Money Saving Master Plan After Securing Your Overseas Education Loan

Planning to study abroad is a thrilling venture, and securing an overseas education loan with a lower interest rate and processing fees is a crucial step. But the journey doesn’t end here. In fact, it is just the beginning of a financial maze where strategic decisions can lead to significant long-term savings. In this article, we are here to guide you to maximize your savings after securing your education loan for abroad studies.

For better understanding, we will break down the complexities of repayment of student loans for studying abroad, going beyond just interest rates. Exploring factors like TCS on foreign remittance taxes, the twists and turns of tax policies (especially Section 80E for tax exemptions), other overseas education schemes, Loan transfer, and smart moves for repayment. Thus, join us in this voyage of exploring the tips to help you not just settle, but thrive after opting for an overseas education loan.

Major Expenses While Studying Abroad

Anyone heading abroad for their studies should have a strong budget game from day one. Because once your overseas education loan is sorted, the next big step is understanding where your money will actually go. Knowing the major expenses upfront can help you plan your savings better, stay financially ready, and avoid any unexpected shocks.

Here is a quick look at the average yearly costs Indian students usually face while studying overseas. Indian students need to note that the figures that will be payable by their overseas education loans may vary based on the country they are applying to, the city, lifestyle, currency, and even the exchange rates.

By mapping all these expenses well in advance, plotting your disbursements, and managing your study abroad loan timelines carefully, you can plan ahead for a money-saving plan for a smoother, stress-free overseas experience.

Plan of Action to Maximize Money Saving after Securing Overseas Education Loan

1. 0% TCS on Foreign Remittance

Understanding the complexities of Tax Collection at Source (TCS) on foreign remittance is essential for students financing their overseas education. Foreign remittance is the transfer of funds from a foreign country to one's home country and plays a significant role in contributing to the economic growth of the receiving nation. The process falls under the Liberalised Remittance Scheme (LRS), and thanks to the Budget 2025 changes, remittances funded via overseas education loans are totally exempt from Tax Collected at Source (TCS).

For ease of understanding, let us take an example. Assume you are planning to send Rs. 10 lakhs abroad for your higher studies. All of the amount, if sent via an overseas education loan, will attract 0% TCS for each financial year. If you are self-funding, you will have to pay 5% tax on the amount exceeding Rs. 10 lakhs, which in this case is 5% of 1 lakh, equaling Rs. 5,000. 

However, if you have taken an education loan, your tax liability drops to 0%, resulting in no TCS. Thus, you can save money on taxes if you opt for an overseas education loan rather than self-funding.

2. Strategic Saving with Section 80E

Did you know that the interest you thoroughly repay on your education loan can lead to tax deductions under Section 80E It is not merely about financing your higher education; it is about turning those repayments into a strategic move for financial flexibility. Let us take a quick example to understand the basics.

Imagine someone with a taxable income of Rs. 15 lakhs annually, falls into the 15% tax bracket for the year 2025-26, which makes him accountable for Rs. 2.25 lakhs in taxes each year. Imagine enlisting him as a co-applicant for your overseas education loan. This time, you opt for an education loan of Rs. 50 lakhs for your master's studies spanning 2 years, locking in an interest rate of 12%.

At this rate, your annual interest payment amounts to Rs. 6 lakhs, gradually tapering off over the years. Now, enter Section 80E, and the entire Rs. 6 lakhs in interest becomes tax-free. Now, out of your brother’s taxable income of Rs. 15 lakhs, these Rs. 6 lakhs can be sliced away, reducing his taxable income to Rs. 9 lakhs and eventually leading him to a lower tax slab of 10% than 15% as per the New Tax regime. The tax payable now stands at a mere Rs. 90k with a jaw-dropping saving of Rs. 1.35 lakhs each year. Thus, it is not just an education loan; it is a tax-saving adventure.

3. Availing Government Subsidies and Schemes on Loans

Most students are already aware of the CSIS scheme for education loan, which offers interest subsidies for studies within India. But here is something not everyone knows — yes, the Indian government and banks do offer financial support and subsidy schemes for higher studies abroad too. So, if you're planning to study overseas, there are special schemes that can ease the financial pressure. Let us quickly run through a few that are worth checking out:

• Dr. Ambedkar Interest Subsidy Scheme (ACSIS): Targeted for OBC and EBC students, this scheme provides interest subsidy during the moratorium period for postgraduate and doctoral courses abroad. Eligible candidates study on an IBA model education loan from scheduled banks. Income ceilings vary: up to Rs. 8 lakh for OBCs and Rs. 5 lakh for EBCs.

• Credit Guarantee Fund Scheme for Education Loan (CGFSEL): Under this program, students from EWS backgrounds can secure collateral-free loans up to Rs. 7.5 lakh. The government guarantees 75% of the loan, helping you avoid pledging assets.

• PM-Vidyalakshmi Portal: The PM-Vidya Lakshmi Portal connects overseas educational loan applications to multiple banks and also provides access to various other state or central schemes. It simplifies the loan application process and makes it easier to track the status in one place.

• Special Concession for Girl Students: Many public and private sector banks in India offer a 0.5% interest rate concession to girl students applying for overseas education loans, including those planning to study abroad. This initiative encourages higher education among women and reduces their overall repayment burden.

• State-Level Schemes: Some Indian states like Punjab, Kerala, and Maharashtra have their own financial assistance programs for overseas education. These include subsidies, grants, or reimbursement support based on merit and category.

