The sharp depreciation of the rupee against the dollar has been affecting a large number of people. Strengthening of the US dollars and its impact on the Indian Rupees since September 2017 is about 13 per cent. Indian Rupee has depreciated about 11 per cent against the British Pound since September 2017 and has depreciated by about 9 per cent against the Canadian dollar since September 2017. Depreciation of Indian Rupee has been a bit higher against these currencies compared to the previous years., which has mostly affected people with expenses in foreign currencies. For instance, along with foreign travel, education abroad is also getting more expensive. Several parents are taking the tough call of not sending their children abroad for higher studies. It has affected more the people who already have children studying abroad, as the depreciation of the rupee has increased the quantum of their education loan.
How does this affect you?
For students pursuing higher education in foreign countries such as the USA, the expenses are incurred in dollars. Hence, when the rupee falls, the amount that needs to be paid in the dollar increases, because of which the funding requirement also increases. The effect of the fall in the rupee against the dollar also depends on the country where the student is pursuing his/her education.
The rupee depreciation impact on a person varies depending upon the country they are going for higher studies. A student going to countries like the USA, Australia, and Canada will be affected by the rupee depreciation against the US dollar, and experts suggest they need to plan their finances well in advance. Other countries such as Austria, Belgium, Germany, and Norway also offer quality education at subsidized rates, which experts say can also be opted for.
Ajay Bohora, Co-Founder, MD, and CEO of HDFC Credila says, “Currency fluctuation is only one of the many other parameters which students evaluate while taking a decision about the destination country for their higher education. Other important parameters like the quality of education in the destination country, credentials of that particular University, overall state of the economy, immigration-friendly policies for graduating students, course curricula and availability of employment opportunities after the completion of the given course should also be noticed as important decision factors for the parents and students, when they decide on the destination country for the given course.”
What do you need to do?
Parents funding for their child or students who are there by themselves need to re-assess their financial situation at this point. If they are low on funds to fund their expenses, they should consider applying for an additional education loan. Secured education loans are generally linked to the cost of the collateral or to the cost of education. These loans normally cover the full tuition fees as determined by the university, along with all other living expenses.
You can also apply for another education loan, even if you already have taken an education loan, but need more money to fund your further education. You can opt for this loan from the existing bank from where the previous loan was taken. The second loan amount is calculated based on your current outstanding amount with the bank and the maximum loan amount that you can avail. For example, based on the collateral provided by you, if you were eligible for a loan of Rs 70 lakh and you had taken only Rs 30 lakh out of which Rs 10 lakh has already been paid back, the total outstanding amount remains Rs 20 lakh. Consequently, your net eligibility will become Rs 50 lakh (Rs 70 – Rs 20 lakh).
If, however, your loan requirement is not fulfilled by your current bank, you can always look for other banks or NBFCs for funds. Experts suggest borrowers can either opt for a fresh loan from a new bank or apply for a transfer of the loan from the old to the new bank. If you are opting for an additional loan from NBFCs like Credila and Avanse, they come in the form of top-up loans to re-finance students.
The approval of these top-up loans from NBFCs depends on whether the students meet their requirement or not. You might also have to provide security coverage which varies from applicant to applicant and depends on your credit-worthiness and merit. Interest rates for top-up loans are generally higher than the existing loan rate and vary between 12 and 15 per cent. It also depends on the prevailing loan interest rate and the collateral provided.
One can also look for scholarships to cope with high living and tuition fees, which will reduce the tuition fees significantly.