Shubhang Shah, 25, from Ahmedabad, is currently pursuing a two-year Master’s course in Software Engineering Systems from a university in Boston. He began pursuing his foreign education in September 2021. Shah’s parents are financing the cost of his higher education from their savings.
“When you send your child abroad, there are many expenses that you or even your child, the student, may miss out in your budget,” says Eela Dubey, Co-founder of EduFund, a firm that helps create an investment plan for a child's education goals. She adds that these expenses can stack up easily if you are not into budgeting.
To avoid such a situation, Shah carried out thorough research to have clarity on the multiple costs involved besides the tuition fees of the university before travelling abroad. Like Shah, other students going abroad need to do some due diligence before travelling abroad. Let’s understand ways to figure out your estimated expenses beyond university tuition fees and other costs to create your budget.
How to calculate estimated expenses
One of the primary sources to rely upon in estimating expenses is the university website. “There are several components on a university website that give you an idea in terms of cost of living, the cost of studying, cost of books, medical insurance and more,” says Shah.
The cost of living varies from city to city in foreign countries. “The estimated cost of living is mentioned on the government websites as well. You must take the inflation aspect of the foreign country you are traveling to into account with the cost of living,” says Naveen Chopra, Founder & Chairman of TCGlobal.
Shah also took guidance from admission counsellors in universities. They helped him in planning for additional costs to budget.
Students should also network on social media and speak to seniors who have already attended the same university or lived in the same city in the last couple of years. “The seniors have a good sense of the costs you are likely to incur, beyond what is available on the website of the university,” says Vishal Dhawan, founder and chief financial planner of Plan Ahead Wealth Advisors. He adds, we recommend that whatever expenses you estimate, build in a 10 percent additional buffer, for expenses that you may have missed out.
Here are some of the additional costs you need to budget for:
Pre-departure costs
You need to draw up a list of expenses beyond course fees, including the cost of sending applications to universities, airfare, student visa, medical tests and insurance in your budget, so you can figure out total pre-departure costs. “The application cost at a university in the US is around $100. It varies with the course/programme you are applying for,” says Dubey. So, if you apply at five universities, your total cost of application is $500 (i.e. approx. Rs 38,500).
The cost of airfare is an additional and varies with the country you are traveling to. For instance, a one-way airline ticket to Europe from Mumbai costs around Rs 40,000. The cost of the visa application will be around Rs 7,000.
Some foreign countries ask for a medical check-up of a student during the visa application process. This is an additional cost you need to budget for.
Now, many foreign universities offer medical insurance to students. But, you need to pay a premium for that. “You can opt to take an insurance policy from the insurance company partnered with the university or you can opt to take your own from India, covering students while studying abroad,” says Dubey. The premium for an insurance policy purchased from a university is higher compared to India.
For instance, Anirudh Kalkotwar, 30, from Bengaluru has been pursuing his MBA from a university in Barcelona, Spain, since September 2020. He bought an insurance policy from India before travelling abroad. “The insurance policy I bought from India before traveling abroad costs me around Rs 25,000 per annum. If I had taken the insurance cover offered by the university, it would have cost me around Rs 60,000 annually,” Kalkotwar says.
“We recommend an insurance policy offered by the university because it is more customised to what is required by the students in a foreign country,” says Dhawan.
Also read: How to save and invest for your child’s foreign education goal
External coaching expenses
Several students need external support in the initial semesters as they have joined the programme from various streams and work experiences. The external coaching/tuition helps them to improve in their weak subjects/modules.
Most banks cover tuition fees, living expenses, health insurance and the cost of study material for education loans. For instance, Bank of Baroda considers all the above-mentioned expenses as a project cost. “Apart from this, we consider airfare, laptop cost, stationery and any other expenses required for students to complete the course, including study tours, project works, thesis, etc.,” says HT Solanki, General Manager Mortgages & Other Retail Assets, Bank of Baroda. He adds, “We do not consider the cost of external coaching or tuition in any subjects for an education loan." So, a student needs to budget for these expenses if she is weak in a particular subject.
Cost of accommodation and deposit
One thing that people miss out on during their planning is the cost of accommodation and the deposit on a rented home. “The cost of where you’re staying can radically differ depending on which city you live in,” says Dubey. For instance, in the US, if you live in a smaller town, your house rent would be around $700 (i.e. around Rs 55,000) a month. But in a city like New York, San Francisco or Chicago, you would end up paying rent of around $2,000 (i.e. around Rs 1.55 lakh) a month. Shah paid three months’ rent as deposit amount to the landlord, i.e., around Rs 1.5 lakh, before travelling abroad. “This was one of my biggest pre-departure expenses,” says Shah. The house rent reduces if you prefer staying far from your university in the city.
Also read: Ten banks that offer the lowest interest rates on education loans
Local transportation and short outings
While staying far away from the city, there will be additional costs involved in local travel that your budget needs to account for. “Also, students need to take into consideration expenses for short outings/trips during vacations from the programme with friends,” says Dhawan. For instance, Kalkotwar did five trips in nine months with friends in parts of Europe during breaks from the programme. “This cost me an additional Rs 3 lakh. I paid for it from savings while working on campus and living expenses disbursed by the bank with an education loan,” he says.
Impact of rising inflation and rupee depreciation
In the current scenario, students are getting exposed to higher inflation and currency risks. The rupee has depreciated against the US dollar by about 7.5 percent this year. “Students need to factor these situations into their monthly budgeting and their impact on the cost of living while abroad,” says Dhawan.
Shah observes that because of rising inflation, house rents have increased around his area in the last six months. For instance, the rent in the northeast of Boston, which was earlier around $500 (around Rs 39,000) per month, is now around $700 (around Rs 55,000) per month. “Previously we used to visit restaurants every weekend. Now we prefer a home meal because of rising inflation and expenses,” he adds.
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