By Nilanjan Chattoraj – Head, Credit & Product – Education Loans at InCred
The rupee has been falling against the dollar over the last several years – the weakest has been this year from Rs 64.08/dollar in August 2017 to Rs 81.11/dollar on September 22, 2022. The current fall is mainly due to supply chain disruptions in view of the Russia-Ukraine war, high crude oil prices, a strong dollar overseas and foreign capital outflows.
While several monetary policy changes designed to arrest this fall will ensure that the Rupee doesn’t slide uncontrollably, several analysts believe the Rupee could decline further against the dollar in the next few sessions as oil prices go up and the FII sell-off continues.
For aspirants of overseas education and their families, this decline is an avoidable complexity however your study-abroad plans should not be thwarted:
- Considering the rupee may decline further, this may be a better time to start your education abroad rather than somewhere in the future when the rupee may in fact become weaker (thus making the overseas degree even more expensive).
- This is an opportunity to plan your finances of an overseas education immaculately – students should look for funding options in their destination countries such as scholarships, assistantships, part-time/on-campus employment, etc. as these sources are not subject to the FX market. These alternate funding channels also give the student a good flavour of the corporate world thereby preparing them better for taking up employment after studies. Similarly, strong financial planning can be a skill that will help these students’ life-long.
- Further, students that are not planning on taking a loan should now consider it given the probability of higher interest rates in the future, and not fund their degrees from personal/family investments thereby exposing these to the volatile FX rates.
- Student loan borrowers may worry about the need to remit more rupees for every dollar expenditure; however, it becomes much cheaper for these borrowers to repay the INR loan once they start earning in USD. Conversely, repaying an USD loan while working in India or another country becomes increasingly more burdensome.
- Students that are already in the US will also be able to transfer more rupees per dollar for their familial/maintenance needs back in India and invest more in India.
All in all, it is a great year to go for studies abroad after the covid-forced hiatus – don’t let the fluctuation of rupee hamper the life-changing opportunity. The INR slipped approx. Rs 5/dollar since Aug 2021 which means that students going this year will end up remitting $20K*5 = Rs 100,000 this year compared to last year ($20K cost per year considered). In dollars, that is approx. 105 dollars per month which is a meagre price to pay for the profound experience that an overseas education gives you.