Reeling rupee drags students abroad deeper into debt at home - The Economic Times

Bengaluru: A more than 10% slide in the rupee against the US dollar over the past 12 months has left Indian students getting education overseas scrambling for additional funds, as loans sanctioned in India are falling short of tuition and living expenses payable in foreign currency.The funding gap has driven a nearly threefold jump in demand for top-up education loans from Indian lenders among students enrolled at US universities, industry executives told ET.TIL Creatives

Reeling rupee drags students abroad deeper into debt at homeProcedural issuesStudents are seeking top-ups of ₹1-6 lakh, leading to enhanced sanctions, fresh documentation, power-of-attorney processes and disbursement delays, they said.Mumbai-based entrepreneur Sunetra Banerjee, whose daughter is studying at a design university in the United States, said she and her husband have paid at least ₹7-8 lakh more than their initial estimates in the first year alone and are apprehensive about further cost escalation."Everything costs more... the course fees, living expenses, even the pocket money," she said. "Travel costs have also jumped big time... A round-trip ticket that cost around ₹96,000 a year ago, is now close to ₹1.6 lakh."At the time of the initial loan disbursement, the rupee was trading at ₹85 to the dollar.Almost 3x Rise in Top-up Loans“It is now at around ₹95,” Banerjee said, noting how quickly financial calculations can go awry.Her daughter has now applied to her college for an additional scholarship. If that does not come through, Banerjee and her husband will have to either consider a top-up loan or liquidate some investments.Banks and education-focused non-banking finance companies (NBFCs) in India sanction loans in rupees, while students pay university fees and living expenses in dollars, pounds or euros.Mahesh Avasare, product lead at student lending platform MPower Financing, said the frequency of top-up loans for rupee borrowers has increased almost threefold in the past one year. According to data from the Reserve Bank of India (RBI), around $450 million of outward remittances were made by Indians to fund overseas education programmes—including university fees and living expenses such as hostel costs—in March 2026. The RBI has not published comparable data for previous months. The total outstanding education loan book of banks, including loans for domestic and overseas education, stood at ₹1.55 lakh crore as of March 31, up 13.4% from a year earlier, according to RBI data.Industry executives said a majority of this was linked to overseas education, with banks and NBFCs together disbursing around ₹20,000-25,000 crore annually. Banks and NBFCs have nearly equal shares of the market, with the State Bank of India—the country’s largest lender—alone accounting for 20-25%, industry executives said. When a loan is sanctioned, lenders convert the foreign-currency requirement into rupees at the prevailing exchange rate.However, if the rupee weakens sharply by the time a student draws the next tranche, the same foreign-currency requirement translates into a higher rupee amount, forcing lenders to process an enhanced sanction. Large lenders typically build in some buffer for currency fluctuations, and secured loans can be enhanced more easily if collateral coverage remains adequate.Growing burdenChaitanya Kalipatnapu, cofounder and executive director of SoftBank-backed executive learning startup Eruditus, said the rupee’s move from about 83 per dollar to over 96 in about one-and-a-half years has increased the cost of a four-year undergraduate degree in the US by ₹30–35 lakh.Getting a top-up loan may require fresh documentation for enhanced sanction. For students already overseas, this could mean a power of attorney executed abroad and sent to parents in India.While higher funding requirements have not led to a blanket tightening of underwriting standards, top-up requests are being treated as enhanced loan sanctions. This means lenders must reassess the documented cost of education and living expenses, the borrower and co-borrower profile, repayment capacity and, in some cases, collateral before disbursing the additional amount. Education-focused NBFCs said they are better placed to handle such cases.