Pursuing higher education abroad is a significant step toward the future you envision for yourself. To support this dream without draining your family’s savings, resorting to an overseas education loan is a wise choice. Not only does it help you cover immediate major expenses, but they also give you breathing room to repay the loan over an extended period. However, before obtaining such a loan, it’s important to ask yourself: how much loan do you actually need? 

A comprehensive, well-planned education loan should not only cover the tuition fees and living expenses, but also account for other essential expenses that come with studying overseas. Getting this number right calls for careful, informed calculations. If that process feels a bit overwhelming, this article is your guide to getting it right. 

From a step-by-step guide to loan calculations to tips to help you avoid common mistakes, this article will walk you through everything you need to know before finalizing your loan. But first, let’s start with the basics and learn what an education loan for studying abroad covers. 

Table of Content

1. What Does an Education Loan for Studying Abroad Cover?
2. Step-by-Step Guide to Calculating Education Loan Requirement to Study Abroad
3. How Much Extra Should You Borrow for Study Abroad Expenses?
4. Factors Banks Consider Before Sanctioning the Education Loan to Study Abroad
5. Common Mistakes While Calculating Education Loan to Study Abroad
6. Tips to Reduce Your Education Loan Requirement to Study Abroad
7. Can You Increase Your Education Loan to Study Abroad Later?
8. Frequently Asked Questions

What Does an Education Loan for Studying Abroad Cover?

According to the Transnational Education (TNE) Report 2024-2025, approximately 33% of Indian students take an education loan to study abroad, accounting for more than 100,000 aspirants. 

The numbers keep increasing every year, which makes us wonder: if education loans come with high interest rates, collateral requirements, and heavy debt, why are so many students taking them? The answer is smart & comprehensive coverage of overseas education costs. 

Here are all the expenses that a good education loan offer should cover. 

• Tuition fees: The education loan covers 100% of the total cost of tuition for the duration of study. 
• Living expenses: The education loan covers the essential living costs as part of the total cost of attendance: 
• Accommodation: The education loan finances up to 100% of the total cost of accommodation, depending on the type of accommodation and lender’s specific policies. 
• Travel Costs: The loan provides essential funds for airfare and relocation, along with daily commuting in the country through public transportation, as included in the total cost of attendance. 
• Health insurance: Many lenders provide coverage for health insurance since it is a prerequisite for visa approval and university enrollment. 
• Visa application charges: Education loans cover the visa application charges, and since it is required to be paid before leaving for studies, several lenders provide pre-visa disbursement. 
• Books, laptop & study materials: The loan provides 100% coverage of costs for books, laptops, and required study materials as these are certified as essential for course completion. 
• Miscellaneous and emergency expenses: Education loans cover predefined miscellaneous expenses and costs for certain academic and medical emergencies. However, this is subject to the lender’s policies. 

With such wide coverage of expenses, taking an education loan for study abroad can be a strategically sound choice. A comprehensive loan offer reduces the stress of paying essential expenses out of pocket. In addition, it leaves personal savings for leisure activities, lifestyle expenses, and building a crucial financial buffer for unexpected post-graduation emergencies. 

After learning what a loan covers, the next step is identifying what costs you want it to cover. This calls for an accurate step-by-step calculation of the required loan amount, which we will review next. 

Step-by-Step Guide to Calculating Education Loan Requirement to Study Abroad

Calculating your education loan requirement doesn't have to be complicated. To ensure you arrive at the right loan amount that covers all your expenses, without underborrowing or overdrawing, follow the detailed step-by-step guide below. 

Step 1: Calculate the Total Tuition Fees

Once you have accepted the university offer letter, calculate the total tuition fees based on the Cost of Attendance (CoA) outlined in the offer letter. 

Lenders calculate the total loan cap by adding up the figures listed for the following.

• Tuition fees per semester or year
• Mandatory campus housing and meal plans
• The university-regulated health insurance premiums
• Currency conversion considerations

Step 2: Estimate Your Living Expenses

Based on your university location, find suitable accommodation nearby and estimate the costs for food, utilities, local transportation, and personal expenses while living in the area. 

Step 3: Add One-Time Pre-Departure Costs

The pre-departure costs involve essential expenses you need to pay out of pocket but can be reimbursed later with the education loan. These costs involve the following and must be included in the loan amount calculation. 

