Funding a degree that has not been priced yet

Education inflation runs at 8% to 10%. A ₹25 lakh course today is ₹79 lakh in fifteen years. The maths, the glide path, and the products to avoid.

By Raj Mohan

20 Aug 2026 · 5 min read · planning, education, goals

Education is the goal most parents care most about and plan worst for, because it combines the two things that break financial plans: a hard deadline you cannot move, and an inflation rate much higher than the one everybody assumes.

The inflation number

General CPI in India runs around 5% to 6%. Education inflation — private school fees, engineering and medical seats, overseas tuition — has run closer to 8% to 10% for two decades.

At 9%, costs roughly double every eight years.

The last row is the one that catches people. A US or UK master's degree costing ₹60 lakh today is close to ₹2.2 crore for a child now aged three — and that ignores currency. If the rupee depreciates 3% a year against the dollar as it has historically, the effective inflation on an overseas degree is closer to 12%.

Plan against the inflated figure. Planning against today's cost is the single most common failure, and it does not become visible until the year the fees are due.

Start with the actual target

Three questions, answered honestly:

What are you funding? Undergraduate in India, postgraduate in India, or overseas? The range is ₹15 lakh to ₹2 crore in today's money, and the plans that follow are not remotely similar.

When? Undergraduate at 18, postgraduate at 22. That is the deadline and it does not move.

How much of it? Not all of it, necessarily. Education loans are available, carry a section 80E deduction on interest with no upper cap, and are arguably a reasonable thing for the person receiving the education to service. Funding 60% to 70% and letting a loan cover the rest is a legitimate plan, and it beats underfunding retirement to fund a degree.

That last point deserves emphasis. There are loans for education. There are none for retirement. A parent who empties their retirement corpus for a degree has transferred the problem to the same child, fifteen years later, in a larger form.

The glide path

The deadline is fixed, so the asset allocation has to move with it. This is the part most plans get wrong — either by staying in equity too long, or by never entering it at all.

Years 1 to 10 (child aged 0–10): 80% to 100% equity. The horizon is long enough that volatility is noise. Index funds and a couple of diversified active funds. This is where the growth has to come from; anything else cannot outrun 9% education inflation after tax.

Years 11 to 14 (aged 10–14): shift to about 60% equity. Start moving new contributions towards hybrid and debt. Volatility now has real consequences.

Years 15 to 16 (aged 14–16): about 30% equity. Move accumulated gains into debt funds and deposits. You are protecting a corpus, not growing one.

Final 2 years: near zero equity. Fixed deposits, liquid funds, or an FD ladder timed to each semester's fees.

The reason for the de-risking is specific and worth stating plainly. If your child turns seventeen in a year the market falls 35%, and the corpus is fully in equity, the money is not there. There is no waiting for a recovery — the admission deadline is in March. The whole plan fails at the last moment, for a risk that costs almost nothing to remove.

What to actually put money in

Equity index funds for the accumulation years. Low cost, no manager risk, and over fifteen years the cost difference against active funds compounds into a large amount.

PPF, if the timing works. Fifteen years is close to a perfect match for a newborn's undergraduate horizon, it is tax-free, and it is the safest possible base layer. The lock-in is a feature here, not a drawback.

Sukanya Samriddhi, for a daughter under ten. Currently 8.2%, entirely tax-free, with partial withdrawal allowed at eighteen for education. Better than PPF on rate, and the withdrawal rules are designed for exactly this goal.

Debt funds and FDs for the final four years.

What to avoid: child insurance and education endowment plans. These are the products most aggressively sold to new parents, and they combine poor insurance with poor investment. Returns typically land at 4% to 6%, well below education inflation, with high costs, long lock-ins and heavy surrender penalties. The insurance component is a fraction of what a term policy provides for a tenth of the premium.

If you need protection for this goal — and you do — buy term insurance sized to cover the full future education cost, and invest the difference. A ₹1 crore term policy for a healthy 32-year-old costs around ₹12,000 to ₹15,000 a year. A child plan promising a ₹25 lakh payout will ask for several times that.

The monthly number

To reach ₹91 lakh in fifteen years at 11% average return across the glide path, you need roughly ₹19,000 a month, stepped up 8% a year as your income rises.

Flat, with no step-up, the requirement is around ₹25,000 a month for the entire fifteen years — much harder in year one and much easier in year fifteen, which is exactly the wrong way round.

Start at what you can afford and step it up with each raise. ₹8,000 a month at age one, increased 10% a year, outperforms ₹20,000 a month started at age eight, and it never requires a month you cannot manage.

Open the savings goal calculator

Published by FinClamp. This guide is information, not financial advice — see the disclaimer.