Thursday, 2 May 2019
Is the Education Loan Burden worth that Course Abroad
In today’s globalized world, employers prefer workers who have international exposure, language skills, and cross-cultural competence; an international education is seen as a passport to a brighter future. But studying abroad is by no means cheap, and the cost of studying abroad continues to rise exponentially every year. In fact, according to The National Center of Education Statistics, international students currently pay US$26,290 for an undergraduate program. This is a whopping 42% increase in the fee that was charged in 2009-2010! And to meet this increasing cost of education, a significant number of Indian students take education loans.
Since getting an education loan these days is not very difficult, the number of students taking an education loan has risen. However, this rosy picture - of taking an education loan and going abroad for studies - has a flip side too and many a times students struggle to repay their education loan. In fact, according to reports by Indian Banks Association, the NPA in domestic education loan category has risen from 7.29% to 8.97% in March 2018 in just two years. If repaying their education loan helps students build a good credit score, why do they end up as defaulters? Is it because they are unable to get a job with good pay that makes it easier for them to repay their loan? If yes, then should a student take education loans to study abroad or look for domestic options for study?
In this blog, we discuss the various pros and cons of an education loan for studying abroad and whether it is really worth the financial burden, will try to answer all the above questions.
Is it worth taking an education loan for studying abroad? Well, there is no clear answer to it. In fact, the answer can only be found after a student conducts a cost-benefit analysis, considering the course’s cost and future employment prospects, when taking a study abroad education loan to decide if the education loan burden is worth the course abroad. Some pointers to be noted when doing a cost-benefit analysis are mentioned below.
The cost of studying abroad, like in India, includes more than just the tuition fee for the duration of the program. Students should thus meticulously calculate the total cost of their education abroad by including things like living expenses, study related equipment, and other associated costs too. Once they know the approximate amount they have to shell out for their education abroad, they can then look at various scholarships that they are eligible for and then subtract the scholarship amount or other financial aid that they can get. It should be remembered here that getting a scholarship is quite competitive and students should account for that. They should also account for the opportunity cost, i.e. the return on investment when studying a similar course in India, and compare both. This calculation will give them a fair idea of how much their education abroad is going to cost than when compared to studying in India and how much the return on investment for both is.
One of the benefits, when studying abroad, is the employability prospect after the program. This obviously differs from course to course and from college to college. Some courses in a particular college will have high employability prospect while some other course in the same college will have low employability prospect. Understanding this will give students a clear picture of where they will end up after their program and how much they will earn. For this, students must look at the placement records of the program and college they are interested in and also try and talk to current and previous students - who can give them a clearer picture. Students can always make use of GyanDhan’s “Estimate Future Earnings” tool and know the estimate of their future earnings when pursuing a particular course. This tool helps students decide whether it makes financial sense to study abroad at the University of their choice.
Also, students must consider current political factors which affect employability in foreign countries - such as the changes made to H1B1 visa, confusion related to Brexit, etc. All these affect the student’s prospect of working in that particular country, and thus that should be factored in as well.
An education loan is the silver lining in the dark cloud for all those students who had to shelf their study abroad dreams for lack of finances. Depending on their individual profile, students can take an SBI Education Loan, BOB Education Loan, Axis Education Loan, ICICI Education Loan or loans from other banks and NBFCs. Though there are other lenders too in the market, these four are the most preferred ones and students who are confused about which bank they should apply to can always take the help of GyanDhan to select the best loan option for their particular profile.
A student who takes an education loan should carefully look at the interest rate being charged, and any extra charges that the bank charges and then compare it with their estimated future earnings. GyanDhan’s Education loan EMI calculator will help students know the approximate amount of EMI payable by them per month. All it needs is information such as loan amount, tenure of the loan, interest rate and duration of the program. Students will get to know how much EMI they need to pay monthly through this tool and compare it to their future earnings estimate to make the cost-benefit analysis when taking an education loan.
Once the cost-benefit analysis is done, students can get a clear picture of the total amount they would pay when taking an education loan for studying abroad as well as the amount of money they would save after repaying the loan. With this complete information in hand, students should be able to judge whether it is financially prudent to study abroad using an education loan. Studying abroad is no doubt a life changer, yet it should not become a financial burden. Weigh your options and then take the decision!
In today’s globalized world, employers prefer workers who have international exposure, language skills, and cross-cultural competence; an ...