Planning to study abroad? Here are your funding options

Studying in a great university abroad is no longer just a fad, or something reserved for those with deep pockets. All this is due to the growing appeal of a global career and lifestyle, the increased spending power of the middle class and the boom in student financing options.

The pandemic doesn’t seem to have slowed India from becoming the second-largest country in sending students to various countries. According to a release by Common App in January 2020, the number of international student applicants increased 10 percent (of which Indian applicants were up by 28 percent) as compared to 2019-2020 levels.

So, how are all these students funding their dream of studying abroad? With tuition fees, accommodation, living and travel expenses, the whole thing can be twice as expensive as planning an Indian wedding!

Self-financing

According to opendoorsdata.org, more than 85 percent of the total international students choose to bootstrap their education abroad. Some students choose to dip into family savings and assets to fund their education, at least partially and cover the rest through scholarships and part-time work. But this leaves the whole family at risk without a Plan B.

Secured/Collateral-based education loan

Many banks, both public and private, and NBFCs offer education loans against a collateral of a certain value such as a house/land. This is a systematic and structured approach and has many advantages such as tax-saving benefits. The loan repayment usually kicks in six months after the degree is completed, irrespective of whether you have a job or not, and must be repaid within seven years of finishing the degree. So, this is a factor that students must consider before signing up for one.

The difference between banks and NBFCs is that banks usually cover about 85-90 percent of expenses such as tuition fees, lodging, travel and lab fees, whereas NBFCs offer 100 percent Cost of Attendance (CoA) coverage. Similarly, banks may also have an upper limit on the sanctioned loan amount for large amounts such as over 20-30 Lakhs, depending on the course and university you select. NBFCs have no such cap on loan amount. However, banks may also offer concessions on interest rates for women, which NBFCs don’t.

Also read: Education loans, quarantine costs and scholarships: All you need to know about studying abroad

Unsecured/Collateral-free education loan

Another option is to opt for unsecured education loans offered by many financial institutions that require no collateral. This is given based on your financial status, for example, your credit score. However, since this is riskier for the lender, it may be more tedious and expensive as you may be charged a higher interest rate for the same loan amount. Students may also not get any favourable repayment terms for the same reason. Many banks and NBFCs require you to pay interest while you study.

International financial institutions

A trending option among students is educational loans from international financial institutions. They may provide loan amounts in foreign currency with or without a co-signer/collateral. They calculate interest rates based on the loan applicant’s future repayment potential rather than historic data, and hence can also provide lower interest rates than banks or NBFCs.

Also read: Short on money for overseas education? Here’s how you can raise funds

SIP investments

This option depends on how early you start and is more suitable for working professionals rather than students who wish to pursue their postgraduate studies.

A systematic investment plan (SIP) is a great way to both invest and save for salaried professionals. The frequency of investment is based on the discretion of the candidate to allow them a flexible approach. SIPs have gained a lot of traction over the years in the field of financing the educational endeavours of postgraduate students.

The key to remember is that every student is different. So, it is important to weigh the pros and cons of each option before proceeding further. Being part of a community of both like-minded aspirants and selected students could help bridge the gap between resources and real-life, thereby reducing misinformed decisions!