If there’s one thing that unites Indian students and their families, it is the drive to access quality higher education and the desire to secure the best possible resources and facilities for a successful career ahead. For many students, this often means a dream not bound by borders, aiming to attend the best educational institutions and programs worldwide. There are plenty of reasons motivating them, from state-of-the-art research opportunities to industry-relevant programs and culturally diverse environments. Many students work hard to build an academic profile that appeals to international admission teams. As much as pursuing higher education abroad is a leap of faith, it is also a practical decision that requires a lot of planning, foresight, and budget preparation.  

International education is a considerable financial investment for students and their parents, including the annual tuition fees, living costs, travel expenses, and other miscellaneous costs. Depending on the study destination one chooses, these expenses can come up to lakhs or crores. While some families can afford this investment based on their savings alone, many rely on study abroad loans to cover the costs while still protecting their resources. In this article, we will explore both financial strategies and help students determine which one is more appropriate for their background and requirements.

Table of Content

1. Cost of Higher Education Abroad
2. Advantages of Using Savings for Higher Education Abroad
3. Advantages of Using Study Abroad Loans for International Students
4. Study Abroad Loans vs Savings: Which One to Choose?
5. Tips to Choose the Right Study Abroad Loan
6. FAQs

Cost of Higher Education Abroad

Studying abroad isn’t as easy as going through the top-ranked Universities and picking the ones that have the most appealing programs. The modern student often looks beyond the international prestige and reputation of the institution, also focusing on the teaching style, industry connections, student services, and graduate outcomes. Another important aspect to consider is the overall cost of the program, based on the budget set by students and their families. We’ve provided a brief understanding of the major costs in popular study destinations below.

 The overall budget of international students may differ according to their chosen program, city of residence, scholarship opportunities, student visa costs, and other such factors. However, even a tentative budget is enough to understand whether savings can cover the overall costs. Head to the next section to see why some families might prefer relying on savings for higher education abroad.  

Advantages of Using Savings for Higher Education Abroad

Indian families often have diverse financial resources, from personal funds put together by the student to Fixed Deposits, Insurance Policies, and the value of gold, land, or properties. External financial support, such as corporate sponsorships or scholarship opportunities, is not counted as a part of these savings. Household savings are a major financial support for many international aspirants, alleviating the costs of studying abroad and allowing them to experience student life in a completely different geography and culture. Some advantages of using savings for higher education abroad are mentioned below. 

• Students start their academic and professional journeys without the financial pressure of debt. 
• There is less financial pressure to get a job after graduation, allowing students to make career decisions based on passion and long-term goals. 
• Using savings for education abroad helps students avoid inflation and fluctuating interest rates in study abroad loans.
• Students do not need to risk their family assets as collateral if they pursue higher education based on savings.

Basically, self-funding or using savings for higher education abroad can feel like a simple option, but it may not be sustainable for families with different financial backgrounds. With rising costs and fluctuating currency exchange rates, savings can be used up faster than expected, making study abroad loans more popular. Keep reading to understand how getting education loans for abroad studies can benefit students.

Advantages of Using Study Abroad Loans for International Students

In the past few decades, higher education abroad has gone from an exclusive dream for a handful of students to a feasible reality for every student with the necessary motivation and talent. Every success story abroad is supported by an entire ecosystem of family members, government policies, and diverse lenders in the Indian financial market. Based on their financial background and requirements, students can choose a secured (collateral-based) education loan or an unsecured (collateral-free) education loan. Here are some benefits of choosing a study abroad loan:

• It keeps savings intact for other financial goals such as retirement, emergencies, etc. by covering every expense and accounting for fluctuating currency exchange rates and costs worldwide.
• It can encourage students to make choices that aren’t just based on a pre-determined budget or financial constraints. 
• Students can start their academic journey without having to wait to save the full amount of their chosen program.
• Study abroad loans generally have a moratorium period that lasts the program duration and up to 6 months or 1 year beyond, reducing the immediate financial strain and allowing students to concentrate on their studies and job search after graduation.  
• Indian students receive tax deductions on the interest paid towards study abroad loans, which boosts their savings and makes repayment easier. 
• Repaying the loan is beneficial for the credit history, helping students with financial investments and decisions in the future. 

