Education Inflation - The monster you need to tame

The Rising Price Tag of Dreams

One of the most cherished life goals for most families apart from retirement is funding their children’s higher education. However, what many underestimate is the sheer pace at which education costs are climbing. Unlike general inflation, which hovers around 5-6% in India, education inflation has consistently been in the range of 10-12% domestically and 5-7% internationally (in USD terms). Factor in currency depreciation, and the real impact is even more staggering for global education.

Projected Cost of Higher Education

Let’s break it down with a simple example:

• A 4-year undergraduate degree in India today costs around ₹20 lakhs at a premium institution.

• At 10% inflation, in 15 years, the same would cost over ₹83 lakhs.

• An international degree costing $80,000 today (₹66 lakhs at ₹82/USD) could balloon to $220,000+ (₹2 crore+) in the same time frame—especially when you add currency depreciation and foreign inflation.

  
  
  
  

Chart: Education Cost Growth Over 15 Years

Year	Domestic Cost (₹)	International Cost (₹)
2025	₹20,00,000	₹66,00,000
2030	₹32,20,000	₹1,05,10,000
2035	₹51,84,000	₹1,67,30,000
2040	₹83,60,000	₹2,66,30,000

Assumptions: Domestic inflation = 10%, International = 6% + 4% INR depreciation

Why is Education Inflation So High?

Unlike typical consumer goods or services, education is both a necessity and a status symbol, which allows institutions to keep increasing fees. Here are a couple of drivers:

• Lack of price regulation: Top universities, especially in the private and international domain, have near-monopolistic power. Demand far outstrips supply.

• Increased cost of infrastructure and faculty: Quality education requires top-tier facilities and global talent, driving operational costs higher.

How Do You Tame the Monster?

While you can’t control education inflation, you can control your investment behavior:

a) Start Early – The Power of Compounding

Starting when your child is young gives compounding a runway. Even small SIPs started early can grow into significant sums over 15–18 years.

b) Aim for Higher Target Returns

With inflation eating into future purchasing power, settling for low-yield investments won’t cut it. You’ll need to lean into equities (at least early on) for better compounding.

c) Fixed Timelines – No Room for Flexibility

Unlike retirement, where you can delay or reduce expenses, college starts on a fixed date. You can’t tell the university your corpus needs another year to grow.

d) Reduce Risk as the Goal Nears

Imagine the market crashing 20% just before the fees are due. Gradually de-risking your portfolio into debt or safer instruments as you near the goal is critical.

e) Manage Currency Risk

For overseas education, INR depreciation is another silent cost. Historically, the rupee has depreciated 4-5% per year. Currency-hedged investments or holding USD-denominated assets can help cushion the blow.

How WealthBeacon Helps

At WealthBeacon, we bring clarity and confidence to education planning. Whether you dream of sending your child to an Ivy League university or a premier Indian institute, we:

• Help you define the education goal clearly—cost, location, duration, and timing.

• Build a custom investment plan based on your risk profile and timeline.

• Monitor and rebalance regularly to ensure you stay on track.

• Manage currency exposure for international programs.

Let us worry about the numbers—so you can focus on your child’s aspirations.

Summary: Plan Early, Invest Smart

Education inflation is real—and it’s accelerating. But with the right strategy, this monster can be tamed. Start early, invest wisely, and make sure your portfolio evolves as your child grows. At WealthBeacon, we’re here to help you turn aspirations into achievements—without financial stress.