How Currency Fluctuations Increase EMI And How Students Can Reduce Risk

If you’re planning to or are currently pursuing a degree abroad, you’re fighting tuition inflation and a volatile exchange rate.

When I speak to families, the first number they mention is the USD-INR rate (which is hovering above 90) and what that does to their EMIs. 

The rupee has declined about 6% against the US dollar year-to-date, making it Asia’s worst performer this year. 

The same goes for the Euro, which trades around ₹106 per EUR, up from roughly ₹89 a year ago. 

The pound has also climbed to about ₹122 per GBP, after trading near ₹107 in late 2024.

For a family sending money out every month, these forex fluctuations can add about ₹1.5 lakh to just your semester fee for a year abroad.

So why does current fluctuation matter for your student loan repayment?

Currency depreciation creeps into your tuition, living expenses, and later your EMI. It also raises default risk. When every semester costs a bit more than planned, you borrow more, stretch tenures, or take high-interest top-up loans. That leaves less breathing room once EMIs start.

Let’s look at the full impact of forex fluctuations on student loan repayment and how you can reduce this risk.

How exchange rates affect study abroad costs (During study)

Before EMIs start, forex fluctuations shows up in a more immediate way. It hits your semester bill and your monthly budget. 

Some education loan repayment challenges due to exchange rate depreciation are increased: 

1. Tuition fees

For a master’s program that charges $50,000 per year, a ₹83/USD vs ₹91/USD is the difference between ₹41.5 lakh and ₹45.5 lakh.

1. Living expenses

Rent, groceries, transport and health insurance are all in local currency. When the rupee weakened from around ₹84 to roughly ₹90 per dollar, students reported their monthly costs rose by nearly ₹20,000.

This drives higher total borrowing and affects international student loan repayment, especially for non-collateral loans.

If your original cost estimate assumed ₹85/USD and the rupee actually hovers near 90, your sanctioned amount can suddenly look short. That’s when many students:

• take an extra top-up loan at a higher rate, or
• use credit cards/overdrafts, which are much more expensive.

Most students plan for one exchange rate and live with another. This forex fluctuations impacts their  student loan repayment in more than one way.

How currency depreciation impacts EMIs (During repayment)

When one in three Indian students now relies on an education loan to study abroad, the currency in which your loan is denominated becomes as important as the interest rate.

Let’s see how currency fluctuation impacts your education loan EMI on an INR vs foreign currency loan.

INR Education Loans (Most Indian Bank/NBFC Loans)

Will a loan in rupees protect you from forex risk while studying abroad?

With an INR loan, your EMI is set in rupees. Currency movements don’t directly change the EMI. 

But because the total borrowed amount during the course increases with each costlier remittance, final EMI can end up higher than the initial estimates.

A rupee slide can effectively add 3-5% per year to repayment costs on INR education loans.

Here’s how a weaker rupee can push up your EMI on an INR education loan.

Rupee depreciation also prompts many families to increase loan tenures and top-up borrowing.

So, when does an INR loan makes sense? INR loans usually work better if:

• you’re likely to return to India soon after your degree,
• your long-term income will be mostly in INR, and
• you want EMIs that are relatively predictable and not linked directly to USD/INR.

But you can also get a foreign currency loan, say in USD, if you plan to study in the USA. Such a loan can protect you from forex fluctuations on repayment.

Foreign Currency Loans – Student loan repayment in foreign currency explained

Here, the EMI is fixed in USD/GBP/EUR. Every month, your lender converts that into rupees. 

Your repayment cost in INR rises whenever you convert foreign-currency debt at a weaker rupee level. But if you earn in USD, your income and loan payments move in the same currency.

“A USD loan protects students from currency swings and minimises the risk of repayment shock once they start earning abroad.” 

             — Prodigy Finance’s global business head. 

The logic is straightforward. If your salary and EMI are in the same currency, you have essentially hedged yourself. For someone planning to live and work abroad for several years, foreign-currency loans can actually reduce forex risk on EMIs.

But if you return to India and your income is in INR, the same foreign currency EMI can become heavier every year as INR weakens. So, over a 10-15 year period, even a 1-2 rupee move each year can mean several lakhs extra in total repayment.

Here is a breakdown of how exchange rates affect monthly loan payments for a foreign currency (USD) loan.

You might also wonder, does the period of the loan matter for forex risk? 

Why longer loan repayment durations equal higher forex risk

With most overseas master’s program fees now crossing ₹30-40 lakh even at public universities, stretching loans over 10-15 years feels natural. But that also compounds foreign currency risk for Indian students abroad.

The Indian rupee moved from about ₹63 per USD in 2015 to roughly ₹90 in 2025. 

This structural weakening over a decade means:

• higher loan amounts, 
• higher EMIs and 
• longer repayment periods for most INR loans.

Combine this with the estimate that just one rupee depreciation adds 3-5% annually to repayment costs, and you see why repayments spread over longer time frames are more exposed.

Similarly, for foreign-currency loans, each extra year is another year of EMI exposure to USD/INR or GBP/INR moves. 

A ₹1 move in USD/INR can raise total education cost by lakhs over the course of a degree and its repayment.

Here is an example of how a longer loan tenure can increase forex risk.

In plain terms. The longer your tenure, the wider the range of possible EMI outcomes driven by foreign exchange rate changes together. 

How to manage and reduce forex risk in student loans?

Here are some tips to reduce exchange rate impact on EMI and support long-term financial planning for international students.

• Match EMI currency with future income

If you’re likely to work abroad 5-7 years, a foreign-currency EMI can be safer. If you’ll return to India or are unsure, an INR loan caps forex risk on EMI, though rupee depreciation still raises how much you borrow.

• Plan for a weaker rupee

For forex risk management for Indian students, budget as if INR will be 5–10% weaker over your course and early repayment years.

• Use forex cards and pre-booked rates

Use a student forex card to lock in a rate for everyday spending and fee payments to reduce the impact of forex fluctuations on student loan repayment. Many cards avoid per transaction FX markups and are cheaper than credit cards.

You also pre-book big payments (fees, annual rent) where available so you know the INR amount in advance.

• Time large remittances

After budgeting for currency fluctuations while studying abroad, send larger transfers in periods when INR is temporarily stronger. Over a full degree, this can save tens of thousands of rupees.

• Refinance once your profile improves

You can also explore refinancing into a cheaper INR loan or a better foreign currency rate after your income stabilises and reduce the impact of forex fluctuations on student loan repayment. This will cut both interest cost and forex exposure over the remaining tenure. 

GradRight helps compare such options by letting multiple lenders bid on your improved profile.

Rohit, who was rejected by multiple domestic lenders, used our loan bidding platform to discover Prodigy Finance and chose a collateral-free USD loan with a lower interest rate, said:

“The entire process was unbelievably easy to follow.”

This kind of story is now common. Students compare INR vs foreign currency loans side by side on FundRight to compare “earn abroad” vs “return to India” scenarios. And then decide which currency’s risk they’re more comfortable living with.