US education dream of Indian students got dearer by 10% thanks to inflation and exchange rate

Students who are studying abroad in the USA or ones who are planning to do so in the near future should brace for not only higher tuition fees and cost of living in dollar terms but also higher cost in rupee terms due to sharp decline in the value of the rupee against the US dollar. Here is a look at how the cost of higher education in the US has gone up for Indian students.

Exchange rate hits badly for Indian students studying in US

There has been a steep depreciation of the rupee against the US dollar. While $1 was fetching Rs 73.12 on June 14, 2021, it has now gone down to Rs 78.0015 as on June 14, 2022. This is a 6.16% decline in the value of the rupee against the US dollar in just one year. What it means is that for every Rs 1 lakh, you would now need to pay an additional Rs 6,575 compared to last year, to support your US education.

Rising trend of annual cost of education in US

As per the report “College Tuition Inflation Rate” by EducationData.Org, the annual inflation in higher education in the US was 8% which was way above the annual retail inflation. This means that each year college fees has been rising much more than general prices in the economy. College tuition fees saw a rise each year even after adjusting for inflation. As per the National Center for Education Statistics, the average fee of a 4-year degree programme in a private nonprofit institution rose from $31,700 in 2010-11 to $37,600 in 2020-21 when both prices were kept constant at 2020-21 price level.

The story is no different if one wants to study in an Ivy League college in the US – you to will have to dole out higher fees and face the annual inflation. The total cost of education for an undergraduate programme for one academic year at Harvard University has gone from $82,178 in 2021-22 to $84,413 in 2022-23. The annual student budget or the cost of attendance (the total estimated annual cost for a student) at MIT has gone up from $77,020 for the academic year 2021-22 to $79,850 for the academic year 2022-23.

Total cost has gone up by around 10%

Depreciation of the Indian rupee together with the usual annual rise in the total cost of education in the US has gone up by around 10% for new students.

Record inflation over and above usual education cost rise

Liquidity infusion to deal with the Covid 19 pandemic combined with the Russia-Ukraine war have pushed up global inflation sharply. For May 2022, the USA has registered retail inflation 8.6%, the highest level seen in the last 40 years. Inflation means that every rupee that you hold has lesser value in terms of purchasing power and it is directly linked to the exchange rate. Though the rise of tuition fees in the US during the two pandemic years of 2020 and 2021 have been subdued, however, with inflation touching a record high, a much steeper rise in future is quite possible. Whereas the rise in cost of living will have an immediate impact in pushing up their budgets.

No exchange rate shock for education in UK or Canada

Though the exchange rates of the Indian rupee to the British pound and Canadian dollar has gone through a lot of volatility during the last one year, however, on a year-on-year basis there is hardly any major difference in the exchange rates between June 2021 and June 2022. This means that the students studying in these countries have been lucky as they will just have to deal with the usual education cost increase and not get perturbed by the adverse exchange rate movements.

However, avoid future shocks, one should get the desired forex exposure early or create some foreign assets. Investing global equities with higher exposure in stocks of the destination country is an option which can work as a cushion against future exchange rate movements.

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