4. Securing Lower Interest Rates Through Loan Transfer

Many students are unaware of the prospective savings through the education loan transfer. It is basically transferring your student loan from one lender to another due to various factors such as higher interest rates, unresponsive staff, unfriendly repayment policy, etc.

Let’s say, you have a current outstanding education loan of Rs. 60 lakhs, and your monthly EMI is Rs. 70K. As you make the payment, let's say Rs. 40K goes to interest, and the remaining 30K cuts away at the principal. Starting the next month, your principal drops to Rs. 59,70,000, and the interest is recalculated.

This continues with the interest portion decreasing over time, paving the way for a gradual reduction of the principal amount reaching nil. Contrary to a common misconception, the interest already paid to the initial lender need not be paid again. The outstanding amount is considered a fresh loan every month, and the interest portion gradually reduces over time.

5. Avoiding Late Fees and Credit Score Damage

Missing an overseas education loan EMI can get you in trouble with your lender and your credit score. A single missed payment might seem harmless, but in the world of loans, it can trigger late payment charges and hurt your CIBIL score. And once your credit score takes a hit, getting another loan or even a credit card later becomes a real pain.

So, what can you do? Set auto-debits for your EMIs, keep a small emergency fund for months when you're low on cash, and always know your due dates. A good repayment history not only saves you from penalties but also builds your creditworthiness. In the long run, it could even help you negotiate better terms with banks if you plan to refinance or take other loans. It is like building your financial report card, and nobody wants a red mark there!

6. Saving on Loan Interest via Prepayments

Now, here is a pro tip most students tend to overlook — prepayments. If you are receiving scholarships, part-time income, or even just a monetary gift from family, consider using it to make a prepayment towards your overseas education loan. Why? Because it can help reduce the principal amount much faster and, in turn, cut down the overall interest you will pay.

Let us say you make a Rs. 1 lakh prepayment during your study period. That one move alone could reduce your future interest outgo by a lot over the loan tenure. And guess what? Most lenders don’t charge any penalty for prepaying education loans, especially if it is an unsecured one. So, whether it is once a year or once every few months, chipping away at your principal through prepayments is a smart money-saving strategy.

Tips to Save Money While Studying Abroad

Studying abroad teaches you more than just academics — it is also the perfect time to master money management. Here are some practical tips to help you stretch every rupee (or dollar!) a little further:

• Research Costs in Advance: Knowing the average tuition and living expenses from day one helps you plan your finances better.

• Look for Scholarships: Even a partial scholarship can take a major load off your tuition or living expenses.

• Take Part-Time Jobs: A side job can support your daily costs and give you exposure for your resume.

• Find Affordable Accommodation: Consider homestays, shared apartments, or university hostels to cut down on rent rather than living solo.

• Draw Up a Budget: A monthly budget helps you track your income and expenses, helps you avoid overspending, and stay in control

• Avail Student Discounts: Your student ID can get you deals on travel, shopping, entertainment, and even museums.

• Keep Emergency Funds: Set aside a little every month so unexpected costs related to medical, travel, or academics don’t derail your finances.

• Get a Local Bank Account: Avoid hefty international transaction fees by using a local bank for day-to-day expenses.

• Travel Smart: Using public transportation is not only affordable but also a great way to explore your new city. Also, when going out of station, book tickets in advance, travel during off-peak times, and use student travel passes to save big.

In conclusion, planning smartly your overseas education loan makes a difference in how smartly you handle things. Whether it is using tax benefits like Section 80E, leveraging government subsidy schemes, prepaying in bits whenever you can, or simply avoiding unnecessary late fees, small choices today can mean big savings tomorrow.

Yes, studying abroad is a once-in-a-lifetime experience — but that doesn’t mean you should carry the burden of debt for a lifetime. With a little planning, a pinch of discipline, and a whole lot of financial awareness, you can make this journey lighter on your pocket and brighter for your future. For this, the experts at Élan Overseas Education Loans will help you through TCS exemptions to offering tailored loan advice - say every step of the way!

FAQs

1. Can I change my loan co-applicant later if their income situation changes?

While most lenders prefer a stable co-applicant throughout the loan term, some may allow a change if you provide valid documentation and the new co-applicant meets their criteria. Always check with your bank in advance.

2. Is there any benefit in paying simple interest during the moratorium period?

Yes, paying even a small portion of the interest during your moratorium can significantly reduce your overall loan burden later. It also helps avoid interest compounding and lowers your total repayment amount.

3. What happens if the currency exchange rate increases during my loan tenure?

If your loan is in INR and your university expenses are in a foreign currency, a weaker rupee can increase your financial burden. It is wise to keep an eye on rates and explore forex cards or remittance options with lower conversion fees.

4. Do education loans cover expenses like laptops or internet charges for online learning?

Yes, many banks include laptops, internet subscriptions, and even online course-related tech tools as part of the academic-related expenses, as long as it is well-justified in your cost estimate and supported by the university.

5. How can I manage loan EMIs if I face a job delay after graduation?

If you don’t get a job immediately, contact your lender before your EMI begins. Some banks offer EMI deferment or a short extension to your moratorium period on request. Having a repayment buffer fund also helps in such situations.

6. Can I apply for a top-up loan if my course expenses exceed the sanctioned loan amount?

Yes, if your total cost of education goes up — due to currency changes or extended course duration — you can request a top-up. However, this is subject to the lender’s assessment of your repayment capacity and the co-applicant’s eligibility.