• Standardized Test and Language Proficiency Test Fees 
• University application fees and admission confirmation deposit 
• Visa Application fees and country-specific immigration surcharges
• Airfare, relocation, and logistics for extra baggage
• Initial accommodation deposit 

Step 4: Include Health Insurance & Other Mandatory Costs

Do not forget to include other essential costs, such as the upfront payment of health insurance and the cost of gear and a survival kit, including electronics and season-specific clothing. 

Step 5: Subtract Available Funds

After analyzing the total expenditures, calculate how much of it you can cover with the available funds. These funds include the following: 

• Scholarships
• Family Contribution
• Personal Savings
• University Grants
• Assistantships

Step 6: Final Education Loan Amount Required

Once you subtract, you'll determine the true cost of studying abroad, which corresponds to the actual loan amount needed. 

All the steps mentioned above can be summed up to a simple formula: 

Education Loan Amount Required = (Total Tuition Fees + Living Expenses + Travel & Visa Costs + Health Insurance + Study Materials & Miscellaneous Expenses) − (Scholarships + Family Contribution + Existing Savings)

After deciding the loan amount, if you want to determine the monthly installment based on the loan tenure and interest rate, you can use an abroad education loan EMI calculator. 

Now, an important consideration: the required education loan amount gives you an estimate of how much you need, at a minimum, to study abroad. As a result, settling strictly for the face value of the cost can leave your budget incredibly tight. This calls for learning how much extra you should borrow. 

How Much Extra Should You Borrow for Study Abroad Expenses?

When moving across the world, unexpected price hikes, shifting market trends, and hidden living costs are inevitable. As a rule of thumb, you need to borrow a little extra than you need. 

Borrowing extra does not mean overborrowing; it means building a financial shock absorber for unexpected scenarios. Here is what the extra amount can help cover. 

• Emergency buffer: Extra funds act as immediate financial safety nets for sudden personal emergencies or urgent travel needs. 
• Currency fluctuation: It protects you against volatile currency exchange rates, ensuring a sudden drop won’t limit your purchasing power. 
• Inflation during study period: It absorbs the year-on-year increases in local rent, groceries, and utility bills, keeping your lifestyle stable. 
• Unexpected academic expenses: It covers the mandatory unlisted program costs, including lab fees, sudden textbook updates, etc. 

With the safety mechanism in place, you can study without any financial stress. 

However, just as you’ll analyze the right lender that provides comprehensive cost coverage, the lender will also decide the loan amount they can provide based on several factors.  

Factors Banks Consider Before Sanctioning the Education Loan to Study Abroad 

Before providing an education loan, the lender analyzes several factors beyond standard abroad education loan eligibility to assess the borrower's repayment capability and the associated risks. These factors are as follows.  

• University Reputation: University’s reputation and official accreditation serve as a reliable indicator of students’ future earning potential and career trajectory, determining the repayment capacity.
• Course: Lenders analyze the specific field of study, such as STEM, Management, or Healthcare, to ensure high market demand and strong employment rates. 
• Total cost of attendance: The total cost of tuition fees, accommodation, food, travel, and health insurance helps banks determine the precise total funding limit. 
• Repayment capacity: Lenders calculate the estimated salary against the projected monthly loan installments to verify whether you can comfortably manage the debt after graduation. 
• Co-applicant profile: Lenders review the steady income of the co-applicants to ensure they can act as financial backup during your study period. 
• Collateral (if applicable): When opting for secured loans, the banks assess the market value and the title deeds of any pledged immovable property or liquid assets to secure the loan amount. 
• Credit history: The lender evaluates the credit score of the applicant (you) and the co-applicant (your parent or guardian) to analyze the repayment behavior. 

Meeting all the lender’s expectations makes it much easier to get the desired amount. However, it does not immediately grant you approval. You need to avoid a few common mistakes when finalizing the total education loan for studying abroad. 

Common Mistakes While Calculating Education Loan to Study Abroad 

Accurately calculating your education loan requirement is as important as choosing the right lender. A small error in estimating expenses can leave you with unnecessary debt after graduation. 

Avoid the common mistakes mentioned below that can lead to over- or underborrowing.

