Some Ways of Funding Education Without a Loan
Grants and scholarships from charitable institutions: Trusts and charitable institutions funded by corporates, religious organizations, etc offer scholarships and grants to exceptional students in select areas of education and research, or because they belong to a certain religion.
Scholarships, fellowships, or grants from educational institutions: Most educational institutes award scholarships to the needy and deserving students. Philanthropists and alumni also donate money to help such students. If you meet the eligibility criteria, you can apply for such scholarships.
Investments: Parents or earning students can invest their money in pure investment options such as Public Provident Fund, National Savings Certificates, insurance (money back/endowment/unit-linked), and mutual funds (both debt and equity-oriented). If you have a longer investment horizon, you can also consider investing directly in equity. Though risky in the short term, equity tends to give good returns over long periods.
Insurance schemes like money back or endowment policies may give defined payouts at defined periods: In an endowment scheme, you pay a premium every year and get a lump sum amount when the child has grown up and is ready for college. However, in the current scenario, the guaranteed amounts on such policies give extremely low returns and the real returns only come from unguaranteed bonuses which vary from year to year.
Of course, in the case of the untimely demise of the parent, the child not only gets the sum assured on maturity but the interim premiums are also waived. The return from such policies is relatively low (even after taking into account the bonuses declared), barely covering the inflation rate. So, it is possible that you may end up with a shortfall if education costs increase at a higher rate than average inflation levels.
