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How To Save Your Retirement From Child Education Loans?

May 08, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

A child’s education plan offers the combined benefits of investment and protection. Invest in one, and save your retirement funds from child education loans.

Sanjay wanted his son to pursue an MBA course from a foreign university. He took an education loan from a bank but could not pay it back. As a result, he had to split his retirement corpus to pay off the loan. On the other hand, Anil decided to plan for his daughter’s education early. He searched for a child education plan and started investing in it. This helped him categorise his investments. Not only did he save for his daughter’s education, he also had the bandwidth to build a retirement kitty. The reason Anil succeeded and Sanjay didn’t is simple: child protection plan. Such plans helped Anil accumulate funds over time to finance his daughter’s higher studies.

These plans can help you accumulate funds to meet your child’s education expenses. Here are 5 ways how you can save your retirement corpus for those second innings of your life:

  1. Get A Child Education Plan

A child education plan offers the combined benefits of investment and protection. These are designed keeping in mind your child’s education. They provide financial security so that your child’s education is unhindered.

These plans include corpus for child’s education, medical treatment during the tenure of the investment plan, support of the child in the parent’s absence. It also protects income of the child, and acts as a collateral for higher education loans.

  1. Being realistic is important

Having a foreign degree may or may not guarantee a high paying job. Instead of banking on a future prospect, students must start planning for their future from the start. Parents should start encouraging their children to find alternate sources of funding such as scholarships or working part-time while studying. This can reduce the amount used from their education plans.

  1. See if you can get an extension

When jobs are difficult to come by, lenders are willing to consider extending the repayment period. This will give you more time to repay the education loan. Though this will mean a higher cost in the long run, it is likely that your child’s salary will also improve with time and he/she will be in a better position to service the loan.

  1. Service interest during moratorium

Moratorium is a repayment holiday that is offered by banks to those who avail of education loan. Typically, it extends for the duration of the course plus one year, or six months after finding a job, whichever is earlier. Paying the interest during this period can help reduce the debt burden. Banks charge simple interest during the moratorium period and give a 1% discount, if interest is serviced during this period.

  1. Opt For Loan Insurance

Imagine that your child goes through an unfortunate accident that leaves him with the inability to pay the education loan he took. In such a situation, an insurance can come to his rescue. An education loan insurance provides cover in case the loan applicant is unable to pay back the loan because of some unfortunate incident like a disability or worse, death. But, like all loans, this loan too comes with its own set of rules and regulations that you need to be aware of before purchasing it.

Your children’s education loan can derail your retirement planning. So, make sure you are not burdened with EMIs you can’t afford. Be smart with your financial planning and save yourself from a burdened retirement. Therefore opting for a child education plan can make the process easier for you. With financial covers to help your child run after his/her dreams, such plans allow you to plan for your retirement without any worries.

To know about AegonLife’s life insurance products, visit our home page.

Advt. No.: IA/May 2018/3922


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