Student loan for studying abroad: Is it worth it? Here’s what you need to know

As of late 2024, over 1.33 million students are pursuing higher education abroad according to the recent report published by PTI. This is a considerable increase from past years, this fact was presented before the Indian parliament some time ago. It highlights the growing trend of Indian students pursuing higher educational prospects abroad.

This takes us to the question, about the significance of taking a student loan i.e., its pros and cons for studying abroad. This article is dedicated to the discussion about the pros and cons of taking student loans for taking up educational opportunities in the future.

NBFCs witness robust growth in education loans

India's leading Non banking Financial companies (NBFCs) are witnessing massive growth in their education loan books according to a recent CRISIL report. The report estimated the asset under management (AUM) to exceed ₹60,000 crore from ₹43,000 crore last year. This is being driven by rapidly growing demand for foreign education and increasing inflation and costs of higher studies.

What are the current education loan rates in India?

Interest rates offered on education loans in India are different for different banks. The rates are being offered by State Bank of India at 9.90% per annum. ICICI Bank offers rates in the range of 9.50% and 14.25% per annum. HDFC Bank is offering loans from 9.50% per annum as on April 2025. However, it will be advisable to check individual banks for the changes and updates for the latest position in the rates.

Note: The interest rates applicable on the above loans are indicative in nature only. For the latest information, corresponding interest rates and updates with regards to the same please contact your respective financial institution.

What are the benefits of taking a student loan?

• Easy accessibility: Student loans are easy loans that provide financial help to people who normally don't have the money to pay tuition fees, living expenses, book purchasing money and other education expenses.
• Repayment is deferred: Most of the education loans offer the option to start repayment after graduation, easing the financial  debt burden during study time. This is offered with the clear understanding that during education periods students cannot earn money simultaneously.
• Helps in enhancing credit history: Regularly made on-time payments help in establishing a good credit history, this is very beneficial for the future. Because it makes sure that any future loan will be easily available and accessible in a smooth manner on easy interest rates.
• Repayment options are provided with flexibility: Lenders provide for varied repayment schemes and modes like options which are comforting depending on the income of an individual. For this, keeping your lender well informed is the best way to go.

What are the drawbacks and things to be noted before taking a student loan?

• Debt burden: A loan comes with the capability to accrue debt. For this reason, individuals who take loans during their early age might find it difficult later on and it might take decades for them to be able to pay the debt. This can also impact your credit score. 
• Accumulation of interest: A loan installment if not well controlled may result in accumulation of interest. Interest which is accumulated over time increases the total amount to repay.
• Financial and emotional pressure: Monthly EMI repayments can lead to financial and emotional pressure. This denies financial independence and prevents economic stability.
• Risk of default in a severe state: Failure to repay now will lead to default, thus negatively impacting credit profiles and credit scores. This will make any future loan very difficult to secure.

Conclusion

Therefore, student loans can be an extremely crucial tool towards meeting fiscal needs, but one must weigh the pros and cons against the likely constraints and difficulties of seeking the aforementioned loans.

Prospective applicants therefore must think critically, analyze their fiscal capacity, and get to know terms and conditions of the loan before going ahead with their loan applications.

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