With the depreciation in the value of Indian Rupee, students are now facing serious problem of lack of fund. In order to tide over the problem, students are going for alternate options such as scholarships or part time jobs.

The depreciation has forced students to change their plans

Most of the students who aspire to pursue their higher education abroad hopes that the new year will bring them the good news of increase in value of Indian Rupee. The fall in value of Indian rupee has forced many of the students to keep apart their plans to study abroad and take up a job. Nayan Upadhayay, a student from Mumbai says that his course fee has now increased by 18 per cent as a result of the fall in value of the Indian rupee. He observes that this is in addition to the living expenses.

Increase in expenses due to depreciation

Nayan’s course is due to start on April 2012, and extends to a period of 21 months. The total amount required to pursue the course is Rs. 34.2 lakh, out of which Rs. 23 lakh forms the tuition fee and Rs. 11.14 lakh forms the living expenses. If he had joined for the course in 2011, he would have saved an amount of about Rs. 5.38 lakh.

In 2011 alone the value of Indian rupee has depreciated about 18 per cent. At the beginning of 2011, the rupee stood at 44.2 and fell to 53.07 towards the end of the year.

The depreciation directly impact the cost of overseas education

The depreciation of the rupee directly impacts the cost of pursuing overseas education. The fall in value is in fact directly proportional to the increase in the cost of overseas education. With the fall in value, the cost to obtain US dollar increases along with the 2 per cent rise of bank rate. So even if the banks sanction loan, for instance an amount of Rs. 15 lakh, it would fetch only about USD 28,000, which would have otherwise fetched an amount of USD 33,000. As a result the students now are forced to look for other means to find almost 20 per cent of additional fund.

In India there are many eligible and deserving students, who are financially not so sound to pay such a hefty course fee, but apply for higher studies abroad. For such students arranging such a big amount is toodifficult even with their excellent academic records and the availability of scholarships. According to Mohit Gundecha, Chief Executive Officer at YourNextLeap.com, an online career and academic counselor, the fall in value has led to higher cost of financing, and in some instances the savings that the families managed to build has now become inadequate and their dreams about a prosperous future shattered.

The limit placed by banks

The banks in India usually place a limit on the amount of education loan that they can provide to thestudents who wish to go abroad for their higher education. It usually falls between a range of Rs. 15 lakh and Rs 20 lakh. With the present fall in value of the Indian rupee, the amount the banks are willing to provide would be insufficient for those who wish to pursue MS.

Students looking for alternate options

According to educational consultants who operate in overseas education segment, students are looking forward to other options to tide over the present situation. They are considering alternatives such as part time jobs or financial assistance in the form of scholarships. Students who do not succeed in finding any of the any of the above alternatives are putting a hold to their plans till the value of Indian rupee rises.

According to Vinayak Kamat, Gee Bee World, a consultancy working in the overseas education segment, the students who depend completely on bank loans and finds job in India with beginner compensation packages will be the most affected.

The impact is yet to surface

Krishna Kumar, MD, State Bank of India observed that the impact of the fall in value of rupee will be experienced not in the current year but in the next academic year. He added that the banks will calculate the cost economics in March-April this year.

Slump in the growth of education loans

The depreciation of the Indian rupee along with the uncertainty in the global economic condition has resulted in the reducing the momentum of growth of educational loans. The economic uncertainty surrounding the world has made negative remarks in the minds of the risk managers at banks and that might have resulted in the education loans losing momentum, says Prashant Bhonsle, country head, Credila Financial Services, an HDFC Ltd Venture. He added that the managers might now attach higher risks for students, as far as job potential is concerned.

The data from the Reserve Bank of India indicates that the annual rate of disbursement of education loan increased only 17 per cent in October 2011, when compared to 24 per cent in October 2010.

Increase in number of applications

Credila has observed that they have received two and a half times more application for higher studies abroad in the last two months as against the number of applications in the same periods previous year. The maximum amount they offer as education loan to students is about 20 lakh. In the case of loans for higher education abroad, the amount will be above 20 lakh, and so the banks take collateral as security. In the case of education loan up to Rs. 4 lakh, there is no need for collateral as of now. In the case of loans up to Rs. 7 lakh, the banks will ask for third party guarantee.

The education loan sector is very closely related to the education sector. The changes that take place in the education sector have its impact on the education loan business.  The employment opportunities for a course affect the repayment of the loans. As the education sector evolves, it becomes more challenging for banks.

It is observed by experts the as the overseas education becomes expensive, students will be forced to take higher education courses in Indian institutions.