At a time when the rupee is testing new lows, parents need to plan forex requirements for their children’s higher education abroad. As foreign education costs are spread over two to four years, a 5% rupee depreciation on a $50,000 fee can increase the cost by over Rs 2 lakh.
To mitigate this risk, parents should hedge against currency fluctuations. They should also go for a forex card to lock in the exchange rate.
Read FE 2026 Money Playbook: Your Ultimate Investment Guide for the new year
Forward contract
A forward contract acts as an effective risk mitigation tool. By locking in exchange rates, parents can plan finances and avoid unexpected cost escalations. They can use a forward contract to freeze the exchange rate for future tuition and living expenses. For instance, if the rupee is at 89.76 against the dollar, a parent can lock this rate for a payment due next semester. Even if the rupee falls to 92 against the dollar, the costs will still be calculated at 89.76, protecting their budget from currency shocks.
Banks advise customers to hedge currency risk while sanctioning education loans. “Forward contracts are booked in line with the university fee payment schedule, providing visibility and certainty on the rupee outlay,” says VRC Reddy, head of treasury, Karur Vysya Bank.
A parent buys a specific number of dollars on a future date, typically a quarter before, at a rate fixed today based on the spot rate and forward premium. “When a parent books a contract, the bank secures those dollars immediately from the market, locking in the cost,” says Karunn Kandoi, founder and chief executive officer, Vidysea Education, an overseas education consulting firm.
Forex card
It is a prepaid instrument that allows an individual to lock in a fixed exchange rate before travel, safeguarding against the volatility of a weakening rupee. With a forex card, parents can load the required amount for living expenses or study-related costs before flying abroad.
Gagan Malhotra, chief operating officer, BookMyForex.com, says a forex card ensures that the funds loaded on the card are not affected even if the rupee falls further. “This eliminates uncertainty in budgeting and protects against unexpected increases in costs due to currency depreciation,” he says.
A forex card can be used for payments at stores, universities, and for ATM withdrawals, without incurring cross-currency conversion charges. This makes it an ideal tool for managing international payments.