• Ignoring Living Expenses: Many borrowers omit essential living expenses when estimating the total cost of education, which can be a serious mistake. This oversight may result in insufficient funds to cover their living costs abroad. 
• Not accounting for exchange rate fluctuations: Exchange rates can change dramatically over the course of your study, and budgeting at a static exchange rate leaves you vulnerable to sudden inflation.
• Forgetting insurance and visa costs: Insurance and visa costs are mandatory upfront expenses, and overlooking them can trigger cash shortages before you leave the country. 
• Overestimating future earnings: Unrealistically estimating future earnings after graduation just for securing the loan can trick you into accepting a higher debt load. 
• Borrowing more than necessary: Taking as much loan as the bank approves means you will end up paying a lot of extra, avoidable interest on the money you never really needed. 

Avoiding these mistakes helps in calculating a realistic loan amount. However, it is only half the process. The next step is to actively reduce the amount you need. 

Tips to Reduce Your Education Loan Requirement to Study Abroad

Minimizing the loan amount requirement without underborrowing is possible when you consider the various ways you can cover a portion of your cost of education. This can reduce interest costs and make repayment easier after graduation. 

Follow the practical tips mentioned below. 

• Apply for scholarships: Scholarships can help you cover a portion or the full amount of the tuition fees, keeping the loan requirement low.
• Choose affordable accommodation: Selecting accommodation out of the city center at affordable rates can reduce the total living expenses. 
• Work part-time where permitted: Salary earned through part-time jobs can help you manage extra living expenses, including daily expenses for groceries and utility bills, while preserving the funds. 
• Select universities with lower tuition fees: Choose the university that offers affordable tuition fees to reduce the overall cost of education, lowering the required loan amount. You can also choose public universities that offer low to no tuition fees. 
• Use education discounts: Look for tuition fee discounts, fee waivers, and financial mechanisms that can reduce the overall cost of education. Some universities offer discounts based on merit, financial background, or international status.

Once you have accounted for all the potential discounts and fee waivers you can get, you will be left with a clear baseline for your initial financing. However, as studying abroad is a transformative journey, expecting unforeseen changes after arriving at the destination is a practical part of planning. This brings up a critical safety question: can you increase the loan amount later if your initial calculation falls short? 

Can You Increase Your Education Loan to Study Abroad Later?

Having the flexibility and the reassurance to increase your loan amount later is all you need to make the journey stress-free. Luckily, lenders offer various options to increase the loan amount later on. 

• Revised cost estimates: If tuition fees or accommodation rent increases after your loan has been finalized, you can request updated financial documents from your university or accommodation provider. Based on this, you may ask your lender to reassess your loan and increase the sanctioned loan amount. 
• Top-up education loans: Many lenders offer a top-up option for education loans for the revised loan amount, covering the unexpected expenses that occur after the course has commenced. You can opt for it without requiring you to submit a new loan application. 
• Additional disbursement: The top-up loan amount will be disbursed as an additional disbursement in the form of structured periodic installments for the tuition fees and living expenses. 
• Bank approval process: The bank approves the loan top-up after a risk evaluation phase. During these steps, the bank may ask for additional documents along with the revised cost receipts from the university and accommodation provider. 

After all the steps have been completed, your loan cost will be revised, and you will receive the requested loan amount. However, please note that the top-up policies can change based on the lender. Therefore, before finalizing a lender, make sure to check whether they offer this option. 

In conclusion, calculating the right amount for an Education Loan to Study Abroad becomes easier when you use the right approach and make an informed decision. If understanding the actual cost of education and determining the tuition and living costs feels difficult, then you can reach out to Élan Loans. Through our extensive network of trusted financial lenders for overseas education, we help you compare the best loan offer and provide comprehensive loan services. 

FAQs

Q1. Is it possible to get a loan covering 100% of study abroad expenses?

Yes, many lenders offer 100% coverage of the total cost of attendance (CoA) for studying abroad. However, it depends on the lender-specific policies and eligibility requirements. 

Q2. What expenses are usually not covered under an education loan?

Education loans generally do not cover refundable deposits, coaching fees for standardized tests or English proficiency tests, optional travel or vacation trip costs, or lifestyle expenses. 

Q3. Which types of lenders offer lower interest rates? 

Public or nationalized banks are known for offering the lowest interest rates. However, they often require collateral to be pledged for loan amounts exceeding INR 7 lakhs. 

Q4. Which lenders provide loans based on the total cost of attendance?

Many NBFCs, international lenders, and a few private banks offer loans based on the total cost of attendance. Some of the popular options include Avanse, Credila, InCred, Auxilo, MPower Finance, and Prodigy Finance.