While both savings and study abroad loans serve the same purpose, the perspective and choices of students may change once they take a holistic look at their foreign educational journey. In the next section, we will compare the two ways of funding so that students can understand which one suits their circumstances.

Study Abroad Loans vs Savings: Which One to Choose?

Choosing between savings and study abroad loans to fund a degree abroad depends on several factors, from the cost of the program to the family’s income and the student’s expected return on investment (ROI). While savings give students more independence, it can be difficult to follow the budget during emergencies or unforeseen circumstances. On the other hand, loans are a considerable financial investment, but students can keep saving funds for a rainy day and manage expenses more easily. Whether a student chooses savings or goes ahead with the abroad education loan process can be determined by comparing both options, as we’ve done below. 

With this, it is easy to understand that students benefit the most from a hybrid approach, i.e., using study abroad loans for the major expenses while having access to some savings to cover the margin or cover unforeseen costs. Having understood the importance of study abroad loans in the financial preparation for higher education abroad, it is time to move on to some advice for choosing an appropriate loan scheme. 

Tips to Choose the Right Study Abroad Loan

Deciding to use study abroad loans alongside savings to balance the costs of the preferred study destination is one thing; finding a loan scheme that fits the student’s requirements, the family’s backgrounds, and the regulations of the institution and the visa authorities is another thing altogether. With Nationalized Banks, Private Banks, Non-Banking Financial Companies (NBFCs), and International Lenders offering personalized loans for international students, it can be difficult to narrow down the best bank for education loans for abroad studies. Below, we’ve provided a few helpful tips to help students compare loan schemes. 

• Pay attention to the loan coverage and margin. Depending on the balance they want between loans and savings, students can explore myriad funding styles. 
• Check whether the lender supports the study destination, institution, and program. It is also important to meet the eligibility criteria set by the lender.
• Look for loan schemes that provide flexible disbursement and repayment methods. This flexibility can be important to manage financial responsibilities. 
• Compare interest rates and types for various lenders, as well as processing fees, late payment penalties, and prepayment charges.
• Research the collateral and the necessary documentation thoroughly. This helps one identify lenders with reasonable collateral requirements.
• Check for interest rate reductions and subsidies based on profile or region. This can help lower the costs of repayment.

Mixing study abroad loans with savings gives students both stability and access for their academic journey abroad. The more diverse the sources of income or funding, the easier it is to manage the day-to-day expenses of living abroad, have experiences beyond campus, and still have a little money left in the bank.

Ultimately, the pertinent question isn’t whether to fund higher education abroad with savings or loans, but rather how students can use both to put themselves on a successful academic and professional journey. As for figuring out the difference between fixed and floating interest or shortlisting lenders that support diverse profiles, Élan Overseas Education Loans is the go-to destination for it all. Our Loan Experts help students create an attractive financial profile, leverage the best schemes, and ensure timely disbursements for a smooth ride from start to end. Start the application process with Élan today!

FAQs

Q1. Are study abroad loans risky?

Ans. Yes, there is a little risk that comes with taking a study abroad loan, especially if there is uncertainty about job opportunities after graduation. However, lenders understand the risks and offer moratorium periods and long repayment tenures to help students gradually cover the costs.

Q2. Which lenders have the lowest interest rates for study abroad loans?

Ans. The interest rates for various loan types, institutions, and programs vary across lenders. However, in general, Nationalized Banks and Co-Operative Banks tend to have comparatively low interest rates, especially for Premier-Listed Institutions. 

Q3. How do I calculate the loan amount required?

Ans. Students can calculate the loan amount required for their academic journey by collating expenses for tuition fees, living costs, study material, travel, health insurance, etc. If they plan to use any savings or have received scholarships, they can edit their budget accordingly to understand the loan amount needed. An online study abroad loan calculator is also a great tool for this. 

Q4. Do I require a co-applicant for all study abroad loans?

Ans. Not necessarily. International Lenders such as Prodigy Finance and MPower Finance offer unsecured education loans without a co-applicant for certain study destinations and institutions. Students can opt for these loans if accepted by their chosen study destination.

Q5. What are pre-visa disbursements used for?

Ans. Generally, pre-visa disbursements of study abroad loans are required for tuition fee deposits and show fund requirements for the student visa. Not all study destinations need a pre-visa disbursement, so it’s important to check and notify the lender accordingly.