Planning To Educate Your Child Abroad? Think First
Now that COVID seems to be ending, you may be mulling over the idea of sending your son or daughter to a foreign university for an under-graduate education.
Ask yourself: why?
If the reply is: “Why not? I have pots of money,” then this article is not for you.
If the answer is one of the following:
- (S)he is not getting admission to a good college in India;
- (S)he will have a better life living abroad; or
- (S)he will have a good career abroad;
then you need to think hard before taking the plunge.
And if you are facing peer pressure—neighbour, cousin, colleague have all sent their kids abroad—and your wife and child are keen on it too, you still need to think hard before deciding.
The first hurdle you need to cross is: can you afford it?
Please do not make the common mistake that I find happening all too often: you pay for college from savings you cannot (or should not) afford to spend, OR, you are banking on your future earnings to meet the cost.
So how much your savings can you afford to spend?
My benchmark is 25% of your savings on all your children put together. Spend any more than that, and you are seriously jeopardising your own future. 
Please remember, money spent on a child’s education has to be “forget-about-it” money, i.e., money you do not really need for yourself (and the rest of your family). 
There are rarely any returns from this money for you. Returns, if any, go to your child. 
The worst thing you can do to your child is to start him/her climbing the tree of foreign happiness, and then pulling the ladder away mid-way when you lose your income, or perhaps your life. Your child will be devastated. 
So, if you are banking on future income, just forget the idea of a foreign education for your child.
Now that the boundaries are established, let us see what a foreign education really means in terms of money and life.
First, the cost.
An under-graduate four-year University programme costs, to cover tuition fees and basic living cost, (at current exchange rates):
US/UK Rs1.5 crore
Canada Rs1.0 crore
Australia Rs1.4 crore
(Of course, these are indicative numbers. An Ivy league college will cost substantially more, while a State University degree may cost less.)
To this, you have to add several other things: vacation period costs, airfares and spending money. 
You can safely add another 25% to account for these expenses.
Bottom line – we are talking about Rs2 crore for a foreign under-graduate degree.
What does your child get for this sizeable chunk of money?  
To be frank, not much.  
Here’s why.
If you are planning to bring your child back to India after graduation, the foreign degree has very little value. 
With so many good colleges in India, employers see no special benefit in hiring a foreign graduate degree-holder. 
Besides, people in India know only a few names: Harvard, Yale, Oxford, Cambridge, etc. 
A degree from one of these colleges still means something, but Michigan State, Warwick University, or even University of Wollongong or Montreal do not inspire awe. 
In short, in the Indian market a foreign graduate degree is no better than an Indian one, but costs a whole lot more.
Ah – even higher education abroad, then? 
Add another 50%-60% to your ‘investment’, but still your child will not get more value from the education if (s)he comes back to India and looks for a job.
Oh!!! Have I got it all wrong? How silly of me!  
Your real purpose is to get your child ‘settled’ abroad.
Not so easy, I am afraid.
It is almost, if not totally, impossible for an Indian graduate student with no experience to get a work permit in the US or UK. Yes, Canada and Australia do have room for such youngsters. 
But the problem is – immigration laws are notoriously fickle, and four years is a long time in the current scenario of shifting economics, and ample time for the current government to be deposed. 
Today’s favourable immigration environment is no guarantee that the same will be true when your child graduates.
See the US. How many times have the H1-B rules changed in recent years?
And even if your child gets a work permit, what next? 
No matter what people say, social and racial prejudices do create glass ceilings. 
Moreover, life in these countries is no cakewalk, as any long-standing non-resident Indian (NRI) will tell you.
Then what?
Ah, you are forgetting the value of Rs2 crore in today’s India. It can get your child many things, such as:
- A monthly income of Rs1 lakh to supplement whatever (s)he earns from an ‘ordinary’ job after graduating from an Indian college.
- A compact 2-BHK apartment in almost any Metro city, with money to spare for furniture and a bike, or even a small used car. Very good investment, too.
- A nice big nest egg to invest in Sensex-based mutual schemes, which have historically outperformed every other investment in every market in the world.
- Capital for a small business, provided your child has the acumen and the drive.
Why not one of these instead of a foreign under-grad degree?
Yes, I am saying that an under-graduate degree abroad is not worth the money you spend. 
But I am not saying that all foreign education is worthless.
Setting aside the case of a brilliant kid, for whom the right college can open the path to a very successful career and even fame, there is a good case for a more ‘ordinary’ boy or girl to go abroad to study.
Let us say your child obtained a degree from a decent college in India, got a good job and worked for a few years to get some worthwhile experience. 
For such a person, going abroad for an MBA or a Masters in a specialist line can be really worth its cost. (S)he can return to India and get a really great job based on relevant work experience, backed by a good degree. Spending money on this can be very fruitful. 
As to my personal experience, I sent both my daughters for under-graduate study abroad when I was living in the Middle East, but I paid from accumulated savings, not future earnings. 
Also, I gave both the same choice: An Ivy league college, or a cheap college and a big chunk of money on graduation. 
Both chose Ivy league.
Maybe you can give your child the same choice – an under-graduate education abroad, or Rs2 crore in cash after (s)he graduates from an Indian college.
You may be surprised by the choice!
(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world (until Covid, that is), playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)
Amitabha Banerjee
6 months ago
Dear tillan2k, yes, it is not possible to pay for education by working part time jobs. In the US, for example, I earned $3.07 per hour washing dishes in 1975, when my semester tuition fee was $4,000, i.e. about 1,300 hours of work . Today the minimum wage is around $8 per hours, and semester tuition is $30,000+, i.e. nearly 4,000 hours of work. Even a student loan is prohibitive, because you would start work after graduation with a debt burden of over $120,000.
6 months ago
all countries have moved away from subsidised education let the student or its parents pay part time jobs may not be enough to pay the expense s
6 months ago
Condemned to Slavery. I will still choose a Cop or a Bobby over Sachin Vaze.
Ch Ravi
6 months ago
I am always glad to read your articles.
6 months ago
Interesting article highlighting how 2 cr can be well spent by not going beyond India (which you did) or by not getting emotionally entangled with our child's prospects of better growth (like your parents may have) and not to mention, bringing a logical perspective to fiscal aspect of investing in higher education (which you have learnt from your experience

