₹80 impact: Students going to study abroad will feel the pinch, but it is worse for students already there

• One dollar now costs as much as ₹80 rupees, which changes the dynamics of student loans drastically.
• If a student took out a loan of $100,000, it would now be worth ₹8,000,000 instead of ₹7,000,000 it was last year.
• The depreciation of rupee has an impact on three people — the students going to study, the students who are already studying abroad and the ones repaying the student loans.

August is right around the corner and many students are getting ready to go to foreign universities, but a weaker rupee is expected to spoil the party.

One US dollar now costs ₹80. The impact will be felt by students going to the US, Australia and Canada.

If a student takes a loan of $100,000, it would now amount to ₹8,000,000 instead of ₹7,000,000 last year.

“Amidst the sharp fall in rupee against the US dollar, and the expense towards pursuing higher education abroad skyrocketing, availing the right education loan has become imperative for students and their parents, especially for countries like the United States, Australia and Canada.” Mahesh Shukla, CEO and Founder of lending app PayMe India, told Business Insider.

It’s much worse for students already studying abroad

Ankit Mehra, the CEO and co-founder of non-banking financial company (NBFC) GyanDhan, noted that the situation could worsen by next year if the rupee continued its downward slide. The students who took the loan this year at the deprecated rate would at least be able to pay the tuition fee at that rate for the first year of education. The matter gets more complex for students who are already studying abroad.

“A student who has been paying a fee of ₹65 per dollar in 2017 will now have to pay around ₹80 per dollar in 2022, thereby increasing his financial obligations significantly,” PayMe India’s Shukla said.

The value of the rupee has depreciated about 7% in the last six months. Now, students who took education loans without any margins for currency depreciation could currently be at a shortfall of 7%, which is a really big margin to cover. If the value of the rupee depreciates any further, the students who went to study this year would be in a similar situation for their second year of education.

Several lenders — including GyanDhan — have launched a top-up scheme offering additional funds to students.

So much for the tuition fee. Students also have to worry about managing living expenses. “The countries that the student is eyeing to pursue higher education also matters amidst economic turmoil… Countries like Austria, Belgium, Germany and Norway also provide quality education, which might not get too much impacted by the exchange rate fluctuations,” Rachit Chawla, founder and CEO of an NBFC called Finway FSC, said.

Students repaying dollar loans feel the pinch

GyanDhan’s Mehra noted that the depreciation of rupee has an impact on three people — the students going to study, the students who are already studying abroad and the ones repaying the student loans.

Individuals who took loans from an international lender in dollars and are currently earning in rupees owe much more to the banks. Meanwhile, the ones who took out a loan from an Indian lender and are earning in dollars are in a sweet spot, as they owe much less to the banks.

“When students are going abroad they tend to compare two banks — let's say an Indian bank and an international lender — they just look at the (interest) rates,” Mehra noted, highlighting that an international lender would lend money in an international currency, which is subject to fluctuations.

“Once they come back to India, they see that the 10% (interest rate) wasn’t really a 10%. It is actually a much different loan,” he added.

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