The falling rupee makes foreign education costlier. How should Indian students handle this?

The depreciating rupee is a concern for many parents as it means they will have to shell out more for the foreign education of their children to cover the currency risk. Consider this: On December 20, 2011, $1 was equal to Rs 52.77, while on June 14, 2022, it reached an all-time low breaching Rs78.  The fall in the value of the rupee will affect the overseas education plans of parents as it is going to make costlier the tuition fees and living expenses of the students. In such a scenario what can students do to curb the cost of foreign education?

“Needless to say, having strong grades would increase a student’s chances of a tuition scholarship (even application fees in many cases) and reduce the economic burden on the students thus curtailing the impact of the rising dollar. Apart from this, the student needs to do thorough research on the loan product and loan provider,” says Ashwini Kumar, General Manager (India) and Vice President, MPOWER Financing.

For example, a US loan provider offers a few benefits - the loan is disbursed and repaid in US dollars. This is quite vital in itself as the risk of currency fluctuation can be mitigated, without losses due to foreign exchange conversion costs or manual intervention. “A student doesn’t need to worry about the timing of disbursements either because it is a US institution that is disbursing to a US university, similarly for Canada and other countries. The possibility of exchange rate fluctuations would not impact the students. Students can also check whether the educational institute has any tie-ups with the financial institution for education loans. In certain cases, such tie-ups help in faster loan processing and lower overall costs to the students,” adds Kumar.

Second, students must think through while choosing between fixed-rate and variable interest rate loans. “Students must choose fixed-rate interest loans, rather than variable-interest loans unless they are quite savvy in following capital markets and their impact on their variable interest rate - which is still not enough because they need an action plan to change course on their variable rate. Students wanting peace of mind and no volatility in their monthly payments should not entangle their valuable learning time in variable rates and their fluctuations. A variable-rate product may, in some instances, offer a lower initial interest rate, but during the tenure of the loan, it can rise much above the fixed-rate,” says Kumar. 

Moreover, parents who are planning to send their kids abroad can consider investing in overseas markets as it eliminates the currency risk. “For some clients who have goals in foreign currency such as overseas education expenses overseas investing works as a hedge against sharp currency movements,” Lovaii Navlakhi, Managing Director and CEO, International Money Matters Pvt Ltd told Business Today.

“In case students have decided on the institution, they are encouraged to do extensive research on the most effective education loan provider available in the market. Students should consider institutions that provide a clear and full-service model,” says Kumar.

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