Shall You Use EPF Corpus Towards the Education of Your Kids?

Last Updated : July 31, 2024, 3:12 p.m.

Seeing their kids top the charts professionally remains a dream for doting parents. They compromise on their comfort to ensure their wards get the best education to move up in their careers. Despite being tight on their spending, a lot of parents don’t seem to accumulate enough to see their children attain higher studies. In the absence of such studies, their kids either become unemployable or they get jobs with not much growth prospects.

As a parent, you could even contemplate loans for education. There are different loans for the said purpose. Either you can take a personal loan on your name or your children take an education loan . A personal loan is a hassle-free loan that does not require any collateral provided your income can deal with the proposed EMI obligation and your credit score is at least 700-750. Whereas, an education loan above a certain amount requires collateral, plus banks may not finance the whole sum by keeping a 5%-10% margin on loan amounts above specific limits. Both these loans will have to be paid in installments, which include both principal and interest.

However, options don’t end there. You can even take a loan against your employees provident fund (EPF) for the education of your kids. This is a unique loan as you don’t need to return the same. It is treated more like a withdrawal from the corpus that gets accumulated month-on-month and year-on-year. So, the salary you receive on hand comes after the deduction of PF. All these deductions accumulate to become one large sum over time. How does the deduction happen? The employer deducts 12% of your basic salary and dearness allowance and deposits in your provident fund. A matching contribution is also made by the employer. But how much can avail, what is the process, terms & conditions? You should know all that before using your EPF corpus. Let’s spare some time to read this post that details the same.

Your retirement corpus can be accumulated via the long-term vehicle known as the Employees' Provident Fund Organisation (EPFO). You can only withdraw from your EPF kitty in specific situations because it would be counterproductive to this product's intended objective of making liquidity easier. Generally speaking, you cannot take early withdrawals from your EPF account unless you wish to work for yourself or have quit your job . However, you are only permitted to take out a certain amount of your EPF savings before retiring, such as for marriage , your own education , that of your siblings or children , or emergency medical costs for your dependent parents , spouse or your children.

How Much Can You Withdraw from EPF for Education?

You can withdraw as much as 50% of your EPF contribution along with accrued interest on the same. The withdrawal can be made for the education of your son , daughter , siblings , and even yourself . You can get this for post matriculation studies. It can be granted for as much as 3 times.

Should You Need to Meet Any Conditions?

Yes, there’s a condition placed by the retirement body Employees Provident Fund Organisation (EPFO) when you look to withdraw for education purposes. You must be an EPF member for at least 7 years .

Shall You Rely Solely on Provident Fund or Take a Bank Loan Too?

This will depend on a variety of factors such as your EPF contribution, your retirement goal amount and the fund you need for education. If you consider the provident fund rules, the eligible advance is estimated based on the employee’s share to the EPF and the interest on the same. Now that the employer’s share and the interest that comes with the same is not considered, your share and interest have to be substantial enough to get some reasonable amount, particularly if you are looking to withdraw for the higher studies. Using the provident fund corpus for education can make it tough for you to attain the goal amount, which you might have targeted at the time of retirement. At the same time, you also need to see how much amount you require for education.

For example, you require INR 5 lakh and your contribution to EPF inclusive of interest is 8 lakh and you have some 8 years left before you retire. You can get an advance of INR 4 lakh, falling short of INR 1 lakh. Since you are nearing retirement, you can even look to reduce the EPF advance to 30%. If you do, the advance amount will come down to INR 2.4 lakh. You will need to take a loan of INR 2.60 lakh to cover the gap.

What is the Process of Getting an Advance Against EPF for Education?

You need to visit the Unified Member Portal of EPFO and login to your account using credentials. If your online EPF account is not created, you can get it done online. The credentials include the Universal Account Number (UAN) and the password. If you don’t know your UAN , which remains the same even if you have multiple EPF accounts by virtue of switching jobs, you can know it online by mentioning a few details. Once it is done, you need to create a password conforming to the alpha, numeric and special character requirements.

Once you are done with your credentials, you can log in to the account and go to ‘Online Services’ and then click on Form 31 . Fill the details sought in the form and submit it to your employer, which will send the same to the EPF office. Along with the form, you also need to submit a certificate regarding the course study and estimated expenditure from the institute head. The concerned officers will check the details thoroughly and approve the advance later on.

This EPF advance is helpful, particularly in situations where someone needs money to get out of a tight financial situation. The Employees Provident Fund Organisation, or EPFO, permits emergency withdrawals, also referred to as EPF loans or EPF Advances, to assist EPF account holders in such circumstances. The important elements of the EPF loan are covered in the sections that follow.