With every fall in the rupee against foreign currencies, studying abroad becomes expensive. As a result, the dream of studying in foreign universities would become a distant one for the aspiring students, while sustenance may become difficult for the students who are already studying abroad.
Impact of falling rupee
With the depreciation in rupee, the cost of study (including boarding and lodging) will go up in rupee terms even if there is no hike in fees. For example, if the tuition fee of a course in a US university is $10,000 for a year, it will be Rs 7 lakh in rupee terms when the value of USD 1 is INR 70. If the rupee depreciates to INR 75 against USD 1, the same tuition fee in rupee term will become Rs 7.5 lakh. It will further increase to Rs 7.7 lakh, when the rupee further depreciates to INR 77 against USD 1.
“The weakening of the Indian currency against the US dollar will profoundly impact students’ (both existing and new) overseas education plans. Parents who have been covering up the cost of foreign education from their coffers will experience a higher outflow of the sum due to rupee depreciation. Similarly, people who fund their education through bank loans may have to go for a top-up education loan that some banks offer to bridge the gap created by exchange rate fluctuations,” said Ashish Fernando, Founder, and CEO, iSchoolConnect.
“The devaluation of the rupee increases the financial obligations. When the rupee falls in value, the rupee amount required to pay in dollars increases. This translates to increased cost of education and living expenses and diminishes the value of the corpus set aside for overseas education by aspirants and their family members as loans are taken factoring in the initial requirements. While top-up loans and refinancing options are excellent sources. However, the repayment terms of such loans are not feasible for everyone; also, to obtain this loan, one may be required to pledge collateral,” he added.
How does a depreciating rupee impact finances in terms of investing in studying abroad?
As studying abroad not only involves tuition fees, but the cost of accommodation, food, travel etc, the impact of rupee depreciation becomes many fold.
“Indian students who are already studying abroad, the current depreciation of INR against the US dollar only leaves room for crisis management. However, for those planning their studies abroad this year and beyond, the current state of economic factors should help define a corpus that considers tuition fees, travel expenses, and cost of living and considers exchange rate fluctuations that may necessitate a revision of investment plans,” said Fernando.
How to manage your finances
While existing students have to find ways to cut costs or get a scholarship or to generate some side income to cope up, aspiring students may enhance or modify their investments to meet the extra costs.
“Students can hedge this fall by carefully considering economic conditions and planning meticulously. Scholarships are a blessing for deserving students. Several scholarships for students from various backgrounds are available from institutions, government-based scholarships, private organisations, and trusts. Choosing appropriate bank loans is another good measure. Though most banks have adopted the floating interest rate as default, ensure to make a clear choice to opt for a floating interest rate when applying for an education loan. A loan with a variable interest rate will profit from the RBI’s rate adjustment, directly related to inflation and other related factors,” said Fernando.
Investments in foreign funds are also good options to get currency adjusted returns to negate the impact of rupee depreciation.