The Impact of Falling Rupee and Tips to Manage the Extra Expenses

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Direct Effect Of Falling Rupee On Education Loan

One of the consequential effects of the falling rupee can be understood in simple terms: for buying anything that cost $1 last month, one has to spend INR75, and for that same item today, one has to spend INR76. So, this is an explanation that everyone can understand. But when one sees this with respect to abroad education loans, the impact could be way more than what has been explained in the example above. The loan amount for education abroad is usually pretty high, and it can run into crores. When the loan amount is so significant, even a slight depreciation of the rupee will cascade the abroad education loan. 

Usually, people see abroad education loans in narrower terms and think of it as the payment of tuition fees. Earlier, this used to be the case, but now the abroad education loans are much more comprehensive than mere payment of tuition fees. Now, they give comprehensive coverage and include almost all the student’s expenses in abroad studies. The covered expenses include the cost of living, the airfare, the insurance cost, the cost of stationery, buying laptops and computers, etc.  The cost of everything increases every time the rupee plummets by certain points. All the expenses that are mentioned above are affected, and the overall cost incurred on these expenses increases. 

Seeing it from the perspective of individual payments that one has to do, its effect can be understood more clearly. If the tuition fee for a particular course at Stanford University is $40,000 per semester, then, in that case, an Indian student has to pay INR 30,00,000 when 1USD= 75 INR, and when 1USD= 76 INR, then the same student has to pay 30,40,000. A straight increase of INR40K per semester. Here we have discussed only one aspect of the cost of education, i.e. the tuition fee. If we add all other costs covered under the cost of education, it can bring a significant change in the loan amount. So, a one rupee depreciation can have such a massive impact on the overall cost of education. A student from a middle and lower-middle-class family might have to rethink their study abroad plan if they haven’t planned well in advance. One must prepare for all the eventualities because the dynamic payments like the cost of accommodation, the cost of food, and other expenses are to be taken care of on a monthly basis. 

The Ways To Escape From the Crunch Of Depreciating Rupee

As such, there is no direct way to escape from it, but there are certain things that one can do to minimize its effect to the maximum possible extent. One of the first and foremost things that one can do is to choose a destination where the tuition fee is low and the level of education is the same. One of the finest choices in this regard is the public universities in France, Germany, Switzerland, where most of them are either free or with a minimal tuition fee. The cost of living in Europe is certainly higher than any other continent, but if one can get a waiver on the tuition fee, the cost of education comes down considerably. The cost of living can be managed to an extent by working part-time, cutting down on unnecessary expenses. However, one should always bear in mind that this doesn’t mean that they don’t have to take an abroad education loan, as countries want assurance of financial stability before giving student visas. But choosing a university that has less tuition fees can be of great help. 

Another possible way to mitigate the impact of the falling rupee is to take a loan of an additional education loan. Being low on expenses is something that can be a big-time hurdle to securing admission to a foreign university. So, the question is, what an additional education loan is? There are times when students are low on expenses, but there is a way out in the form of an additional education loan which is calculated on the current outstanding amount with the bank and the maximum loan amount that the borrower can avail. But this is restricted to secured loans only, and those with unsecured loans don’t have this option. If there is no option of taking a second loan from the bank, the student can always go to another NBFC or bank, for that matter, in order to get the second loan. If the reason warrants and the borrower’s needs can be justified, then the chances are likely that they may get the second loan. There is another option wherein a borrower can apply for a transfer of the loan from the old to the new bank. There are NBFCs like Credila and Avanse that help students with refinancing or top-up loans. 

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Top-up loans and refinancing are certainly a good choice, but not everyone can afford the terms of repayment. For taking the loan, one might have to pledge collateral. Even after pledging the collateral merit and creditworthiness, one must fulfill other criteria to get the refinancing. Also, the rate of interest is very high for these loans. In fact, it can be more than 15% in some cases. So, one must think carefully before taking this loan as its implications will be felt at the time of repayment of loans. 

Another thing that students can do is to choose a floating interest rate. Since bank interest rates also change with the factor mentioned above. A loan that is on the floating interest rate will benefit from the change in rates by the RBI, which is directly linked to inflation and other related factors. However, the banks themselves have now switched to floating interest rates, and in most cases, it is the default interest rate type. 

And, the last but the best way out to actually extinguish the effect of the depreciation of the rupee is to apply for a scholarship and get one. There are several types of scholarships available for students from different backgrounds. There are private organizations, trusts, government-based scholarships for meritorious students. These scholarships, at times, even cover the living expenses and airfare. A falling rupee is one thing over which the students don’t control. So, it’s in the best interest of the students to choose a way out to ward off as many uncertainties as they can in the journey of their education abroad.