Why foreign study will hold its sway despite inflation, weak rupee

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Foreign education is becoming increasingly popular. The cost of living in the developed world is at record highs, education loans are set to become more expensive and a weak rupee is fueling foreign spending. A Harvard degree will be 26% more expensive this year than four years ago in rupee terms, even though the university has raised fees by only 13%, Mint calculations show. Still, due to the basic need and non-discretionary nature of quality education, students’ plans will not be affected much, experts suggest.

A Local Circle survey in July suggested that Indians don’t see the impact of the rupee’s fall on overseas education plans as much as they do on other spending. This reflects a trend that has been going on since before the pandemic, when the number of students going abroad is increasing rapidly. The count doubled between 2016 and 2019 alone.

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Cost of studying abroad

Despite a weak rupee, the US remains attractive. “Sentiment has not abated at all and I don’t see a big change until the US continues to welcome students,” said Sanjay Laul, chief executive officer of M Square Media, an international education platform.

However, Laul is seeing some migration from the US to low-cost countries. Since the end of February, the rupee has appreciated 6.1% against the British pound and 5% against the euro, compared to a 5.7% depreciation against the dollar. “While rupee depreciation may increase costs for US-bound students, that is not the case for other study destinations with less adverse currency fluctuations,” said Arijit Sanyal, MD and CEO of HDFC Credila, an education loan company.

American Dream

In addition to the scarcity and volatility of others, US institutions have many other things that attract students despite the cost. In January, an InterStride survey found that students rated the reputation of US colleges and universities as the most important driver. “The U.S. is home to all the Ivy League colleges,” says Viva Kaggi, CEO of education consultancy ReachIvy.com. “The amount of funding they receive and the culture of giving back helps colleges reinvest in technology and infrastructure. “Moreover, the pay-offs are huge, he added.

Demand is also driven by the desire for quality higher education along with improving living standards abroad, and the US has a lot to offer on this front, said MD and CEO of Avanse Financial Services, an education finance. Firm. This is another reason why cost is not a major deterrent when more and more Indian students are dreaming big.

Access to capital

For many, studying abroad is largely possible due to improved access to education loans. Between 2016-17 and 2018-19, education loans sanctioned by State Bank of India for study abroad increased by nearly 35%. 3,431 crore, the latest available data shows. The pandemic impacted the education loan sector as students put their plans on hold, but the massive pent-up demand currently in play after the pandemic will bring loans back into the picture.

“In the current year, we are seeing strong growth in loan applications from students planning to study abroad, independent of the impact of the pandemic,” said Sanyal.

Most lenders usually cover both tuition fees and other expenses such as accommodation, travel and purchase of study equipment. They often factor in currency fluctuations while approving loans. Foreign lenders also offer dollar-denominated loans but “with interest rates tightening, dollar loans become expensive and usually not hedged, which increases the risk”, Gainda said.

Coping with expenses

Despite inflation and devaluation of the rupee, the high cost of education does not bother overseas students because of its returns. A RedSeer analysis in 2021 showed that the salary earned after obtaining a degree in the US or UK could be nearly 10 times what they would earn if they studied in India. Science, technology, engineering, and mathematics (STEM) fields, which remain strong focus areas for Indian students, also help them end up with financially stable careers.

“Even if the exchange rate stays the way it is, after graduation, when they pay off these loans, they’ll be paying these funds back at an increased dollar rate and it will be a lot easier to pay off the loans,” Kaggi said.

Meanwhile, to cope with high costs, students can take up campus or part-time jobs or other remote work options, experts suggest.

All in all, the cost will be high, but the returns justify the expense for those who truly dream of an overseas degree.

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