When the idea of studying abroad first germinates in the mind of an international student, they think about the exciting parts first – how it would feel to get an acceptance letter from a recognized University, the research opportunities they might have, and the memories they’ll make during the course. The details come later, when students discuss application timelines, start preparing for entrance tests, and gather the documents required for their chosen program. However, the journey to a foreign educational institution extends beyond academics; it also requires careful financial preparation. Students need to consider tuition fees, living expenses, travel, and other costs as part of the budget. Even then, the actual costs may differ from initial estimates. 

Having a clear financial strategy for studying abroad can help aspirants experience a hassle-free student life without compromising on essential needs. Generally, students try to meet the study abroad funding gap through myriad sources like scholarships, personal savings, and overseas education loan top-up options. There are several ways to ensure that the flow of funding remains uninterrupted during the program. This article will explore some of those aspects, starting with understanding the meaning of a study abroad funding gap. 

Table of Content

1. What is a Study Abroad Funding Gap?
2. Why does a Study Abroad Funding Gap Occur?
3. How to Calculate the Study Abroad Funding Requirement?
4. Scholarships & Grants to Reduce Study Abroad Funding Gap
5. Abroad Education Loan Top-Up to Cover Study Abroad Funding Gap
6. Personal & Family Funds to Cover Study Abroad Funding Gap
7. Study Abroad Funding Gap Options & Key Considerations
8. Study Abroad Funding Gap: Effect on Education Loan ROI
9. Tips to Avoid Study Abroad Funding Gap
10. Study Abroad Funding Gap: FAQs

What is a Study Abroad Funding Gap?

Most students combine more than one source of funding to meet the cost of tuition and living expenses abroad. They mix study abroad loans, scholarships or grants from the University/study destination, and personal savings based on the total cost of their program, the home country, and their family’s financial situation. Students may also look for part-time work once they reach the country to cover part of the living costs. When they’re trying to calculate the loan amount required, students need to identify the study abroad funding gap. This can have two meanings:

• The study abroad funding gap can refer to the amount required after scholarships or savings are put together. 
• It can also mean the amount of top-up loan required for students already living abroad, whose funding has fallen short for some reason.

There can be many financial, administrative, or personal reasons why students may face a gap. Let’s go over some common reasons in the following section.

Why does a Study Abroad Funding Gap Occur?

A degree abroad is a complex undertaking, with students and their family members needing to make a thousand big and small decisions along the way. From which country and educational institution they choose to the accommodation and transport options in the city, an international student’s overall budget is influenced by each of these decisions. As such, a study abroad funding gap can occur at any point in the journey – after students get the admission confirmation from the institution, during the program, or even after they graduate. This gap isn’t always a sign of poor planning; it can also arise from unforeseen circumstances. We’ve identified some key reasons why the funding gap may occur below.

• Steep increase in the tuition fees and living expenses over the course duration.
• Limits or margins for the chosen overseas education loan.
• Delayed or partial loan/scholarship disbursement.
• Fluctuations in the currency exchange rate.
• Extensions or changes in the program duration.
• Unexpected personal situations related to family or health.

Many times, first-time borrowers also underestimate the overall costs of studying abroad or forget to add miscellaneous costs to their budget. In the next section, we will explain how to calculate the total requirements for studying abroad. 

How to Calculate the Study Abroad Funding Requirement?

When students approach lenders for an overseas education loan, they need to know the loan amount, margin, and interest rates available for their academic and financial profile. However, they can only compare loan offers from various lenders if they have a clear view of the amount they need after accounting for savings and financial aid. With so many factors and expenses to consider, it is possible to miss out on something while making this calculation. The simple formula given below can help students calculate the amount needed for their study abroad journey.

• Total Study Abroad Funding Requirement = Tuition Fees + Living Expenses + Accommodation + Travel Costs + Health Insurance + Visa/Application Fees + Other Education Expenses + Emergency Fund

 Once this budget is created, students can use the following formula to understand the study abroad funding gap:

Funding Gap = Total Study Abroad Funding Requirement − (Available Funds + Education Loan/Scholarship)

Let’s clear this up further with an example. 

• The student’s total study abroad funding requirement comes to INR 50 lakhs for the duration of their chosen program.
• Their personal funds, scholarships, and overseas education loan cover around INR 45 lakhs. 
• In this case, the funding gap = INR 50 lakhs – INR 45 lakhs = INR 5 lakhs. 