With INR not performing very well over the years; increase in "quota" system; politicization of Universities (Asoka U - the latest); govt interference and surpression in student matters - why would any parent not want to send their child abroad to come place where they can focus on what they are suppose to do - learn right from wrong through education. Middle class Indian are a frustrated lot and have become tired of being called middle class.

Yes, 2 cr can get you a 2BHK somewhere; 2 cr can also feed countless homeless or provide education to poorest of the poor - why limit the argument then?

Lastly, assuming that only Harvard, Yale, Cambridge are "known" in India is a 3 decade old notion. That may be true for someone who is 70 yrs plus but not in current India.
Amitabha Banerjee
Replied to DSS comment 6 months ago
Dear DSS - to set the record straight.......The fees at IIT were, in my time, Rs 100 a year, and mess bill and sundries came to Rs 1,500 a year. Of this, I got a scholarship which covered about 65%. I did my MBA at Rochester USA on a Rotary scholarship, supplemented by washing dishes in a restaurant. My father had clearly told me that he could not afford to pay for a post-grad education, and I didn't ask him to pay either.
I had told my daughters the same thing - no money for post-grad. They did MBAs at Wharton and Northwestern, one on aid from her employer and the other on a loan from me, which she paid back in full.
I think it is grossly unfair to say that colleges in India do not provide a good education. There are countless millions who have been educated thus, and have done very well in life.
What I am trying to say is that an education abroad is NOT a path to utopia, and that parents should not exhaust their resources in giving such an education to their children.
Amitabha Banerjee
6 months ago
Hello Mr Dhavan. Alas !! Child being developed to be 'someone" in life at the cost of the parents' luxuries, or even necessities, and the child looking after the parents in their old age - that formula is disappearing, and disappearing fast. I wish this wasn't true, but I am afraid it is.
India is moving inexorably to the Western formula in which a child is on his/her own at 18, and in turn is not responsible for looking after the parents in the tail-end of their lives.
That's why I said 'forget about it money".
Maybe I am wrong, and I wish I am.
Replied to Amitabha Banerjee comment 6 months ago
It is so true on multiple counts. We have just seen the children of a very eminent personality not even returning to India when the parent passed away - sad and shocking! We also see cases around us where children fight over the one flat that the parent has painstakingly acquired -- so a 2BHK that is perfect for one family with two kids, now has two grown up kids, each married, starting their own families in the same apartment, with parents relegated to living room sofas! This is an unfortunate reality of the new India too. Let me hasten to add that there will still be millions of children who lovingly look after parents - but educating them cannot be an insurance, unless you look at it like typical Indian insurance that often doesn't pay!!!
Replied to sucheta comment 5 months ago
So true !
MA Dhavan
6 months ago
As I read through this part of the article, which talked about "forget about it, money spent on children", I said to myself, this must be written by someone who returned to the motherland after a long time overseas.

Someone who now thinks logically, but has lost touch with how things work locally. So it must be written be my favourite writer here at MF. I learnt how to save taxes through indexation benefits from reading his articles. This writer in his articles talks logic which is sometimes helpful.

In the context of this article, if you are from a middle class family in India, the money spent on children is not "forget about it money", for most parents, it is the investment that is expected to return the highest yield.

The money spent on children is the cheapest health & life insurance policy available to most Indian parents. The more the children the better, you hedge the risk of one or two child not bearing any returns. The money is spent on children, expecting the children to take care of their old age health and wealth requirements. If the money is spent on boys, the investment matures at the time of marriage.

And about the money spent on children's foreign education, it is the easiest route for the parents own holiday ticket to the west. Even before the student settles in with their new country, the parents arrive for visit.

Logically, it is best to get educated in our country, but there is a social agenda behind sending children abroad for studies.
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