Rupee slips to record low near 90: How will it impact study abroad plans and holiday budgets

Rupee depreciation is like hidden inflation for Indian students studying abroad, says Eela Dubey, co-founder, EduFund. Even if tuition fees stay the same in USD, students pay more in INR due to exchange rate changes, increasing their education costs.

The rupee's decline is impacting more than just tuition fees; everyday expenses like groceries, travel and accommodation are also getting pricier, adding to the financial strain.

Currency fluctuations are making it tough for students and parents to plan and budget for foreign education. A weaker rupee means higher costs and more debt, hitting middle-class families the hardest.

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Mitigating rupee risk: Measures Indian students overseas can adopt

According to Malhotra, students can manage their overseas finances more efficiently by following a balanced approach: using forex cards for everyday expenses, opting for wire transfers for tuition payments, and maintaining a small emergency cash fund. Loading a forex prepaid card at a fixed exchange rate helps protect against rupee depreciation. “For example, locking in a rate at Rs 89.50/USD can safeguard spending if the rupee later weakens to Rs 90.55/USD,” the spokesperson added.

Forex cards are a cost-effective option for students studying abroad, eliminating foreign transaction fees and DCC charges. Unlike INR-denominated credit or debit cards, which are affected by fluctuating rupee rates, forex cards offer a more stable and affordable way to manage expenses overseas.

Traditional money changers and banks charge high mark-ups (2 percent to 8 percent), so opting for zero-markup forex services is an appropriate option.

To ensure better financial control while studying abroad, Malhotra recommends opening a local bank account in the destination country. This supports smoother budgeting, efficient money management, and helps avoid multiple types of forex conversion charges.

Additionally, financially-savvy parents can consider hedging against currency fluctuations using forward contracts, which lock in favorable exchange rates and minimize potential losses.

Students should minimise discretionary spending and consider cost-saving measures like shared housing. Additionally, where allowed, students can explore part-time job opportunities to boost their income.

By implementing these smart financial strategies, students can effectively manage their international expenses with greater confidence and ease.

How to hedge against rupee volatility risk

Financial advisors recommend that a solid financial plan for studying abroad should include investments, education loans, and scholarships. These three elements help students manage expenses and achieve their academic goals.

Investing in USD-denominated assets can provide a natural hedge against currency fluctuations, notes Dubey. For individual investors, passive US ETFs offer a straightforward and effective way to mitigate exchange rate risks while outpacing education inflation.

For those who prefer investing in Indian markets, diversified equity mutual funds with strong long-term growth potential can be a good option. These funds can help counter education inflation and rupee depreciation, making them a viable choice for managing study abroad expenses.

While exploring external financing options like loans and scholarships makes sense, Dubey stresses that relying solely on them isn't the best approach. Instead, having personal investments can serve as a much-needed financial safety net.

Choosing lenders with lower interest rates, flexible repayment options, and customised loan structures can significantly reduce financial strain.

Foreign travel is also getting pricier

Leisure travel is also being impacted. A European holiday that used to cost around Rs 2.2 lakh per person now costs over Rs 2.6 lakh, thanks to pricier hotels, internal flights, and daily expenses, said Pavan Kavad, Managing Director, Prithvi Exchange (India) Ltd.

If you are flexible with your destination, you can look for destinations where the exchange rate is favourable. “Places where the rupee has a stronger value, such as certain Southeast Asian countries, offer more value for money, allowing travellers affordable accommodations, food, and adventure activities,” said Kavad.

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Trim costs with advance booking and group travel

“Booking flights and hotels ahead of time is a smart move - you'll get better hotel rates and cheaper flights,” said Kavad. Travelling with a group can also save you money, as you can split transportation costs and score discounts on accommodation and other travel services.

Maximise benefits via loyalty programs, credit cards, and forex deals

Travellers can cash in on airmiles, loyalty programs, and discounts to save money. Redeeming miles for flights or upgrades, using forex cards, and grabbing forex offers can help reduce costs.

Keeping an eye out for forex deals, like promo codes from foreign exchange firms during peak holiday season, can help minimise expenses. Grabbing these opportunities can make foreign trips more affordable, even with the rupee's volatility.