How a weakening rupee affects education loans for students going abroad

The Indian rupee has recently hit an all-time low of 85.09 against the US dollar on December 19, and dipped further to 85.10 on December 20. This depreciation is expected to affect Indian students aspiring to study abroad, particularly in countries like the US, where tuition and living expenses are paid in dollars.

Financial burden for families

Prashant A Bhonsle, Founder and CEO of Kuhoo Edufintech, highlighted the challenges this depreciation brings for families.

“Rupee depreciation has significant implications for Indian students studying abroad. The same tuition and living expenses fees in dollars will cost much more now. This can derail the financial planning for a middle-class family,” he explained.

Students relying on loans to finance their education abroad will see a rise in loan sizes, increasing the debt burden on families.

Bhonsle added, “If they are taking an education loan, the loan size will increase, thereby increasing the debt burden for the family.”

While education loan companies might experience short-term growth due to larger loan amounts, Bhonsle cautioned that the rising debt could pose risks.

“The increased loan amount per student may have some risk challenges, especially if students’ employability or starting salaries do not align with the increasing costs.”

A silver lining for students earning abroad

For students already working or those securing campus jobs, the depreciation may work in their favor.

“The same depreciation can be beneficial for students who have already gotten a job or will get campus jobs. They’ll be able to repay higher EMIs because the conversion ratios for inward remittances will be favorable,” Bhonsle noted.

What should loan seekers do?

Rahul Subramaniam, Co-founder of Athena Education,

advised students to reassess their financial plans.

“The depreciation of the Indian rupee increases tuition fees, living expenses, and financial burdens, making it imperative for families to rethink their strategies,” he said.

Look beyond the US and UK

Students should explore countries like Germany, France, and Switzerland, where public universities offer subsidised education and lower tuition fees.

Subramaniam emphasised the importance of looking beyond traditional destinations.

Apply for scholarships and financial aid

Subramaniam also encouraged students to explore merit-based and need-based scholarships.

“These resources can ease financial strains,” he said, advising students to seek out available financial aid programs.

Proactive financial strategies

To safeguard against currency volatility, Subramaniam recommended proactive measures.

“It’s advisable for students to pay tuition fees in advance when exchange rates are favorable,” he said.

Additionally, students should budget carefully, minimise unnecessary expenses, and explore part-time work opportunities to supplement their income while studying abroad.

A look at education loan rates and terms from various bank:

Bank	Loan Amount	Interest Rates	Maximum Amount Offered	Repayment Tenure
SBI Education Loan	Up to ₹4 lakh	13.35% p.a.	For studies in India: ₹10 lakhs	5 to 7 years
			For studies abroad: ₹30 lakh
	₹4 lakh – ₹7.5 lakh	13.60% p.a.
	Above ₹7.5 lakh	11.60% p.a.
Axis Bank Education Loan	Up to ₹4 lakh	16.95% p.a.	For studies in India: ₹10 lakh	Up to 7 years
			For studies abroad: ₹20 lakh
	₹4 lakh – ₹7.5 lakh	17.95% p.a.
	Above ₹7.5 lakh	15.95% p.a.
HDFC Education Loan	Up to ₹4 lakh	12.00% p.a.	₹10 lakh for studies in India	Up to 15 years
	₹4 lakh – ₹7.5 lakh	13.00% p.a.
	Above ₹7.5 lakh	12.50% p.a.
PNB Education Loan Scheme	₹4 lakh – ₹10 lakh	Calculated individually	₹10 lakh for studies in India	Up to 15 years
Avanse Education Loan	Minimum ₹50,000 to maximum requirement	Calculated individually based on course	Not specified	1 to 10 years

(Source: Paisabazaar)