Increasing access to credit is a key element of development policy across the globe. Children in India are acutely susceptible to cyclic poverty traps due to economic disenfranchisement, rampant exploitation of child labor, and associated under-investments in schooling—making investment in human capital particularly crucial to the country’s development. The purpose of this paper is to examine the channels through which access to credit impacts human capital development and schooling decisions. In particular, this study explores the practice of child labor as both a consequence of credit and a potential barrier to education. An analysis of households living in the slums of Hyderabad, Andhra Pradesh reveals that access to credit in general results in a significant decrease in the probability that a child will attend school, while access to loans from microfinance institutions may further decrease the likelihood of schooling. Results reveal the potential for microfinance to increase investment in household microenterprise, thus exacerbating demand for child labor and reducing education outcomes. Future policy will need to account for the capacity of microfinance loans to create detrimental incentives among households, and reforms should include comprehensive services based on promoting child education. This may include the institution of lending reform where credit is linked to, and even conditional on, child schooling.