Ways to finance education

My parents used to say, “Education is the only lasting gift we can give you.” They taught me and my siblings the value of education as the clearest path towards a bright future. Our education was their driving motivation. They worked hard not to accumulate wealth but to be able to send us to the best schools. They would add, “Education is your inheritance and our legacy.”

My story is not unique among Filipino families. In fact, in a study conducted by NEDA, 80 percent of Filipinos aspire for a simple and comfortable life and, for 73 percent of them, it means they are able to send their children to college. Education is still an aspiration for majority of Filipinos because it is a huge expense that eats into the family’s savings come enrollment season. So many Filipinos resort to funding their kids’ tuition and school expenses by taking a loan. Getting a loan for whatever means used to be frowned upon and was avoided for fear of going deep into debt and incurring mounds of unpaid bills. But these days, with the high cost of education, a loan is viewed as a means to invest. Just like a home or a car, education is an investment after all.

With the rising cost of education and school fees that have outstripped inflation, particularly in higher education institutions, here are your options for your children’s education:

• Government and private scholarships. Usually granted to those who are academically gifted or sports-oriented but financially challenged, scholarships are a form of financial aid awarded to students to help pay for tuition fees and other school requirements. These scholarships can come from government entities, private institutions, or charitable individuals. Applicants are usually subjected to qualifying examinations and required to show proof of financial need. These may be partial scholarships, where parents or students still shoulder a percentage of the fees, or a full grant where the full tuition is shouldered by the donor. You may check with your target schools or universities on the types of scholarships available, as well as the qualifications and requirements.

• School installment payment plans. Schools offer monthly, quarterly, and semestral payment plans, aside from the annual payment plan. The longer the payment plan, the higher the total annual payment will be. Understandably, there is interest imputed in the installment payment plans. The longest available payment plan is 10 months, equivalent to the number of months in a school year.

• Credit card financing. If you still find 10 months’ school financing challenging, consider credit card financing which offers up to 12 months. Many schools that accept credit cards can offer credit card installment financing at enrollment. However, if your school does not accept credit cards, you may apply for school installment financing through the bank’s branches. For other school needs such as uniforms and school supplies, some stores have promotional tie-ups with the banks and offer low installment financing.

Many banks help make school expenses affordable and easy on the pocket. BPI, for instance, offers a Special Installment Plan (SIP) up to 12 months to pay for tuition and school-related fees. Needed cash up to 100 percent of the card’s available credit limit can be made available via credit to a deposit account within 24 hours.

• Personal loans. Another viable option to finance your education is a personal loan, a flexible type of loan that can also be used for different purposes. You may apply for a personal loan with payment terms of 12 to 24 months at any of the bank’s branches. Depending on your current net take home pay, considering other loan obligations you may have, this loan can be three times your gross monthly income. The application and evaluation can take five to seven working days, while release of the loan proceeds usually takes one to three working days upon signing the necessary documents.

• Property equity loans. Property equity is the portion of the property that is free of any mortgage. If the property is not mortgaged, the equity is 100 percent. For a property that is mortgaged, the equity increases as the loan gets paid. Property equity loan allows the owner of the house to borrow against the equity in his or her property. The advantage of property equity loan over credit card and personal loan is the lower interest rate and longer tenor. Property equity loans to finance education can be up to 36 months. For those with existing housing loans that had been materially paid up, this is a viable option.

• Saving up. The best option is always one that is the result of proper planning and discipline. Given that school enrollment is predictable, saving up for this can be done for an entire year. There are deposit and investment products that allow one to automatically set up a portion of one’s net payroll or monthly cash inflows towards a “build-up savings” account meant for school expenses. Doing so allows you to save on interest expense. Visit your branch of account and inquire about the various build-up savings products. These may come with a higher interest rate or a free insurance coverage. Choose the one that suits your needs better. As many parents would say, “live within your means.” Aside from having enough for your family’s day-to-day needs and emergencies, saving up for the education of your children should be a top priority.

The investment in your children’s future is one you cannot afford to compromise. Financing their education through scholarship grant, credit card, personal loan, property equity loan, build-up savings account, or a combination of these is an investment where the appreciation is assured and returns are guaranteed. Plan ahead. A bright future for your children awaits.