Education loan book growth to halve amid US visa curbs

Mumbai: Crisil has forecast that growth in the education loan book of non-banking finance companies (NBFCs) will slow to half of last year’s pace due to tightening immigration policies in the United States that are discouraging Indian students from pursuing higher education abroad.“Policy uncertainties in the US, combined with measures including reduced visa appointments and the proposed elimination of Optional Practical Training norms have culled newer loan originations. This has led to around 30% decline in total disbursements to that geography last fiscal,” said Malvika Bhotika, Director at Crisil Ratings.According to the ratings agency, education loans had been the fastest-growing asset class for NBFCs in recent years, with assets under management (AUM) rising by over 50% annually.

However, Crisil expects this growth to moderate to around 25% in the current fiscal, down from 48% last year and 77% the year before. The AUM is projected to reach ₹80,000 crore by March 2026, up from ₹64,000 crore in FY25.The slowdown has been attributed to a sharp decline in loan disbursements to the US — traditionally the largest destination for Indian students — as the country reduces visa appointments and considers scrapping the Optional Practical Training (OPT) programme for international students.

Disbursements to Canada, the second-largest market, also declined due to stricter student visa rules, including higher financial requirements and a cap on permits. As a result, overall education loan disbursements rose just 8% in FY25, a sharp fall from the 50% growth seen in FY24.To counter the US-led slowdown, NBFCs are now diversifying into alternative geographies such as the UK, Germany, Ireland and other smaller nations.

Disbursements to these destinations have doubled, with their combined share in total education loan disbursals rising from 25% in FY24 to nearly 50% in FY25. However, this diversification is unlikely to fully offset the drop in US-bound disbursals.The US still accounted for 50% of total education loan portfolios as of March 2025, down from 53% a year earlier, and this share is expected to decline further in the coming years.NBFCs are also exploring new product adjacencies including domestic student loans, school funding, and loans for skill development and coaching. While these segments involve lower ticket sizes and are unlikely to materially impact AUM, they may offer portfolio stability during global disruptions.Asset quality in the sector remains strong for now, with gross non-performing assets (NPAs) at 0.1% as of March 31, 2025.

Even after adjusting for the principal moratorium — which covers around 85% of the loan book — gross NPAs stood at ~0.7%.“Despite the global developments, NBFCs have maintained healthy asset quality so far,” said Sonica Gupta, Associate Director at Crisil Ratings. “However, high growth in the past few years and estimated ~15% of the portfolio coming out of contractual moratorium this fiscal pose some asset quality risks.”The report emphasizes that NBFCs’ ability to scale newer segments while maintaining quality, and to adapt to changing student preferences and international policies, will be critical for sustaining growth in the education loan segment. The analysis is based on NBFCs rated by Crisil, which represent over 90% of the industry’s total AUM.