Students who had taken a loan this year in March when the rupee was at 75 against the dollar can add a few lakh into the loan.
What constitutes a triple whammy?
- Extension of loan by around ₹3.5-5 lakhs depending on the rupee exchange value.
- Increase in living expenses.
- Rising interest rates.
A student from Mumbai has been planning to pursue a medical course in Georgia in Europe. It costs around Rs. 30 lakh for five years. Moreover, she is not taking a loan and her father is bankrolling it.
Analysing the past few months, it is seen that Europe is in the throes of a possible recession. The value of the Indian rupee is depreciating. Moreover, inflation in the continent is impacting expenses that have been budgeted.
Students, therefore, are now pushed to take a loan as their living expenses will change drastically. Those who have already been admitted have a completely worse scenario on rupee depreciation. The rupee has fallen more than 7% against the dollar since the beginning of 2022.
Students who had taken a loan this year in March when the rupee was at 75 against the dollar can add a few lakh into the loan. An extra Rs. 7 is added for every dollar of the loan which would inflate the loan and the interest. A loan could get extended depending on the exchange value of the rupee at the time of the loan by around Rs. 3.5-5 lakh.
Moreover, Indian students have to support themselves as their living expenses are going up. As per estimates, the Eurozone inflation is at 10%. The US Inflation has recently hit a 40-year high. Indian students are affected as most of them head to these destinations.
There has also been a rise in interest rates. The Indian central bank raised repo rates four times this financial year and the base rates are now at 5.9%. Interest rates are expected to be hiked in the near term and the base rates may stabilize once it’s around 6-6.5%.
The interest rates for loans linked to MCLR and BPLR will see a gradual increase in the near future. Therefore, EMIs of current and future borrowers will be on the rise. The US and Europe-bound students will have a psychological impact of a possible depreciation in the rupee.
Studying abroad will become much more expensive. However, this has not been discouraging students from pursuing their higher education dreams. There is more worth in the return on investment in terms of quality of education, international exposure, career growth, networking and skills developed.
Students who are planning to go abroad this year and the next, have been planning it two years before. Thus, slight hindrances will not change their plans. However, some may choose to delay it.
In a few sections of society, parents are managing the EMIs on the border which will get affected. A student who had to arrange ₹25 lakh for their overseas education before the increase in rates will find it difficult to arrange for additional funds. This is because parental income has not increased in proportion to the hike in interest rates.
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