When Should You Begin Financial Planning for Studying Abroad?

There has been a gradual increase in the number of students going abroad for further studies. Every year, over 2.5 lakh students fly out for degree programs. A lot of planning and preparation goes into it before the application process. Depending on your stream, country, program, and program duration, the cost of higher education is determined.

Studying abroad is expensive but usually has a good return of your investment. While some students choose to self-fund, more than 60% of students look for external funding (scholarships, loans) to meet their higher education expenses.

Bad financial planning can cost you lakhs and cause unnecessary financial stress in the future. To avoid this, students should start planning for their further education abroad at least fifteen months in advance. Similarly, students need to begin financial planning eight-twelve months before leaving (at the time of course or university selection time) to avoid any obstacles. And, effective financial planning starts with budget planning.

Budget Planning

One way to define ‘budget’ is the total money you are ready to spend from your savings, plus the amount of external funding you can get. The external funding depends upon a variety of academic and financial factors. Academic ones are the type of course, its duration, university you choose and its location. And, financial factors include your parents’ income, parents’ financial discipline, the city you live in, presence of collateral, among others.

For instance, if you are choosing a STEM program in a US university, with a GRE score of more than 310, you could potentially get up to INR 45 lakhs of external funding (an unsecured education loan). If your family savings that you can readily invest is about INR 10 lacs, you can assume your total budget to be INR 55 lacs.

Each student may have a different estimated amount. If you estimate your budget to be too high, you may end up with a university admit that you cannot fund. If you estimate the budget to be too low, you may miss on choosing a better university for your career. To help you estimate it right, you can schedule a free call with your financial advisor here.

The next important step is to estimate the costs of different courses in the right manner and only choose those courses that fall within your budget.

Estimating Realistic Costs

Often, students underestimate the cost of their studies by at least INR 10-15 lakhs. The cost of the program you want to pursue is based on several factors including tuition fee, living costs (food, on/off campus accommodation, utilities, petty cash). The expenditure should also consider the cost of books, electronics, initial room set up, local trips, health insurance, airline expenses, visa application, health check-ups, university applications, and other miscellaneous expenses that could be endured during the entire tenure abroad. You also have the option of hiring a consultant for the preparation of the application, whose cost also needs to be included in the budget.

If you do not find enough universities within your budget, note that universities far away from the major cities or public universities might have lower tuition fees. In the US, for instance, the living cost in New York is nearly 1.5 times the living cost in Philadelphia. A one-year program will also be significantly cheaper in most cases.

Thus, a list of preferred courses and universities must be prepared so that you can calculate the total realistic cost for each and check if they fall within your budget.

Documents You Need

During the visa application process, the student needs to show proof of financial documents supporting their claim of funding the entire education abroad. The documents required to back this claim are as follows:

  • Bank solvency letter
  • Fixed deposit certificate
  • Last six months’ bank statement
  • Sponsorship Letter (if someone is sponsoring your education)
  • Education Loan Sanction Letter (if any)

If you are planning an education loan, make sure your parents’ (or co-applicants’) income tax returns for the past two years are filed at least six months before applying for an education loan.

Funding Education

The student might be financially supported by his/her family or could be looking at an outside financial source to fund the higher study abroad. In case of financial support by the family, only the budget needs to be decided and adhered to.

The student could apply for a university-specific scholarship to fund his/her education. There are various types of scholarships available, and the student needs to search for the one which is suitable for him/her. The scholarships are competitive and require a strong CV as support. The student needs to prepare in advance to make a strong resume by gaining some industrial experience or having done a few summer internships also helps.

The student could also contact the student help center in the desired university to get information about the scholarships offered by the university for international students. A few of the international scholarships available are as follows:

  • Commonwealth Scholarship and Fellowship
  • Chevening Scholarships
  • Vice Chancellor’s International Scholarship
  • Rhodes Scholarships

The student could also apply for a scholarship in India. The names of the scholarships available are as follows:

  • Erasmus Mundus Joint Masters Degrees
  • Fulbright-Nehru Master’s Fellowships
  • National Overseas Scholarship Scheme by the Indian Government
  • Inlaks Scholarship

The student has another option of applying for an education loan from well-renowned public or private, domestic or international lenders. Various types of education loans are available with different types of interests and durations of payback.

Students need to understand the eligibility guidelines and qualify the same as well before applying for the loan. The eligibility criteria and credit preferences vary from bank to bank. Some banks weigh in your academic profile more and some weigh in your parents’ or co-applicants’ financial profile more. Take a look at what most banks prefer in your profile:

  • Having a test score. Students with test scores (GRE, GMAT, SAT, TOEFL, IELTS) are three times more fundable than those who do not.
  • Good admit: Each bank recognizes a set of universities around the world for their placements. Sometimes, even with an average score, you can get a great admit. Schedule a 15 minute session with our expert counselors and see which universities fit your profile best.
  • Visa-friendly Destination Country: Banks prefer US and Canada the most. UK, Singapore, Australia, Germany and Ireland are also considered positively. The maximum unsecured loan amounts you can get will vary based on the country you choose to study in.
  • Co-applicants’ Financial Discipline: Your parents’ credit or financial discipline will have an impact on what you can get as an education loan, as most of the lenders will ask for them to be your co-applicant. Having too many active EMIs will also deter banks.

To get personalized advice on how banks will consider your profile, get on a call with an expert from GradRight here.

The loan application and approval might take anywhere between seven days to two months, depending on the lender, collateral presence, and the time required for the follow-up. Hence, financial planning needs to be done well in advance – after having test scores or applying to universities but before securing admission to the desired university.

The student sometimes tends to under-estimate the expenses or could be late in applying for a bank loan. This reason alone could lead to dropping their plans after all the hard work. To avoid any such problems at the eleventh hour, the students should be well prepared and have some buffer time of at least five months in between their finances being sorted and flying abroad for the course.

Planning to study abroad is an investment for your brighter future. As is the case for any other investment, a lot of planning, perseverance, careful management, commitment, and research goes into it. Therefore, financial planning should also begin with other preparations eight-twelve months before the departure.

With inputs from Sasidhar Sista, Alumnus of University of Pennsylvania, Co-founder, GradRight

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