How the weakening rupee is impacting study plans in the US

Dagia, who currently runs a PR and celebrity management agency, Dharmishtha's Diary in Mumbai, plans to continue working on her business alongside studying in the US. She says that not only the tuition fees, but also the living expenditure has also gone up drastically. “The courses, I’m looking at are in universities in New York and Los Angeles, and both are expensive cities. The rents are high and it’s difficult to find an apartment. Travelling to and from India for work is also costlier now. I want to strike a balance between my work and studies. So I have to rethink and put the plan to study on hold. Right now, I’m trying to earn more so that at least next year I can execute the plan and take up one of the courses,” she says.

The students who have enrolled in the US universities for the 2022-23 academic session have to bear the brunt of the increasing financial obligation.

Dhvani Shah, a 24-year-old architect, has enrolled for Masters in real estate development at New York University for the fall intake and is set to travel in September this year. When she first started her admission process in 2021, she was considering the tuition fee and living expenditure valued at Rs75 for $1 which has now come close to Rs80. Her combined costs, which came to around $117,100, or roughly Rs87.8 lakh in October 2021, now stand at approximately Rs93.6 lakh.

“With the fall in rupee, health insurance that would have initially cost Rs2,92,000 would now be for Rs3,20,000. I did consider not going to the US because of the ever-increasing rate of the dollar, which has increased by total expenses by around 10-15 percent,” she says. “Living in the US compounds the problem as post-pandemic there has been an incredible hike in real estate market.”

Shah says she is unable to find an apartment in the budget she had set a couple of months ago. Her intention of working in the US after course completion is also becoming uncertain in the wake of looming recession-like conditions. “Many of my seniors who have graduated have not been recruited yet.  The job market is unstable, the chances for us international students seem grim now,” she says.

Shah adds that in the last couple of months during her admission process, she noticed her peers putting their plans of studying in the US on hold, thanks to the increasing financial burden. “A number of my peers are deferring or considering other countries as the investment in education increases and the return becomes increasingly uncertain,” she says.

American Dream Becomes Dearer

Indian students currently studying in the US are the worst-affected as they are bearing the consequences of high inflation and depreciating currency. “When I first came to the US in 2021, the rupee was valued at 77 as against one dollar. Today, my parents have to send 20 percent more than what they used to till last year. The living expenditure has grown manifold. Gas price, for instance, was $2.81 per gallon in August 2021 and has now risen to $5.6. It’s getting expensive by the day,” rues Vemulamada Vineeth, 24, a civil and environmental engineering student at Rowan University, New Jersey.

Just like Vineeth, Indian students are facing a shortfall of approximately 15 percent as per their planned budgets and are seeking loan top-ups to meet the difference. “Applications for top-up loans and additional loans are at a record high today. We have so far received more than 100 applications for top-up loans of up to 10 percent of the principal. Students are also looking for scholarships and additional part-time jobs to cover the increasing costs,” says Ankit Mehra co-founder and CEO of GyanDhan which provides financial assistance for overseas education.

The Reserve Bank of India recently hiked interest rates on education loans. For an average Indian student aspiring to enrol in an American university, this means larger loans and bigger EMIs, with lesser stability in the job market.  “In just one quarter, the interest rate on student loans in India increased by as much as 1.5 percent. Since money is a concern for Indian students studying abroad, it will inevitably increase stress for students and parents,” says Ashish Fernando, founder and CEO of education consultancy, iSchoolConnect.  

Study abroad consultants believe while the depreciating rupee is an issue, it wouldn’t have a large-scale impact.  “Planning for international education is a long-term process. Visa interviews and loans can take up as much as a year to complete. Therefore, the students we see ready to go to the US today have already been planning to travel overseas for a long time. From their perspective, the recent valuation of the rupee cannot compare to the prospects and opportunities that places like the US offer, as they primarily plan to work after completing their education,” says Amit Singh, founder, UniScholarz, an education consultant in Mumbai. “We cannot expect much change in demand in the short-term. However, over the mid to long-term, we may observe some hesitation on the parts of the parents if the situation continues on this trajectory,” he adds.

Compounding Impact  

According to data from Trading Economics that quotes the US Bureau of Statistics, the US unemployment rate remained unchanged at 3.6 percent in June 2022, the same as three preceding months. Labour force participation rate “edged down to 62.2 percent in June from 62.3 percent in May”. Consumer confidence is collapsing. The once white-hot housing market is cooling fast in some states and the stock markets are jittery. All this is making economists point at a probable recession in the US. For May 2022, the USA has registered retail inflation of 8.6 percent, the highest level seen in the last 40 years. Inflation indicates the rupee’s diminishing purchasing power and directly impacts the exchange rate.

There might be a short-term impact on university grants and aid if the inflation and recession fears impact university budgets, says Mehra.

Singh agrees, “With rising inflation, it will become more expensive to pay for tenured professors, maintain facilities, and even pay taxes. Now, US universities cannot increase tuition fees for domestic students because that is a regulated market. Therefore, international students may see higher tuition fees from the next year onwards if the situation persists.”

Akshay Chaturvedi, founder, and CEO of Leverage Edu considers the currency fluctuations and the recession concerns a short-term setback. “Even in a mild recession, US’s job-creating industry and startup ecosystem are extremely vast. Will it affect immigrants looking for jobs amidst recession? Yes. Would it impact an immigrant's long-term career? No. Immigrant students get enough stay back period, and opportunities to be able to come out of that unscathed,” he says. “Immigrant students are very ambitious people, in our experience. If it's anyone who would come out on top during a recession, it would be them.”

Also read: Why the Russian ruble keeps rising

Evolving Dynamics

The US has been a favourite of students for overseas education. According to official statistics, over 13.24 lakh students from India went abroad for higher studies in 2021-22 with most of them heading to the USA (4.65 lakh) followed by Canada (1.83 lakh), UAE (1.64 lakh), and Australia (1.09 lakh), among others. But experts believe Indian students, now more than ever, are considering alternative study destinations.

“Over the last few years, the United Kingdom has become the most attractive international education destination, primarily due to the introduction of a 2-year work-visa program. Canada and Australia for their quality of education; and Germany and Norway for their state-subsidised education are the best alternatives that students tend to consider,” Singh says. Nearly 108,000 student visas for Indian nationals were issued in the year ending March 2022, which was almost double the number compared to the previous year, according to official figures from the British High Commission in India.

“Canada and the UK are the primary alternatives to the US for students targeting higher education. Canada has witnessed a dramatic increase in Indian students over the past decade driven by easier immigration norms and a lower cost of education. Australia was also a preferred destination earlier, but has not been able to recover post-Covid due to the lack of clarity on the Covid policy,” says Mehra.

How to Manage Finances

Despite decreasing rupee valuation and the inflation in the US, the interest in, or the scope of, education in the US wouldn’t drastically change, says Singh. “It is reasonable for any aspiring student to want to spend as little as possible throughout their overseas education,” he adds. He lays down three ways for students and parents to better manage their finances.

“First, convert any student debt to the currency of your destination so that you avoid any volatility in the currency of repayment. This may be a long process for some students but could be worth it in the long run. Second, utilise all working opportunities available during the course of the education. Raising capital, even small amounts, in the currency of your destination, can help greatly with daily costs of living and give plenty of real-world experience that will ultimately help reduce financial strain. Third, for parents, it would be advisable to make full use of the Liberalized Remittance Scheme (LRS) window to make their investments in the currency of their destination country and hence be immune to domestic fiscal fluctuations,” says Singh.