Finally received your admit letter for your dream Masters programme abroad? Congratulations! All that hard work paid off! After all the hard work and a long, anxious wait, you can almost breathe a sigh of relief.
But, then there is the cost
Perhaps the biggest stumbling block you’ll face now is the steep cost of a masters abroad.(Just keep reminding yourself that it’s an investment in your future… because that’s exactly what a masters abroad is.)
The total cost of attendance can exceed US$40,000 – including tuition fees and living expenses. Depending on the programme, it can be even more. Given the high cost of a Masters abroad, many students look at educational loans to fund their education. Read How to manage the cost of living in New York as an International Student.
Popular choices for study loans in India are local banks. A number of Indian banks offer education loans for students seeking to study their Masters abroad. It’s an obvious choice; these banks are established brands in the Indian lending industry and highly trusted by the public.
Students consider a loan from SBI, or any other national bank, one of the most trusted bets. These banks are backed by the Government of India and have funded many Indians in the past, who have successfully completed their Masters and repaid their loans.
However, when applying for a loan from these banks, it’s important to remember that every lender and borrower is different. Not everyone is offered the study loan of their choice. Sometimes local bank loans are unobtainable for one or several reasons:
In most cases, Indian Banks do not offer unsecured loans; they require a property mortgage or other assets to back loan commitments. And, loans are extended only upto the value of the assets put up with the bank.
However, many aspiring students aren’t in a position to provide such assets. These financial products are out of reach for students from modest backgrounds.
Often, families contribute their assets to secure the loan for the student. While the financial liability is no longer restricted to student,they could affect the future of the entire family. Moreover, there is a significant opportunity cost to putting up collateral; sometimes the assets could be used for other, more productive, purposes.
Indian Banks assess various factors to establish your credit potential, including your parents’ standing. Masters students have a high post-grad earning potential, but are still considered high-risk by banks because of their modest family background.
This creates an uneven playing field in the educational loan market where students who need financing the most must pay a premium to study their Masters abroad. In some cases, banks may refuse to extend loans after studying your family financial history, independent from your admission to study at a top international school.
Most Indian banks don’t offer the complete cost of attendance required to cover full tuition fees and living expenses. The loan size limit for banks such as SBI is 20 lakh INR. When students do not have other financing to supplement their education loan, they are unable to pursue their Masters abroad as the offer doesn’t sufficiently meet needs.
There are other options, though, and admitted students should consider all of them before closing the door on a Masters abroad.
There is no better money than free money, and education scholarships are free money. Actually, they’re an investment by others that allow you to receive the education you deserve.
Scholarships effectively reduce your cost of attendance and make studying abroad an easier financial decision. There are chiefly three sources of scholarships:
Nearly every school offers Financial Aid to students. Their primary responsibility is helping deserving student to fund their degrees. Visit your school’s financial aid page to understand various scholarships options and criteria. And, if you have questions, don’t hesitate to get in touch directly.
A number of government organizations offer educational scholarships to support the international movement of students. To find these scholarships, research for options in your school’s country and in India. Again, each scholarship has unique criteria, so research carefully before applying.
Education is important and many philanthropic entities across the globe work to support students that can demonstrate financial need as well as merit. Foundations responsible for providing these philanthropic scholarships often have details descriptions of requirements on their website and you may need to perform your own search as they don’t generally work with specific schools, but rather towards educational aims.
There are also private lenders providing education loans to students to study abroad. They are not traditional banks and usually specialize in the industry of education loans.
Be wary of these providers as some do not command the same credibility as your trusted local bank. There are two types of local, private lenders:
These providers often ask for collateral, and when they offer unsecured loans to students, the interest rates are usually exorbitant.
These lenders require a local resident to co-sign the loan agreement. If you have a local co-signer, it’s better to work with an established bank in the country of study than an independent lender.
Sometimes, even with these options, none of them offer financing that work for international students.
Do not let that stop you!
Many students face incredible hurdles when financing a Masters abroad – and they make it work. Some of the best examples come from MBA students who crowdfunded their education. The concept isn’t new to Indians, as ‘crowd-sourcing’ from family and friends is a cultural norm based on strong familial ties.
The concept of crowdfunding education has been taken to a new level by companies like Prodigy Finance. The founders of this company experienced difficulties obtaining financing to study their Masters abroad and created a platform that enables international students to secure study loans at competitive rates.
Each funding avenue, from scholarships and savings to loans, is part of the picture for students pursuing a Masters abroad. It takes time to investigate each one and to secure all of the financing needed.
But remember that education is an investment, not a spending spree. And, with all you’ve done already to earn a seat in a top programme, you should allow the feeling of success guide you rather than the rejection by your local bank. Because, there are other options and you will find the right one for you.
Author Bio: Rishabh Goel is an Associate Relationship Manager at Prodigy Finance. He studied Economics & Engineering at BITS & Masters at London Business School. He has helped Indians excel at GMAT/GRE and mentored students to attend top schools globally. Rishabh is passionate about borderless FinTech, previously working at TransferWise. He is a Sachin Tendulkar fan and would do (literally!) anything to have a coffee chat with him.