This is what students would need to arrange before or during their chosen program. There are many ways to cover this gap, which we will go over one by one in the upcoming sections.  

Scholarships & Grants to Reduce Study Abroad Funding Gap

A study abroad scholarship is a lifeline and a path towards excellent foreign higher education for international students with diverse financial and regional backgrounds. Depending on the coverage and value, these scholarships can help significantly reduce the overall cost of education and bridge the funding gap. They may cover part or all of the tuition fees or living expenses. The scholarship options can vary greatly according to the student’s chosen country, institution, and their academic or financial profile. We’ve listed some common types of study abroad scholarships below.

• University Scholarship: Partial or full scholarships sponsored by the chosen educational institution or connected organizations. 
• Government Scholarships: These can be opportunities funded by government organizations of the chosen study destination or the home country.
• Merit-based Scholarships: These are based on the academic achievements and background of the applicant. Some offers may consider research capabilities as well.
• Need-based Scholarships: These are based on the financial background of students, with many offers designed for applicants from under-represented regions or identities. 
• External/private scholarships: These scholarships are provided by verified or recognized organizations and institutions in the country/region. 

The intakes, eligibility, and application process for all these different types of scholarships may vary greatly. It’s also important to remember that study abroad scholarships are often competitive, with nearly negligible opportunities in certain countries. Scholarships may not be a viable option after the program already starts, which is where top-up loans come in. Keep reading to get further clarity about them. 

Abroad Education Loan Top-Up to Cover Study Abroad Funding Gap

An abroad education loan top-up refers to the process of borrowing an additional sum in addition to an existing loan amount. An abroad education loan top-up is most useful for students who face a study abroad funding gap during their program due to unforeseen or increased costs, especially a hike in tuition fees or living expenses. A top-up helps students increase their overseas education loan amount without having to take a new loan. The amount offered to top up the loan depends on several factors, as highlighted below.

• The student’s overall cost of tuition and living expenses, including any increases.
• Their eligibility for a top-up loan according to the lender’s requirements and discretion.
• The collateral details, i.e., whether the previous loan is secured or unsecured.
• The co-applicant’s income, as well as proof of repayment for the loan (if already started).
• Additional documentation required for the loan top-up. 

Apart from that, many students may choose to cover the gap between costs and funding with personal funds or their family’s savings. Next up, find out more about this aspect. 

Personal & Family Funds to Cover Study Abroad Funding Gap

Indian families have a strong value for quality education, and many start financial planning for the future education of the younger generation quite early. Many times, students may also put together some amount of savings, which can be useful in this case. When students face a funding gap during their program, they can invest a part of these savings to cover the gap. Here are some examples of personal or family funds that can be useful in this situation:

• Personal savings that come from earlier investments, work, grants, etc.
• Family savings or investments, including fixed deposits or mutual funds.
• Cash from liquidating assets like gold, property, loans from family members, etc.
• Contributions from community fundraising or a sponsor in the family or friend circle.

It’s important to note that family or personal savings should be used alongside other sources, not to their full extent. Students should avoid exhausting all their savings, as they may need some funds for emergencies at any time. 

Chipping in funds from fee installment plans offered by the institution, part-time jobs, assistantships/research funding, need-based bursaries, and employer sponsorships for working professionals could also be added to the coverage for study abroad funding gaps. Next, it is time to go over some important factors while deciding how to fund the journey abroad.

Study Abroad Funding Gap Options & Key Considerations

The modern student doesn’t just decide to study a particular program abroad based on academic excellence, rankings, or facilities alone. They try to understand the cost-effectiveness, career prospects, and return on investment (ROI) of the program before applying for it. Students and their family members have a similar outlook on funding the program, mixing secured or unsecured education loans for abroad studies with other forms of funding for the best possible long-term financial health. So, when they face a study abroad funding gap, they must rationally consider various factors for each source. We’ve compared the major sources below. 

Students may need to recalculate their ROI perspective and immediate career decisions to account for the funds used to cover the gap. We’ll explore this impact in depth in the upcoming section.

