Comparing Education Loans and Education Investment Plans

Comparing Education Loans and Education Investment Plans

Comparing Education Loans and Education Investment Plans

Because of poor financial conditions, a lot of students do not continue their studies. But not many of them know that they have several options open for them. Education loans or other financial help are available to them offering better chances for continuing their studies. However such students must understand the difference between Education Loans and Education Investment.

Education Loans and Education Investment Plans, both of them are a means of getting value for education. In Education Loans, we get the facility to take loans immediately which we repay with interest in the future. On the other hand, the Education Investment Plan gives us the facility to take loans long before the actual need. It provides an option to save from today for future education expenses.

This article can prove to be an excellent source for you to know the comparison between these two options, Education Loans Vs. Education Investment Plans.

Definition of Education Loans:

According to Government organisations and banks, Education loans are given to the children to complete their studies. Children can pay for it after the completion of their studies. They have to repay this loan after a certain period.

If a child is serious about his studies and his parents are not able to support him, he can take a loan. When he becomes successful and gets a job, he can pay the loan from his earnings. He can repay his loan along with its interest. This is a facility that is being provided to children so that they can complete their studies.

Advantages of Education Loans:

Children get many benefits under education loans which are as follows:

Advantages of Education Loans

1. Financial Support:

Education loans provide immediate financial help to children and they do not depend on their parents to complete their education but instead take the initiative to improve their future. This is the financial support that children get.

2. Repayment Options:

After getting the loan, the loan has to be repaid promptly, for which many schemes are provided. Students can choose a scheme according to their circumstances and that of their parents so that they do not face any problems in repaying their fees.

3. Possibility of a big loan in the future:

If you take such a loan once, it can be useful to you in the future. Whenever you need a big loan, you will get the loan if you repay the loan on time. If you have paid.

4. Deferred Repayment:

Students taking loans are given a time of a few years after which they can repay their loan. In this way, they can stabilise their financial position and find good employment for themselves, after which their future will be secure.

Under the loan, you get the advantage that you can repay this loan after completing your studies. Many such loans are also available in which students get tax exemption.

Disadvantages of Education Loans:

After taking an education loan, some students may have to face some disadvantages –

  • The burden of loan repayment remains on students in the future.
  • It takes a lot of time to improve the financial position due to the long loan repayment period.
  • Financial pressure increases a lot.
  • Failure to repay the loan on time in the future may lead to difficulty in financial relations.

Definition of Education Investment Plans:

The Education Investment Plans are a plan given by Banks or Government organisations under which parents of students can start saving for the future education of their children.

By doing this gradually they deposit money in their savings account which will be useful in their child’s education in the future. Thus, the Child education investment plan is today’s initiative for the future, which is a plan to complete your future education by saving from today to make your future bright.

Advantages of Education Investment Plans:

Advantages of Education Investment Plans

Education investment plans have the following advantages:-

1. Opportunity to choose among the schemes:

Overall, there are 529 schemes under Education Investment Plans, due to which any person can choose the scheme according to his situation.

2. Future Security:

Under Education Investment Plans, parents start saving today to make their children’s future better, which will be useful for their child’s future education.

3. Financial Security:

By saving under these schemes for a long time, you will accumulate a good amount of money which will provide you financial security.

4. Tax Benefits:

Investors investing under these schemes get the facility of tax benefits.

5. Guidance for the future:

Through this scheme, parents save today for the future of their children. In this way, they think about the future of their children and at what stage they want to see their children, and they save accordingly. Let it work like a guidance.

Disadvantages of education investment plans:

You may have to face some disadvantages under education investment plans-

  • The value of your savings may be at risk due to market fluctuations.
  • You do not get any guaranteed benefit under this.
  • We do not guarantee that the savings saved will be sufficient for your future studies.
  • It becomes difficult for novice investors to understand about these plants.

Key Differences between Loans and Investment Plans:

There are many differences between loan and investment plans which are as follows:

1. Loans are taken to supply immediate value and investment plans are savings made now for future value.
2. The loan is taken to meet current expenses. Investment plans involve saving money now to meet future expenses.
3. After taking the loan, the person must repay the loan. Failure to repay the loan leads to legal action, on the other hand, one does not have to face such a situation in investment plans.
4. In a loan, the loan has to be repaid after a certain period, but in investment plans, savings start right away, which increases the possibility of future profits.
5. On taking a loan, the applicant must repay the loan, whereas in investment plans, there is market risk and there is no guarantee of profit. The applicant may also suffer loss.

Which Option Is Right for You?

If you are currently financially stable and you cannot predict your future, in such a situation you should start saving from today itself. You should pay special attention to where you are investing and whether you are at risk of losing your savings in the future.

On the other hand, if you are currently going through a financial crisis and you need urgent money for studies or some other reason you need money immediately, in such a situation you have to take out a loan. The right option for you depends mainly on your situation. Let’s discuss it in detail.

1. Tax Implications

Tax Implications

Before investing in education loans and education investment plans, it is important to know about the tax implications. People taking loans have to pay taxes along with the loan.

Some eligible students can get a reduction in the interest rate along with the loan, in return for which certain conditions are imposed. Tax under the loan program: If a borrower can take a loan, he can view the payment amount as tax.

The benefit that investors get by investing in Education Savings Scheme allows them to grow their scheme tax-free. Investors have 529 plans from which they have to choose, most of the plans are tax-free. Investing in these schemes gives tax benefits as a gift.

2. Planning for a Combination Approach

It can be beneficial to create a strategy combining education loans and education investment plans. The launch can be used to meet immediate needs and the growth can be deducted as a tax benefit at the time of repayment.

By investing in education investment plans as soon as possible, you can get the benefit of capital calculation of the plans. Select tax-free plans so that you do not have to face any problems in the future. You can consult a financial advisor before applying.

3. Ensuring Your Child’s Education

Every parent must ensure the education of their children, so you can take the help of financial planning to ensure the education of your children. This will be a good step for the educational future of your children.

If you are imagining a future for your children, then you will have to estimate how much it will cost, for which you should invest in student investment plans today and secure the future of your children. There are 529 plans available, you will get the opportunity to choose the perfect plan as per your situation and take full advantage of it.

If you want to take a loan for your children’s education or you want to take a loan for yourself to complete your studies, then choose the right loan so that you can repay this loan in the future.


There are many such schemes and loans available by Government organisations or Banks under which children can arrange the cost of their studies. With the help of Education Loans, they can take a loan to complete their current studies, which they have to repay later.

On the other hand, savings can be made from today for future studies which will be useful in the future, for which many student investment plans are available. Brighten both your present and future and become connected and educated about these options with the advice of a financial advisor.

CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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