Trump effect: Banks consider reviewing policies for US study loans

Among the measures, look at rigorous background checks on institutions and visa scrutiny

The Trump administration’s stricter migration policies and uncertainty over its support to educational institutions has prompted some banks in India to reassess their education loan policies for students heading to the United States.

 

While loans for foreign studies are fully backed by collateral, the review will focus on several key aspects, including a more rigorous background check on institutions, visa scrutiny, and a relook at margin money for loans — which is students’ financial contribution towards expenses. Additionally, banks will evaluate job prospects linked to the chosen courses, according to senior public sector bank executives.

 

Bankers attribute this cautious approach to two primary developments. One, the US has articulated policy and measures to deal strictly with undocumented migrants. The deep scepticism about migration is also likely to adversely impact its legal stance on visas and job prospects in the future. Two, America’s steps to review government support to education programmes and institutions may also impact students’ prospects of getting financial support while pursuing the courses.

 

Although no final decision has been made, the evolving situation necessitates a reassessment, said a senior executive from a Mumbai-based public sector bank. 

 

A banker from a South India-based bank said that given these policy shifts, loans for education in the US are likely to decline in the near future. However, this caution does not imply that banks are closing doors on student loans for US education.  

 

According to the Reserve Bank of India, overall education loans grew by 15.3 per cent year-on-year to reach Rs 1.36 trillion in February 2025.

 

The 100 per cent collateral cover provides lenders with security in case of default. Additionally, the lenders take personal guarantees from students and their families, verify visa status before disbursing loans, and release funds in installments directly to educational institutions upon meeting specific milestones.

 

Another banker said that parents, too, may now be less inclined to send their children to US universities as their first preference. 

 

Indian students pursuing education in the US generally fall into two categories: Meritorious and those with average or below-average academic records.

 

Students with exceptional academic backgrounds and in-demand skills may still choose the US, where such talent is highly sought after. However, students with weaker academic profiles might opt for safer alternatives in Europe, Australia, or other countries rather than face uncertainties in the US, he added.

 

The situation, though, remains fluid, and banks are adopting a wait-and-watch approach.