Representative image

MUMBAI: The landscape of education financing in India is undergoing a significant transformation, largely due to the policy shifts initiated by the Trump administration targeting immigrants. With the United States accounting for a staggering 50-75% of education loan disbursement, Indian lenders are now facing a notable slowdown in business as students reconsider their plans to study in America.

In response to the evolving situation, educational lenders are tightening their assessment criteria for processing education loans for the US. Financial institutions are increasingly focusing on applicants with strong academic profiles and admissions from top-tier universities. This shift comes amidst growing concerns about borrowers' capacity to repay their loans, particularly given the current political climate and fears of a potential hiring slowdown in the US, which is exacerbated by tariff-induced recession warnings. As a result, the pool of candidates eligible for US education loans is shrinking, posing additional challenges to lenders.

Among those affected are not just traditional banks but also a burgeoning number of non-banking financial companies (NBFCs) and innovative financial platforms dedicated to facilitating study abroad loans. Notable players in this sector include Credila, Avanse Financial Services, and InCred Finance, all of which have been impacted by this downturn. For instance, InCred Finance reported a dramatic decline in inquiries and applications for US education loans, which have reportedly halved compared to the previous year.

The US education loan business has seen a 50% decrease across the industry, and this trend is likely to worsen if the Trump administration continues to strengthen its anti-immigration and 'America First' stance, stated Nilanjan Chattoraj, the director of education loans at InCred Finance, in an interview with TOI. He expressed concerns that if the Optional Practical Training (OPT) and STEM OPT programs are terminated, it could lead to a significant reduction in demand for US-based courses.

While the declining interest in US education presents a challenge, there is hope that growing demand for educational opportunities in countries such as the UK, Australia, and Canada may provide some respite to Indian lenders. However, in the interim, these companies are preparing to adopt regulatory frameworks that would enable them to restructure existing loans and manage payment recoveries effectively. This preparation is crucial, especially considering the risk that many students could be forced to return home without completing their studies or securing employment.

The Reserve Bank of India allows certain flexibilities in restructuring education loans. We already have the regulatory models in place, Chattoraj noted. Currently, only about 1-2% of students have needed to restructure their loans, but we anticipate this number to rise to 5% as the situation evolves. Its going to be a complex scenario.

Despite the tightening of approval rates for US-bound education loans, lending continues, albeit with greater scrutiny. Akshay Chaturvedi, the founder and CEO of Leverage, a company that collaborates with banks and NBFCs to facilitate education loans, remarked that lenders are increasingly factoring in perceived immigration risks and uncertainties regarding the return on investment (ROI) for education in the US. He also noted a rise in inquiries about options for transferring credits to universities in alternative destinations and backup plans for students.

While interest in studying in the United States has not entirely collapsed, students are now approaching their decisions with heightened caution. A related report from the Associated Press highlighted that since mid-March, at least 901 students from various countries enrolled in 128 colleges and universities in the US had their visas revoked or legal status terminated. Moreover, international student enrolments in the US saw an 11% decline between March 2024 and March 2025, with a significant 28% drop in Indian enrolments specifically, as noted by Sonal Kapoor, global chief business officer at London-based Prodigy Finance, drawing from data provided by market intelligence firm ICEF Monitor. The emerging trends suggest that countries like the UK are becoming increasingly attractive alternatives for Indian students seeking educational opportunities abroad.