Indian student took Rs 40 lakh for US degree. Now, cannot even pay rent after EMI. Banker explains how to avoid it

In the pursuit of better prospects, thousands of Indian students take on massive education loans to study abroad. But for some, the dream doesn’t quite pan out. India’s education loan NPAs (Non-performing Assets) increased in 2023, with total debt of crores, mirroring a global crisis. Now, a viral LinkedIn post by Bengaluru entrepreneur Pramesh Khanna has brought fresh urgency to the issue, spotlighting the financial toll of expensive international degrees. For many, what begins as a dream ends in a debt trap. Education loans can open doors, but without planning, they risk becoming a lifelong burden.

Khanna shared the story of a young man who took a Rs 40 lakh loan to pursue a Master’s degree in the US, hoping for a high-paying job. But reality hit hard. After struggling for a year post-return, he finally landed a Rs 75,000/month job. With an EMI of Rs 66,000, that’s 88% of his salary gone in a flash. That leaves him just Rs 9,000 to survive—covering rent, food, and daily expenses. It’s barely enough to live, let alone thrive.

EMI vs Survival

This is more than just a tough financial situation—it’s a full-blown crisis. When nearly all of one’s income is consumed by EMIs, survival itself becomes a challenge. With such a heavy debt burden, borrowing more just to meet basic needs becomes a dangerous but often inevitable route. And with the job market being unpredictable—thanks to visa challenges, economic downturns, and saturated industries—many students find themselves underprepared and overwhelmed.

The emotional and mental toll of such a situation is immense. The constant pressure of repayments, the fear of default, and the strain of trying to maintain relationships and self-worth amid financial chaos can be mentally exhausting. Worse, loan default doesn’t just affect the individual—it damages credit scores, limits future financial mobility, and puts co-signing family members at serious risk.

So, is a Rs 40 lakh loan worth it?

Khanna urges extreme caution. He suggests starting with a return-on-investment analysis—what are the realistic salary expectations in India and abroad for your chosen field? If the numbers don’t add up, it’s worth reconsidering. Exploring alternatives like European universities (e.g., in Germany) or top Indian institutes such as IIMs and IITs can offer comparable or even better returns at far lower costs. Additionally, the rule of thumb is that EMIs should not exceed 30-40% of your income. For a Rs 66,000 EMI, this means a monthly salary of at least Rs 1.65 lakh to stay afloat comfortably.

Plan a backup

Planning a backup is essential. Whether it's six to twelve months of savings or cultivating a side hustle that brings in a steady income, building that cushion can be the difference between stability and collapse. And if you're already stuck in a debt trap, there are still ways to manage the damage.

How to manage the situation?

If you’re already caught in such a spiral, there’s still hope. Khanna offers actionable strategies:
- Renegotiate loan terms: Extending your loan tenure reduces EMIs. A Rs 40 lakh loan at 10% interest over 15 years can lower the EMI from Rs 52,900 to Rs 43,000.
- Find alternate income sources: Freelancing in areas like tech, digital marketing, or consulting can supplement income by Rs 20,000–30,000/month.
- Cut costs smartly: Share housing, use public transport, or move to a city with a lower cost of living.
- Seek aid and scholarships: Even after enrolling, some universities offer merit-based assistance.
- Upskill and pivot: Fields like AI, data science, and product management offer better opportunities.
- Ask for family support: If parents co-signed the loan, temporary financial help from them could prevent more debt.
- Add unconventional skills: Exploring alternate or gig economy skills could lead to full-time opportunities in unorganised or emerging sectors.

What are your views on this?