Education loan demand shifts beyond US, NBFC AUM seen up 20%: Report | Personal Finance

Fewer Indian students are heading to the United States due to visa and policy uncertainties, but education loan growth for non-banking finance companies (NBFCs) is expected to remain resilient this financial year, according to a Crisil Ratings report cited by news agency, PTI.

For Indian families planning to finance overseas education, the report highlights an important shift: While the US remains the largest destination for education loans, both students and lenders are increasingly looking beyond it.

Education loan growth remains resilient

The report said the education loan business has remained supported by demand from students pursuing higher education overseas, although the mix of destinations has changed considerably over the past year.

This trend is significant because NBFCs have emerged as a major source of education finance for overseas studies, particularly for students who may not meet the lending criteria of traditional banks or require quicker loan processing.

Why are students moving away from the US?

The report attributed the slowdown in US-focused education loans to continuing policy and regulatory uncertainties.

According to PTI, these include:

• 
  Concerns over post-study work opportunities under the Optional Practical Training (OPT) programme
• 
  Ongoing visa-related challenges
• 
  An evolving employment environment in the US
• 
  Over the past two years, these factors have affected both student confidence and lenders’ willingness to finance courses in the US.

Crisil Ratings said lenders have also become more cautious while evaluating applications for US education loans, leading to lower fresh loan disbursements.

UK and Europe gain ground

As students reconsider their overseas study plans, other destinations are witnessing stronger demand.

According to the report cited by PTI:

• 
  Disbursements for students heading to the US fell 57 per cent in the last financial year.
• 
  Loan disbursements for the UK increased 24 per cent.
• 
  Germany, Ireland and several other countries also recorded higher interest from both students and lenders.

The report said these countries have benefited from relatively stable visa policies, favourable post-study work opportunities and increasing acceptance among Indian students.

For lenders, a broader geographical spread also reduces concentration risk by diversifying their education loan portfolios.

Education loan portfolio sees a major shift

The changing study preferences have altered the composition of NBFC education loan portfolios.

According to PTI, the share of US-linked education loans in the overall AUM declined to 43 per cent as of March 31, 2026, compared with 54 per cent a year earlier.

During the same period:

• 
  The UK accounted for 29 per cent of the portfolio.
• 
  Germany, Ireland and other overseas destinations continued to increase their contribution.

This indicates that while the US remains the largest individual destination, its dominance in education loan portfolios is gradually reducing.

The report also assessed the quality of education loan portfolios and found that asset quality has remained healthy so far.

Education loans generally come with a moratorium period, during which borrowers are not required to begin regular EMI repayments. According to the report, NBFCs usually align this moratorium with the duration of the academic course.

EMIs are typically scheduled to begin after the student completes the course and secures employment, allowing repayment to match expected earning capacity.

However, Crisil Ratings noted that a significant portion of outstanding education loans is still under the contractual moratorium period. While asset quality has remained stable even as more loans move into the repayment phase, the report said the portfolio has not yet been tested over an entire repayment cycle because many borrowers are only beginning to start repayments.

What this means for borrowers

For Indian students and parents planning overseas education, the report points to a changing lending landscape rather than a slowdown in credit availability.

Students choosing destinations outside the US may find lenders increasingly comfortable financing their education as portfolios become more diversified.

At the same time, those planning to study in the US may continue to face closer scrutiny from lenders because of uncertainty around visa rules, employment prospects and post-study work opportunities.

Despite these shifts, the overall outlook for the education loan market remains positive, with NBFCs expected to continue expanding their loan books as overseas education demand remains strong across a wider range of countries, according to the Crisil Ratings report cited by PTI.