things like books, coaching classes, and transport\u2014these costs often go up by 7\u20139% every year.<\/span><\/p>\n

With education now seen as both essential and a big long-term investment, families have been forced to rethink their finances.\u00a0<\/span><\/p>\n

This has pushed household spending on education through the roof\u2014jumping 4.6 times, from \u20b91.8 lakh crore in FY12 to \u20b98.43 lakh crore in FY24. On an individual level, the average spend has also shot up\u2014from about \u20b91,500 per person back then to an expected \u20b96,100 by 2026.<\/span><\/p>\n

While some can afford it, many can\u2019t.\u00a0<\/b><\/p>\n

This makes them turn to borrowing money. Here\u2019s the most telling evidence:<\/span><\/p>\n

According to RBI data, between March 2019 and March 2025, there has been a 95.83% increase in outstanding education loans in absolute terms.<\/span><\/p>\n

\"overall<\/div>\n

According to ministry of finance<\/a>, in the financial year 2023-24, Public Sector Banks in India disbursed education loans to 7,36,580 students, up from 6,29,594 in 2022-23, marking a 17% annual growth in the number of loan accounts;<\/p>\n

The sharp rise in education loans tells a tough story: for many Indian parents, borrowing is a lifeline. As school and college fees climb faster than family budgets can handle, loans have become less of a fallback and more of a necessity. Parents are seen increasingly leaning on borrowed money to fill the gap between dreams and affordability.<\/span><\/p>\n

Educational loan scenario in India vs. in US and UK<\/h2>\n

India\u2019s education loan boom mirrors worrying trends seen in advanced economies. In the US, <\/span>student debt has crossed $1.8 trillion<\/span><\/a>, while in the UK it has <\/span>exceeded \u00a3200 billion<\/span><\/a>, with mounting repayment complexities and significant economic consequences.\u00a0<\/span><\/p>\n

In India, households already spend nearly 33% of their income on EMIs. Adding education loan repayments to this burden could amplify socioeconomic stress over the coming decades.\u00a0<\/span><\/p>\n

As in the West, heavy debt burdens can delay milestones such as homeownership and retirement, while also deepening inequality. Without timely reforms or stronger financial aid structures, India risks facing similar long-term challenges.<\/span><\/p>\n

The early warning signs are already visible. By 2024, the education loan category under personal loans recorded the highest NPAs (in SCB) , underscoring both repayment challenges and systemic risks.<\/span><\/p>\n

A critical difference, however, lies in who bears the debt burden. In the US and UK, students are primarily responsible for repayment. In contrast, in India, education loans often become household liabilities, as parents usually take responsibility for repayment. <\/span><\/p>\n

This reflects India\u2019s family-centric culture, where parents prioritise their children\u2019s education and success, even at the cost of long-term financial strain.<\/span><\/p>\n

Key things you need to keep in mind while taking an education loan<\/h2>\n

Before committing to an education loan, it\u2019s genuinely wise for parents and students to first\u00a0consult a financial advisor<\/a>. A professional brings expertise and an unbiased perspective to evaluate how taking a loan will affect your household finances and create a repayment strategy aligned with career prospects.<\/p>\n

Alongside this, consider these steps for financial safety and peace of mind:<\/p>\n