Education loans have been the fastest-growing asset class for Non-banking Finance Companies (NBFCs). But that momentum is starting to slow down due to new rule changes coming up in the U.S. and Canada. Earlier it was 77% in FY2024 and 48% in FY2025, but now the rate is eventually declining.
“Policy uncertainties in the U.S., combined with measures including reduced visa appointments and the proposed elimination of Optional Practical Training (OPT) norms have culled newer loan originations. This has led to a ~30% decline in total disbursements to that geography last fiscal,” said Malvika Bhotika, Director, Crisil Ratings.
“Disbursements linked to even Canada, the second-largest market, fell as student visa rules turned stricter, including increased financial requirements via proof of available funds, and cap on permits. Consequently, overall education loan disbursements were up only ~8% in fiscal 2025, compared with ~50% in fiscal 2024,” she added.
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Now the focus of NBFCs has shift to other geographical locations. Locations such as UK, Germany, Ireland and smaller countries have been the other alternatives. The share of these regions in total disbursements nearly doubled—jumping from 25% last year to almost 50% in FY2025, as per the Crisil Ratings data.
NBFCs are also exploring more options such as domestic student loans as well as areas like school funding, skill development, certification programs, and coaching classes. These types of loans are usually smaller in size, so they won’t make up a big chunk of the overall portfolio. But they could help add some steady, reliable income while the global outlook gets uncertain.
Non-banking Financial Companies are playing a growing role in supporting students heading to the U.S. and Canada for higher education. These companies offer education loans that often go beyond what traditional banks covers. They not just include tuition fees, but also living expenses, travel, insurance, and even gadgets like laptops. One of the key advantages of NBFCs is their flexibility. They typically process applications faster, may consider a wider range of co-signers (not just parents), and are often more lenient with collateral and credit history requirements.
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For students going abroad, especially to high-cost destinations like the U.S. and Canada, this flexibility can be a lifeline. Many NBFCs also collaborate with international universities and immigration consultants, offering pre-approved loans based on admission letters. Some even disburse funds directly in foreign currency, simplifying the payment process.
However, stricter U.S. visa norms and lower approval rates is adding pressure on NBFCs. With heightened scrutiny around student intent, financial background, and even university credibility, many Indian students are either facing delays or outright visa denials. This has a direct effect on NBFCs, which often disburse loans based on confirmed university admissions. When students fail to secure visas after loan approval, it increases the risk of cancellations, delayed repayments, and in some cases, potential defaults.
As a result, NBFCs are forced to look for other options for its sustainability.