With each drop in the rupee against foreign currencies, studying abroad becomes expensive. As a result, the dream of studying in foreign universities would become distant for aspiring students, while sustenance might become difficult for students who are already studying abroad.
Impact of falling rupee
With the depreciation of the rupee, the cost of education (including board and lodging) will increase in rupees even if there is no increase in fees. For example, if the tuition fee for a course in an American university is $10,000 for one year, it will be Rs 7 lakh in rupee terms when the value of 1 USD is INR 70. If the Rupee depreciates to INR 75 against USD 1, the same tuition fee in terms of Rupee will become Rs 7.5 lakh. It will further increase to Rs 7.7 lakh, when the Rupee depreciates further to INR 77 against USD 1.
“The weakening of the Indian currency against the US dollar will have a profound impact on the study abroad plans of students (existing and new). Parents who have covered the cost of overseas education from their coffers will experience a higher outflow of the sum due to the depreciation of the rupee. Likewise, people who fund their education through bank loans may need to opt for a top-up loan that some banks offer to bridge the gap created by exchange rate fluctuations,” said Ashish Fernando, Founder and CEO of iSchoolConnect.
“Rupee devaluation increases financial obligations. When the rupee loses value, the amount of rupee needed to pay in dollars increases. This results in an increase in the cost of education and living expenses and diminishes the value of the corpus set aside for education abroad by aspirants and their family members, as the loans are taken in taking into account the initial needs. While supplemental loans and refinance options are excellent sources. However, the repayment terms of these loans are not feasible for everyone; also, to obtain this loan, one may be required to give a guarantee,” he added.
What is the impact of a depreciated rupee on finances in terms of investing in study abroad?
As studying abroad involves not only tuition but also the cost of accommodation, food, travel, etc., the impact of Rupee depreciation becomes multiple.
“Indian students who are already studying abroad, the current depreciation of the INR against the US dollar only leaves room for crisis management. However, for those considering their study abroad this year and beyond, the current state of economic factors should help define a corpus taking into account tuition fees, travel expenses and the cost of living. and taking into account exchange rate fluctuations that may necessitate a revision of investment plans,” Ferdinand said.
How to manage your finances
While existing students must find ways to cut costs or get a scholarship or generate additional income to cope, aspiring students can improve or modify their investments to cope with the additional costs.
“Students can hedge against this fall by carefully reviewing economic conditions and planning meticulously. Scholarships are a blessing for deserving students. Several scholarships for students from various backgrounds are available from institutions, government scholarships, private organizations and trusts. Choosing suitable bank loans is another good measure. Although most banks have adopted the variable interest rate as default, be sure to make a clear choice to opt for a variable interest rate when applying for a student loan. A variable interest rate loan will benefit from the RBI rate adjustment, which is directly linked to inflation and other related factors,” Fernando said.
Investments in foreign funds are also good options for earning currency-adjusted returns to negate the impact of rupee depreciation.
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