How Parents & Students May Face Financial Tightening On Foreign Education Loans

A student is going to Georgia in Europe for a medical course. The course fees cost nearly Rs 30 lakh for the 5-year course, his father is managing its expenses so that she does not need to take a loan.

While in former few months Europe would be in a possible recession since the value of the Indian rupee would have depreciated and the inflation would impact the budget expenses. There is a need to take a loan as the living expenses would get changed in Europe.

Similar to the above case some other Indian students want to study abroad while those who have already been placed are facing worse this year as of the depreciation of the rupee. From the start of the year 2022, the rupee would have dropped more than 7% with respect to the dollar.

In March this year if a student has taken a loan when the rupee was at 75 against the dollar then the same would add a few lakh to the loan, it is a public advantage corporation that supports the students to study overseas.

Rs 7 would have been added for every dollar of the loan and the same has inflated the loan as well as the interest.

While including the tuition fees the Indian students would indeed need to assist themselves there since the living expenses surged. The Eurozone inflation stood at 10% according to the estimations the inflation in the US has hit a 40-year high affecting the economy of the students who are studying abroad. Majority of the Indian students are going there for their careers.

Interest rates are rising through the third part of the triple curse. In the same fiscal year the Indian central bank raised the repo rates, it surged 4 times and the base rates now stand at 5.9%. The rise in the interest rates is expected to get increased in the subsequent time, major experts see that the base rates stabilize once it's nearly 6 to 6.5%.

MCLR and BPLR loans would see a rise in interest rates in subsequent times. The EMIs of the current and the subsequent borrowers would get surged because of the same.

The psychological impact of the rupee depreciation would affect the minds of the US and Europe-bound students including their parents.

Taking a foreign degree would going to become expensive. But the experts mentioned that the same would not discourage the students from taking the education of their wants.

Investment return would be productive for the quality of education, career growth, international exposure, skills developed, and networking.

The students who want to proceed abroad for their study in the current year and the next year would have already planned it 2 years before and there is no chance that anything interrupts their plans, however, some might opt to delay the same.

There are some sections of society in which the parents are handling the EMIs and are being impacted by that. A student who managed Rs 25 lakh for their foreign education before the increased rate would face the issues to arrange the additional funds given that the parental income does not get increased proportionally to surge the interest rates.

Authored by CA Amit Gupta, MD, SAG Infotech