Strategies to Deal with Education Loans During High Inflation

Strategies to Deal with Education Loans and Inflation
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The journey to study abroad is an exciting career-building opportunity for many Indian students. However, the financial burden can be more disturbing if the country is facing a high inflation rate. In such economic scenarios, students must adopt strategic approaches to effectively manage their education loans to study abroad. In this blog, we will explore some effective strategies for Indian students pursuing higher education abroad and dealing with education loans from banks in India during high inflation.

Thorough Financial Planning

As borrowing becomes costly during a high rate of inflation, it is very important to plan the entire budget for studying abroad. Expenses like tuition fees, living expenses etc shall be efficiently planned so that the loan amount can be utilised properly. An efficient and effective financial plan will act as a roadmap, helping you stay on track and make informed decisions throughout your academic journey. Also, you must be ready for the fluctuations in the interest rates on education loans during the rising inflation.

Explore Scholarship Opportunities

Scholarships to study abroad are a great way to manage educational expenses abroad. Some organizations provide up to 100% scholarships subject to eligibility criteria. With a scholarship, students can easily mitigate the impact of inflation by actively seeking educational scholarship opportunities. Many universities abroad also offer scholarships and financial aid programs based on academic merit, extracurricular achievements, or specific criteria. Through this way, you will be able to reduce your dependency on education loans. Some of the scholarships in India are AP Ambedkar Vidyanidhi Scholarship, Jaganna Videshi Vidya Deevena Scholarship etc.

Part-Time Work and Internships

Part-time jobs and paid internships are easily available in various countries for international students. You must consider taking up part-time work or internships during your study period to supplement your income. Some countries allow international students to work a certain number of hours per week. Utilizing your skills and gaining practical experience not only adds value to your resume but also contributes to your financial stability. You can even start repaying your education loan early with this income.

Get Education Loan on Fixed Interest Rate

There are certain banks in India that offer education loans to study abroad at a fixed rate of interest. These interest rates remain constant for the entire duration of the education loan. By getting such loans, the cost of your loan will remain fixed and there will be no additional charges for the fear of fluctuations in the interest rate.

Education Loan Refinance

One of the most effective ways to reduce the interest on education loans is to opt for education loan refinance. For example, if your education loan is with Bank A and the interest rate is increased by 2%, try for a balance transfer or loan refinance offered by another bank that is offering comparatively lower interest. Apply for education loan refinance and save your money which you were supposed to pay against the interest rate.

Also Read: Interest rate increased on loan? Check here and know all about IDFC First Bank Education Loan Transfer and save up to 1% on interest rates

Education Loan Restructure

Education loan restructuring is another important financial tool which you can avail in case of financial crisis. If you face any difficulty in paying the EMI, immediately contact your bank and explain the difficulties you are facing. The bank will restructure the loan in which the net monthly EMI will be reduced and the interest rate might also decrease subject to the bank’s internal policy.

Monitor Exchange Rates

The education loan in India is disbursed in Indian currency (INR). While planning for an education loan to study abroad, keep monitoring the exchange rate of the country where you are travelling. The impact of inflation on currency exchange rates can also be observed in some cases. Check the currency fluctuations and try to start making loan repayments when the exchange rates are favourable. This can help you save money in the long run and manage the impact of inflation on your loan repayments. Check with your bank whether you can make part payment on your loan at certain intervals.

Opt for Flexible Repayment Plans

When choosing an education loan, check for lenders that offer flexible repayment plans. Some banks provide a grace period i.e. moratorium before starting repayments or allow you to adjust your repayment schedule based on your financial circumstances. This flexibility can be particularly beneficial during periods of high inflation when financial stability may be uncertain.

Also Read: Want to save your money on loan repayment? Check here and know all about using SIPs to repay education loans efficiently

Emergency Fund and Contingency Planning

Building an emergency fund can act as a financial safety net during unexpected events or economic crises. Having a contingency plan in place will enable you to manage inflation-related challenges without compromising your education or financial well-being. You can start investing some amount of money into SIPs which will later act as an emergency fund and can be used in case of financial crisis.

FAQs

How does high inflation impact education loan repayments?

High inflation can increase the cost of living and, consequently, the overall expenses associated with education loan repayments. As the purchasing power of money decreases, borrowers may find it challenging to meet their monthly loan obligations.

What strategies can be made to manage education loans during periods of high inflation?

In case of high inflation, education loan refinance is one of the best options to make the loan cheaper.

Is it advisable to prepay education loans during high inflation?

This totally depends on your financial status. Depending on your financial situation, prepaying education loans may be a good strategy during high inflation. By reducing the outstanding principal, you can minimize the long-term impact of inflation and save on interest rates.

How can borrowers protect themselves from the effects of inflation when taking out education loans?

Try to choose fixed interest rate loans over floating rates to provide stability in repayments. Explore inflation-indexed repayment options if available, allowing your loan to adjust based on inflation rates.

Can I make part payments for an education loan?

Making part payment on education loans will help you to close the loan before the tenure. Check with your bank whether they allow part payments on education loans.

Financial planning while studying abroad requires careful planning and proactive measures. By adopting these strategies, you can plan for an education loan and its repayment efficiently without facing any financial stress.

To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.

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About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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