Private and foreign higher education is expensive. Inflation is high in the educational sector. Students studying at foreign universities must pay tuition fees and rent accommodation, hostel fees, food, and other expenses.
Students who want to study abroad must consider the impact inflation has on education and the price rises in food, rent, and transportation when calculating their total cost.
Inflation can cause financial difficulties before the course is completed.
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The currency exchange rate is another important factor that can impact the cost of studying abroad. The rupee is stronger and the cost of studying abroad decreases. It becomes more expensive when the Indian rupee, (INR), becomes weaker.
“MPOWER sees this problem every day: Students used to have enough money in rupees, but currency depreciation can affect what they can afford in America – possibly during their final semester, last year, or even for a longer period. A falling rupee could lead to a significant increase in education costs. Although it is often argued that students may pay more for higher dollars, there is an actual time value to money. Students and parents borrow at a higher rate today. This results in higher rupees borrowed per dollar which increases the interest burden. Ashwini Kumar (General Manager, India) and Vice President, MPOWER Financing, stated that the payback time of 1-2 years is very susceptible to market volatility.
When arranging funds to study abroad, it is important that one consider how to minimize the impact of rupee appreciation on the fund.
To reduce the impact of the rupee devaluation on the return, one option is to invest in foreign funds.
A dollar-denominated education loan can reduce the adverse effects of an exchange rate.
We recommend that a dollar-denominated loan is not subject to these fluctuations. Dollar-denominated loans offer students the assurance that they will have funds available when they are needed. Kumar said that students can rest assured knowing that there is no other variable that could have a significant impact on the amount of interest they pay back.
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