Akanksha Vora aspires to join Boston University in the US for her master’s this September 2022. However, the sharp depreciation of the Indian rupee against the US dollar has jeopardised her financial planning. “From tuition fees to living expenses to travel tickets, everything has become dearer due to the exchange rate fluctuations,” says Vora.
“We didn’t account for the depreciation of the Indian rupee while budgeting for my education abroad. My cost has escalated by almost ₹2 lakh in the past four months just because of this. I’ll have to top-up my education loans to fulfill the additional financial requirements,” she adds. Many students, like Akanksha, are worried about the Indian rupee’s depreciating value against the US dollar.
The weakening of the Indian rupee against the US dollar will impact a student depending on their destination country. Students planning their higher education overseas in countries such as the US, Australia, and Canada will bear the brunt of the rupee’s sharp depreciation against the US dollar.
Such students must factor in the exchange rate fluctuations and plan their finances well in advance. However, the ongoing rupee-dollar exchange rates should not influence or come in the way of a student’s study abroad dream. To tide over uncertainty, plan and evaluate your alternatives.
Understanding impact
Tuition and living expenses are the two critical components of a student’s expenditures when studying abroad. The rupee’s current losing streak leads to higher fees and costs of living, as a dollar now costs more in rupee terms than it did previously. An Indian student who always paid a fee at an exchange rate of around 65 rupees per dollar in 2017 might end up paying 78.20 rupees per dollar in 2022.
The following example will break down the arithmetic further to help you understand how exchange rate variations affect the financial burden of international students. For example, assume the tuition for a course at a US university is $20,000 per year.
In 2017, if a student paid ₹13 lakh towards tuition fees, then today the same education will cost ₹15.4 lakh as the value of one US dollar is ₹78.20. So, the student will spend nearly ₹2 lakh more because of exchange rate volatility, making international education more expensive.
The impact is contingent upon the study abroad destination a student chooses to study in and how the home currency is faring in terms of the destination country’s currency. The nosedive of the Indian rupee against the US dollar means increased outgo of Indian currency. The rupee amount required to pay in dollars increases. As a result, students’ financial requirements increase.
Currency fluctuations
The value of the corpus set aside by aspirants and their family members for foreign education is estimated after considering the initial requirements, and this calculation determines the loan amount. For individuals who have not factored in the rate of native currency fluctuation against the destination country’s currency, the depreciation of INR against the US dollar might substantially impact the financial burden of studying abroad.
Exchange rate fluctuations send such financial planning downhill, adding to the financial stress. Parents funding their children’s overseas education or students managing finances themselves can apply for additional education loans if they are running low on finances. These are secured education loans tied to the value of the collateral or the expense of education. They typically cover full tuition fees as determined by the university and the cost of living.
Students can apply for another education loan if they already have an existing education loan but need additional funds to finance overseas education. These loans can be obtained from the same bank that provided the preceding loan. The second loan amount is computed based on your current outstanding balance with the bank and the maximum loan amount that you are eligible for.
Maintaining efficiency
If the option to avail of a second loan from the existing bank is not yielding, students can approach NBFC or a bank to procure a second loan. Certain NBFCs provide refinance or top-up loans to students. While top-up loans and refinancing options are excellent sources, the repayment terms of such loans are not affordable for everyone; also, to obtain this loan, one may be required to pledge collateral.
Another effective technique is to select proper bank loans. Though most banks have made floating interest rates the default, when applying for an education loan, make a conscious choice to go with a floating interest rate. A variable-rate loan will benefit from the RBI’s rate modification, directly tied to inflation and other related factors.
Last but not least, an excellent way to escape the brunt of exchange rate fluctuations is to get a scholarship. Scholarships are a blessing for deserving students. Several scholarships for students from various backgrounds are available from institutions, government-based scholarships, and private organisations.