Big debt, no job: the hidden cost of overseas education loans

Education Loan: Vision for success or path to debt?

Rohit Gupta, 27, from Pune, went to the US to pursue a master’s in computer science. His family invested Rs 75 lakh in the course, including a Rs 40 lakh education loan. Although he did not land a job in the US, he returned to India with international exposure, a strong academic background, and a wider outlook. Now back home, Rohit is tapping into India’s booming tech market, exploring roles in data science and start-ups, while also freelancing to build his portfolio. He sees the loan as motivation to push harder and believes the skills he gained abroad will open doors in the long run. But for Rohit and a lot many others, things did not go as planned.

Current global economic uncertainty, such as inflation, stringent immigration policies, and tech-sector downturns in the West, have introduced a modestly more conservative hiring climate. There has been a decline in employment opportunities for fresh graduates across the globe irrespective of nationalities and this trend is only going to get aggravated hereon.

“Two factors that will accentuate this trend are AI - which is poised to eat up frontline jobs in the services sector - and political protectionism which will adversely impact immigrants being welcomed for entry level roles. Hence, Indian students studying abroad or intending to study abroad have to be mindful of the storm that exists and which will turn into a cyclone in the next couple of years,” says Shabbir Merchant Chief Value Creator, Valulead Consulting, Strategic Leadership Consulting firm.

Families and students who borrow money will need to be more mindful of the return of investment and not blindly pursue the strategy to study abroad. In cases where it would fall upon the student to repay their educational loan, one needs to be extra careful.

“The educational loan repayment terms in India do not offer students and their families the luxury of low interest rates unlike for example in the USA. Therefore, Indian students are under pressure to secure employment soon after graduating. The employment must also be able to pay well enough for the students to repay their educational loans without being a burden on either themselves or their families,” says Anirban Sircar, Founder of APS World Education, a study abroad consultancy.

Four key factors to consider before choosing to study abroad

“Default rates remain modest but tend to be higher for students pursuing degrees without clear job prospects or post-study work visas. The risk rises if income expectations post-graduation don’t match reality,” says Manish Sahijwani, Cofounder and CBO Invest4Edu, a platform for education planning, saving, and investing.

“They should keep four factors in mind on the decision of studying abroad,” says Merchant. He explains.

The first is employability - this should be the most important consideration with respect to whether the course and the country will offer decent employment opportunities. The second is campus learning - how effective will the learning be and self-development for the student in the course enrolled.  Next comes country exposure - a student also learns and grows by staying in a developed country. However, for countries like the USA which are at the start of turmoil, parents have to think deeply if they want their kids to experience that turmoil and polarisation.

Finally comes immigration - many parents and students would want a path to permanent residency / green card / citizenship. They should evaluate the practical feasibility given anti-immigration sentiment spreading across the Western world and long queues for a green card in the US.

Students and parents should use the above four factors to make a decision on whether overseas education is a commercially viable option for the family. If the funding is coming from existing savings (i.e. no loans) then at least two out of the above four factors should be green. If funding is coming by taking a loan, then three out of four factors given above should be green.

Don’t let overseas degrees turn into lifelong EMI burdens

Financial advisors must create a simulation for students and families on a 10 –15-year visibility of investment and returns. “They must help the family to keep emotions aside and make a rational financial / investment decision, keeping employability potential as a key factor. There is no fun in taking a huge loan for overseas education, only to end up taking an entry level job in India after completing the overseas education,” says Merchant.

They must be made aware of the situation of 'Student Debt' in the US where US citizen students have taken a loan for college education and are then ending up taking 15 - 20 years of their prime life in paying back those loans, resulting in zero savings and a constrained cash flow, despite having a good college degree.

Consider alternate options

In the last two decades, the quality of college and higher education in India has significantly improved, with more options. With India poised to have significantly higher GDP growth compared to other large economies, the employment opportunities will be richer for young and fresh talent in India over the next decade vis-a-vis most other economies in the world.

Also, students can choose many affordable alternatives. Premier Indian institutions like IITs, IIMs, ISB, and private universities with global tie-ups offer globally competitive quality education at a fraction of the cost. Hybrid models like semester exchange or joint degrees allow the student to experience international exposure without full migration.

“Additionally, hybrid and online learning models from foreign institutions—necessarily with platform qualifications like Coursera or edX—are increasingly legitimate pathways to international careers. These minimise debt but offer decent career prospects, especially in tech, business, and analytics,” says Sahijwan