Falling rupee raises restrictions for loans to study abroad

We all are aware of the falling rupee. This year, while the rupee has depreciated around 20%, students who dream of studying abroad are left with fear and disappointment.

Moreover, there is a raise in restrictions for obtaining the educational loans to study abroad. Some students are seeking extra bank loans. However, a Rs. 2 million (US $ 36,500) ceiling on loans for overseas education is making this difficult.

According to source, the loan limit had not changed since 2001 when the exchange rate was Rs25 to Rs30 to the US dollar, as compared to around Rs50 now. In 2001, a maximum loan could cover an Indian student's full education costs in most countries. Now, which is barely enough for one year.

Ankur Sarthi, a final year undergraduate student at Delhi University said, "I have already secured a Rs2 million loan from a national bank and I was denied any additional amount."

It is common for students to apply for a student loan several months in advance for taking up a place overseas. Sarthi secured a loan two months ago.

"I had applied to universities across multiple countries. Now I have to pick the cheapest country and also one that gives me opportunities to earn while I study," Sarthi said.

A senior official at a public sector bank asked, "You have to look at the return on an expensive higher education abroad. If a student spends Rs. 2 million to Rs. 3 million on education in a world-class institution but struggles to get a well paying job, is the education worth it?"

The source also highlights India's slowing economic growth and a cloudy jobs outlook in the last four years has raised fear of risky loans, while the number of students seeking loans has gone up significantly.

As of March 2013, there were 2,509,465 education loan accounts with a total amount outstanding of Rs5.352 billion. Over 5% of outstanding student loans had turned bad, up from 2% in 2008.

According to few reports, banks are contemplating and extending the repayment period of loans taken to pursue higher studies abroad, to spread interest payments over a longer period and reduce the cost.