Study Abroad Funding Gap: Effect on Education Loan ROI 

After reviewing their study abroad funding gap options, many students may rely on overseas education loan top-ups or even personal loans to complete their journey smoothly. While this eases financial concerns and immediate strain, it may change their repayment strategy later. It’s important to take these aspects into mind and understand the overall impact of additional borrowing. We’ll explain some important aspects below.

• The total loan/EMI amount can increase considerably. If, for example, the initial repayment was INR 25 lakhs + interest, it may change to INR 30 lakhs or more, depending on the funding gap.
• Some lenders may charge different interest rates for loan top-ups, which can also increase over time during the repayment tenure.
• The repayment period itself may extend beyond the initial plan. For example, if the student had planned to repay their loan within 5 years, they may take an additional 2 or 3 years to cover the additional amount.
• Similarly, the break-even or ROI period may also stretch further than initially intended. Students who planned to work abroad and break even within 2-3 years may need to recalculate their ROI to 4 or 5 years depending on their total loan amount.

Although additional funding is useful for students facing a funding gap, it can be avoided in the beginning of the abroad education loan process with a few careful strategies. Let’s understand those in the following section. 

Tips to Avoid Study Abroad Funding Gap 

Many students use a pre-departure checklist before leaving for their study abroad journey to ensure that they don’t miss any important processes or items during packing. This ensures that they have everything they need when they reach the study destination and can start settling in without hassles. Similarly, students can put together a financial pre-departure checklist to make sure they don’t have a funding gap halfway through the program. A few strategies to create this checklist are mentioned below.

• Create a realistic and detailed cost estimate before departure, including daily necessities, travel, food, and other day-to-day costs beyond academics. 
• Understand the margin requirements of the lender. For offers with less than 100% margin, ensure that the savings or scholarships cover the remaining expenses.
• Adjust the total loan amount to account for fluctuations in the currency exchange rate, economic inflation, etc. 
• Apply for multiple scholarships as early as possible. Going for both government-funded and University-funded grants, for example, can increase the chances of receiving an offer. 
• Open a dedicated study abroad savings account to keep funds separate and find them easier to track. Students can also open a separate emergency savings account to reduce the temptation to spend extra funds elsewhere. 
• Keep a backup funding plan, like a personal loan or a top-up, for emergencies. This can be used in case of unforeseen circumstances. 

If they end up needing to borrow extra money for the study abroad funding gap, students can also communicate and renegotiate the repayment timeline with the lenders and figure out a responsible way to repay the extra amount without feeling the burden of it.

In the end, students should remember not to panic when facing a gap in their study abroad funding. If they face it before their departure, all they need to do is recalculate how to cover the necessary amount. If they face it during the program, they need to understand their options and make an informed decision accordingly. For either scenario, trusted overseas education loan consultants such as Elan Loans have their backs. With our Loan Experts by their side, students can discuss their options, seek troubleshooting advice, and get loan top-ups without any hassles.

Study Abroad Funding Gap: FAQs 

Q1. Which lenders in India offer loan top-ups?

Ans. Many Nationalized and Private Banks, such as SBI, ICICI Bank, IDBI Bank, etc., offer loan top-ups for international students. Certain Non-Banking Financial Companies (NBFCs) like Tata Capital also offer these services.

Q2. Can I get a non-collateral abroad education loan to cover a funding gap?

Ans. Yes, it is possible to get a loan top-up or a second educational loan without collateral to cover the study abroad funding gap. The available lenders, loan amounts, interest rates, eligibility, and repayment process may differ according to the student’s situation, profile, and requirements.

Q3. Does a study abroad funding gap affect my student visa application?

Ans. It can. Many countries require proof of financing during the student visa application process. If these funds are shown as insufficient, the application may be rejected or delayed.

Q4. Can scholarships be applied to the funding gap after taking an overseas education loan?

Ans. Yes, it is possible. Sometimes, the disbursement of scholarships may take more time than loans. In such cases, students may take a loan for tuition fee deposits, accommodation, and student visa requirements until they receive the scholarship funds. Some scholarships may be offered after the first year of the program is complete. These funds can be added to the overall budget once they are confirmed. 

Q5. Can I refinance my overseas education loan after the top-up?

Ans. It may be possible to refinance an overseas education loan even after adding a top-up, but the exact details may vary according to the lender, the repayment tenure, and the student’s financial profile. It is best to check this aspect with the lender for further clarity.