Indian students shift to lower-cost study destinations

The increasing number of Indian students from smaller towns and cities now pursuing education abroad is transforming the profile of India’s outbound students, a profile previously dominated by aspirants from the country’s major metropolitan areas.

But with overseas study more likely to be funded by commercial loans for this group, international education carries a higher risk, experts said, and this is influencing their choice of study destination.

While two-thirds of all study-abroad aspirants still come from so-called ‘metro’ cities – prosperous economic hubs such as Delhi, Mumbai, Kolkata, Bengaluru (Bangalore) and Chennai – overseas enrolments increasingly reflect a rise in applications from tier 2 and tier 3 cities, according to the Transnational Education (TNE) Report 2024 to 2025, released this month by Indian education consultancy upGrad Study Abroad.

The report indicates that 57% of enrolled students now originate from India’s tier 2 and 3 cities, often representing households with tighter financial constraints. This explains the growing reliance on education loans, with one-third of Indian students now borrowing, usually from banks, to fund their international studies.

Cost sensitivity among these aspirants is also influencing destination choice for students who are looking for a greater return on investment, either in terms of lower fees or post-study visas and job prospects.

“Indian students today are far more intentional about their education choices and are driven by geopolitical awareness, cost consciousness, and the realities of stricter visa regimes and uncertain post-study pathways,” said Praneet Singh, associate vice-president of university partnerships at upGrad Study Abroad.

The report highlights a key transformation in the preferred destinations for Indian students, traditionally dominated by the United States, the United Kingdom, and Canada.

Now, countries such as Germany, the United Arab Emirates, Finland and France are increasingly popular among students who prioritise value, affordability and post-study opportunities.

Reliance on loans

The report, based on a survey of over 100,000 study abroad aspirants, revealed that reliance on study loans has surpassed scholarships and family savings as the main funding source. While 28% of students rely on scholarships, many still turn to families for support or self-funding, which may be less available to those from tier 2 and 3 towns.

“The shift towards loan-dependent overseas education represents both an opportunity and a risk for Indian families,” New Delhi-based Jessy Joseph, manager at Loyola Global Careers Ltd, told University World News.

“While international degrees can open doors to global career prospects, students must carefully evaluate whether the potential salary premiums in their chosen field will support loan repayment timelines.”

He added: “We're seeing families essentially betting their financial futures on education outcomes that aren’t guaranteed. The key is ensuring students have realistic employment projections and backup plans before taking on debt that could impact them for decades.”

Budget considerations are also a key factor in this trend. Nearly three-quarters of students aim to remain within an overall budget of INR3 million (about US$33,000) for study abroad, with 40% budgeting INR1-2 million (about US$11,000-22,000) and 34% budgeting INR2-3 million (about US$22,000 to US$33,000) for study abroad.

“The funding landscape is shifting, though family support remains substantial when you combine direct funding with parental assistance,” Maria Mathai, director of education consultancy MM Advisory Services, told University World News.

“What’s concerning is that students borrowing for education face enormous pressure to succeed. When you’re borrowing for education, every semester becomes about proving ROI [return on investment]. Students can't afford to experiment; they need guaranteed outcomes,” Mathai stressed.

Cost-sensitive choices

Cost sensitivity is influencing destination choices, with countries like Germany, which does not charge tuition fees, becoming increasingly popular.

Germany’s share of Indian students studying abroad has risen from about 13% in 2022 to 32.6% in 2024 to 2025, according to the report, surpassing both Canada and the US as a preferred destination and indicating a shift to high return-on-investment destinations.

Factors such as low tuition fees, favourable visa policies, and strong STEM and management programmes contribute to its appeal. The number of Indian students in Germany is projected to grow from 49,500 in 2023 to nearly 60,000 in 2025, according to Germany’s Federal Statistical Office.

Language barriers are less of a concern now, with more English-taught programmes becoming available in countries like France, Finland and Germany.

Motivations for studying abroad are also evolving. Only 16.6% of students prioritise acquiring permanent residency overseas, while nearly half (48.2%) are focused on securing better job opportunities, particularly in management and STEM fields.

Masters degrees remain the preferred choice, with 86.5% opting for postgraduate programmes, and there is a notable increase in demand for management courses, rising from 30% to 56% of chosen programmes in the past three years.

“International education is being democratised. Digital access has enabled students from smaller cities, not just metros, to pursue global studies. Today’s first-generation learners are career-focused, bring fresh perspectives, and need tailored support from universities,” according to Mathai.

Drop in traditional destinations

The traditional appeal of the US, UK, and Canada is diminishing, particularly for students from smaller cities seeking more affordable, career-orientated programmes. Regions such as Europe, the Middle East, and Asia-Pacific are now viewed as viable alternatives, the report noted.

Applications to US universities have dropped by 13% year-on-year, while Canada's share of Indian students has dwindled from 17.85% to 9.3%, a drop attributed to rising tuition costs, longer visa processing times, and policy changes.

The UK remains relevant but saw an 11% decline in student visa approvals for Indian applicants in the past year.