Student loan companies feel the pressure of US visa squeeze, ETEducation
Education loans for study abroad dropped 30-50% in calendar 2025 from the year before amid tightening visa norms in the US, according to non-banking finance companies (NBFCs) and platforms that facilitate such credit. The trend is expected to continue and potentially worsen over the next year.
While students are exploring alternatives such as the UK, France, Germany and other East European nations, executives said the lending volumes historically driven by US universities will be difficult to replicate.
“US volumes are overall down by 60%,” said Damini Mahajan, cofounder of We Make Scholars, an education loan marketplace working with banks and NBFCs. “Even as students take loans to go to other universities, which will offer some degree of compensation, overall volumes are still down more than 30%.”
State Bank of India, ICICI Bank and Axis Bank have sizable exposure to education loans. Among non-banking lenders, Avanse, Credila and InCred Financial Services are key players in this segment.
According to Reserve Bank of India (RBI) data, outward remittances from India for education during the August 2025 fall admission season stood at $319 million, down 23% from $416 million a year earlier. In January 2025, during the spring admission season, remittances were $368 million, down 18% from $449 million in January 2024. To be sure, this also includes living expenses of students.
In a credit note on InCred Financial Services released in August 2025, rating agency Icra had said growth in the student loan segment could slow significantly due to uncertainty over higher education opportunities in the US and other developed markets. InCred has about 24% of its assets under management in student loans. It has diversified into loans against property and other products to offset pressure on its education lending business.
BorderPlus founder Mayank Kumar expects fresh disbursements to remain subdued for the next one to two years. BorderPlus is a global mobility startup for blue collar professionals. To offset the slowdown, lenders may lean more heavily on the Indian market and job-linked programmes in the interim. Kumar is a cofounder of edtech firm Upgrad.
The education loan market is cyclical, with disbursals typically peaking during admission seasons. Historically, the US—being more expensive than European destinations—has accounted for the bulk of volumes.
Alternate businesses
While banks have diversified businesses and significant exposure to domestic education loans, NBFCs such as Credila, InCred and Avanse are more heavily reliant on study-abroad loans, making them more vulnerable to the slowdown.
To compensate, lenders are focusing on newer geographies, domestic higher education and diversification into credit products beyond education loans. Some are offering loans to students heading to countries such as Malta and smaller East European nations.
In August, Bloomberg reported that Warburg Pincus-backed Avanse delayed its public listing amid softening demand for loans to study in the US
In premier domestic universities, these NBFCs face stiff competition from banks, which can offer lower interest rates due to their cheaper cost of capital.
“The problem is that the ticket sizes and quality of students in US courses offered lenders greater comfort on underwriting and repayments. Risks rise when ticket sizes shrink and loans are extended for other countries or local colleges,” said a senior executive at a digital lending company with exposure to the sector.
The sector was jolted in 2022–23 by a spike in bad loans at companies such as Axio (then Capital Float), Avanse and Bajaj Finance, linked to loans given to customers of Byju’s.
“Moving away from large study-abroad loans to smaller domestic or alternative education loans disrupts the business model,” said another education startup founder. To match the ticket size of US-bound loans, platforms would need to underwrite four to five times as many students, raising acquisition costs and risks.
Repayment risk remains
Beyond demand-side challenges, lenders are also grappling with repayment risks, as education loans are typically repaid only once students secure jobs.
With stress in the tech job market, near-term repayments could be impacted, said the founder quoted above. In a credit note on Avanse issued in November 2025, Icra highlighted that education loans—largely unsecured—carry inherent risks due to long tenures, moratorium periods and sensitivity to economic cycles affecting employment. Uncertainty over job opportunities remains a key concern.
“Under such conditions, lenders prefer backing the best universities and students. But geopolitical challenges are forcing them into newer segments, significantly increasing risk,” said the industry executive cited earlier.
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