India’s education loan growth slows to 25% in FY26 as US and Canada tighten student visa norms. NBFCs pivot to new countries and domestic loan segments.
After years of rapid expansion, India’s education loan segment—especially among non-banking finance companies (NBFCs)—is showing signs of slowing down, largely due to international policy changes affecting students’ overseas education plans. According to a recent report released by Crisil Ratings, while NBFCs have seen education loans emerge as one of their fastest-growing asset classes, the growth momentum is expected to moderate significantly in the current financial year (FY26).
Over the past few years, the education loan portfolios of NBFCs grew at breakneck speed, witnessing over 50% growth in assets under management (AUM). In FY25 alone, AUM jumped by 48%, reaching ₹64,000 crore, following an even sharper growth of 77% in FY24. However, this fiscal year, the pace is expected to slow to around 25%, with AUM projected to touch ₹80,000 crore.
Why the Slowdown?
The primary factor behind this slowdown is a set of recent policy changes in key overseas education destinations—most notably the United States and Canada. The US, traditionally the most popular destination for Indian students, has made several administrative and immigration-related changes that are affecting student mobility and, by extension, education loan disbursements.
“Policy uncertainties in the US, including reduced visa interview appointments and proposals to eliminate Optional Practical Training (OPT), have dented student confidence. As a result, education loan disbursements to the US declined by nearly 30% last fiscal,” explained Malvika Bhotika, Director, Crisil Ratings.
Canada, which ranks as the second-most preferred destination for Indian students, also introduced stricter student visa rules. These include increased financial documentation requirements and a cap on student permits, both of which have made it harder for students to secure admission and funding.
Impact on Loan Disbursements
Due to these global developments, the overall growth in education loan disbursements for FY25 was a modest 8%—a stark contrast to the 50% growth seen the previous year. This drop highlights how external policies and global uncertainties can directly influence India’s education financing sector.
NBFCs Shift Focus to New Destinations and Products
To adapt to the changing global scenario, NBFCs are now shifting their focus to alternative education markets such as the United Kingdom, Germany, Ireland, and other smaller European nations. These countries have witnessed a surge in student interest, and disbursements for courses in these destinations have doubled over the past year. The share of such geographies in total education loan disbursements increased from 25% in FY24 to nearly 50% in FY25.
Additionally, NBFCs are beginning to diversify their portfolios by venturing into domestic student loans and related segments such as loans for school education, coaching, skill development, and certification courses. Although these segments involve smaller loan amounts and are unlikely to dominate the overall portfolio, they are considered more stable and less vulnerable to international disruptions.
Challenges Ahead
While NBFCs have shown resilience and agility in the face of changing market conditions, there are challenges on the horizon. A significant concern is asset quality. Although non-performing assets (NPAs) have remained stable so far, about 85% of education loan portfolios remain under a contractual principal moratorium. This means repayment obligations are still pending for a majority of borrowers, and any disruption in global job markets or student migration trends could affect repayments.
Sonica Gupta, Associate Director at Crisil Ratings, noted, “The ability of NBFCs to successfully scale new domestic products and maintain asset quality will be crucial. Their adaptability in navigating global uncertainties and shifting student preferences will determine long-term success.”
Looking Ahead
With students exploring more diverse study destinations and NBFCs widening their reach beyond traditional markets, India’s education financing ecosystem is evolving. While growth rates may slow in the short term, the sector remains a vital enabler of educational aspirations. However, sustaining this role will require financial institutions to remain agile, proactive, and responsive to both global trends and local opportunities
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