Rupee hits 80 versus dollar: 5 ways you can control the cost of foreign education 

The depreciating rupee has suddenly made foreign education more expensive, giving sleepless nights to parents who either plan to send or already have their kids abroad for foreign education. Consider this: On January 1, 2022, $1 was equal to 74.51, while on June 19, 2022, it reached an all-time low breaching the mark of 80, a depreciation of more than 7 per cent since the beginning of this year. 

The slide has occurred mainly on the back of a hike in interest rates in the US, which affect developing countries like India due to capital outflows toward developed countries. Geopolitical issues, rise in crude oil prices, rising inflation and higher interest rates in India also contribute to the depreciation of the Indian rupee. In such a scenario here are a few tips for parents on how to control the cost of rising foreign education with the rupee touching an all-time low of 80 on Tuesday:

Direct loan from US institution: A US loan provider offers a few benefits - the loan is disbursed and repaid in US dollars, which gives some sort of mental peace to borrowers. It keeps the risk of currency fluctuation mitigated, without losses due to foreign exchange conversion costs. “The possibility of exchange rate fluctuations would not impact the students. Students can also check whether the educational institute has any tie-ups with the financial institution for education loans. In certain cases, such tie-ups help in faster loan processing and lower overall costs to the students,” says Ashwini Kumar, General Manager (India) and Vice President, MPOWER Financing.

Ankit Mehra, CEO and Founder of GyanDhan, an education financing marketplace disagrees, “It really doesn't work out as such. Because if you're earning in dollars and repaying in dollars you won’t be impacted by depreciation. But if you are earning in dollars and spending in rupees then depreciation helps, as you will have higher savings because you have to spend lesser dollars on repaying loans. 

Mehra adds, “Every time the rupee depreciates we start getting requests from students to come back to India after pursuing study abroad. And they have taken a USD loan and they suddenly start saying depreciation is hurting them more because they have to pay a lot more dollars. However, the positive side is it gives mental comfort as one doesn’t suddenly have to look for additional funds due to rupee depreciation.”

Scholarships: Scholarships certainly help in reducing the cost of foreign education. “Needless to say that having strong grades would increase a student’s chances of a tuition scholarship (even application fees in many cases) and reduce the economic burden on the students thus curtailing the impact of the rising dollar. Apart from this, the student needs to do through research on the loan product and loan provider,” says Ashwini Kumar, General Manager (India) and Vice President, MPOWER Financing.

Top-up loan: Students who are already abroad and suddenly finding their cost of education up can apply for top loans in order to meet the cost of higher tuition fees amid high US inflation and the depreciating rupee.

Negotiate with the lender: The important point to note is one should always negotiate the exchange rates with the lender to get the best deal. Some lenders tie-up with a private forex player, who might charge more than the market rate for the currency exchange. Since it will increase the cost of the loan, it is better to find a way around it or look for an alternative. But whatever your source of buying foreign currency, it is important to compare and negotiate the rates. This is because by careful planning you can reduce the cost considerably.

Buffering of loan: Last but not least one should always keep a buffer of 5-7 per cent to account for any depreciation in the rupee. This keeps one insulated from the rupee depreciation in future

Also read: How to make money in times of a falling rupee? Here's what analysts have to say

Also read: Rupee hits 80 versus dollar: Here's how the falling currency will impact your life