I am contemplating the idea of taking out a 60L loan to pursue my studies in the United States. I have been accepted into New York University for a bachelor’s degree in Computer Science, a program that is ranked 40th in the world. Upon graduation in 2029, the estimated return on investment for my major is between 80k to 100k dollars.
I would like to seek advice on whether it would be wise to take out a loan for my education. In addition, I would appreciate recommendations for banks that are known for offering student loans with favorable interest rates.
Advice by Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance
Congratulations on getting accepted in a and esteemed university abroad.
Taking an education loan is a family decision since it involves a huge education expense, which in your case is Rs 60 lakh.
Financially speaking, taking a loan for abroad education is a wise decision because of two reasons:
1. Your loan will be denominated in INR, which in the past has depreciated against USD by 3-4% per year and is expected to do so for the next few years.
2. Assuming you get an on-campus job, your income will be in USD, which will be beneficial for you when you want to paydown the loan.
It is important to note that the usual income tax deduction available on education loan in India will not be available to you. But the USD appreciating against INR should offset that.
Coming to the banks, interest rates vary quite a lot, and are based on grade of the university you’re selected for. It is generally best to check with the bank you or your parents have had long term relationship with to get the best offers.
Rupee depreciation
The recent depreciation of the Indian rupee against the US dollar is projected to have a considerable impact on Indian students looking to pursue studies abroad. Particularly in countries like the US, where tuition and living expenses are denominated in dollars, this depreciation will result in increased costs for students. This may pose challenges for middle-class families who had carefully planned their finances for their children’s education abroad. Additionally, students relying on loans to fund their studies will now face larger loan amounts, placing a heavier financial burden on their families.