Non-Banking Financial Companies (NBFCs) in India are projected to maintain a steady 20% growth in their education loan Assets Under Management (AUM) this fiscal year. According to a report by Crisil Ratings, this strong growth persists despite a severe slowdown in US-focused education loans, as lenders and students successfully diversify into alternative international study destinations.
The Great Pivot Away from the US Over the past two years, policy and regulatory uncertainties in the United States—specifically surrounding visa bottlenecks and post-study work opportunities under the Optional Practical Training (OPT) program—have dampened student sentiment.
Lenders have subsequently pulled back from financing US higher education, resulting in a dramatic shift in loan disbursements:
-
US Drop: Loan originations tied to US universities plummeted by a sharp 57% last fiscal year.
-
UK Surge: Disbursements for students heading to the United Kingdom rose by 24%, while other destinations like Germany and Ireland also picked up significant traction.
-
Portfolio Realignment: Consequently, the US share of the overall education loan AUM shrank to 43% as of March 31, 2026, down from 54% the previous year. Meanwhile, the UK consolidated its spot as the second-largest destination, claiming 29% of the total portfolio.
Asset Quality & Repayment Structures Despite the evolving geopolitical and employment environment, the report notes that the asset quality of these loans remains robust.
How NBFCs Mitigate Risk: Lenders typically tie education loans to a strict holiday or moratorium period that spans the exact duration of the course. The Equated Monthly Installments (EMIs) are calibrated around the student’s expected earning potential and are scheduled to trigger only after the course is completed and employment is secured.
However, Crisil cautions that because a massive portion of the collective loan book is still under these active moratorium periods, the portfolio’s underlying resilience has yet to be fully tested through a complete, long-term repayment cycle.
