Education loans have emerged as the fastest-growing asset class for non-banking finance companies (NBFCs), increasing assets under management (AUM) by more than 50% in recent years. However, according to the most recent analysis by rating agency Crisil Ratings, that growth rate is expected to be cut in half this fiscal year as disbursements for educational courses in the United States slow as a result of a raft of policy changes.
The United States has implemented broad visa and policy reforms, including the suspension and subsequent resumption of visa processing under stricter social media scrutiny—particularly targeting specific countries and academic fields. The reforms also propose fixed-term student visas, enforce visa revocations based on political activism, and have sparked legal challenges and institutional backlash.
Key Highlights
- NBFC education loan AUM grew 48% to ₹64,000 cr last fiscal, but will slow sharply.
- Crisil projects AUM growth halving to 25% (₹80,000 cr), as US visa changes dampen disbursements.
These developments have increased enrollment anxiety and posed financial risks to universities. For students from India and other countries, this has resulted in longer wait times, additional documentation requirements, potential term limits, and increased uncertainty—especially for those involved in activism or studying sensitive academic disciplines.
To offset the potential business decline, NBFCs are expanding into new geographies and adjacent product segments.
While non-performing assets (NPAs) in the NBFC sector have remained stable thus far, asset quality remains a concern given global uncertainties and a significant portion of AUM still subject to contractual principal moratorium.
In fiscal 2025, NBFCs' education loan AUM grew by 48% to ₹64,000 crore, following a 77% increase in fiscal 2024. CRISIL Ratings predicts a moderate 25% growth rate this fiscal year, with AUM reaching around ₹80,000 crore.
"Policy uncertainties in the United States, combined with measures such as reduced visa appointments and the proposed elimination of Optional Practical Training requirements, have limited new loan originations. According to Malvika Bhotika, Director of Crisil Ratings, total disbursements to the US decreased by approximately 30% in the previous fiscal year.
"Disbursements to Canada, the second-largest market, also fell as student visa rules tightened, including increased financial requirements such as proof of available funds and permit caps. Overall education loan disbursements increased by approximately 8% in fiscal 2025, compared to around 50% in fiscal 2024," according to the source.
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To counteract these headwinds, NBFCs have increased their focus on other geographies. Disbursements for courses in the United Kingdom, Germany, Ireland, and smaller destinations doubled in the previous fiscal year, as students increasingly chose alternative study destinations. In fiscal 2025, these geographies accounted for nearly half of total disbursements, up from 25% the previous year. However, this shift is unlikely to fully offset the decline in US-linked disbursements.
Notably, the US share of the overall education loan portfolio fell to 50% as of March 31, 2025, from a high of 53% a year earlier, and is expected to fall further in the coming years as lenders shift their focus to other markets.
NBFCs are also diversifying into domestic student loans and related markets such as school funding and loans for skill development, certification, and coaching. While these loans typically have smaller ticket sizes and may not significantly alter portfolio composition, they can provide stability during global headwinds.
According to Sonica Gupta, Associate Director at Crisil Ratings, despite global volatility, NBFCs have maintained strong asset quality.
"The segment's gross NPAs remained low at 0.1% as of March 31, 2025. Even after accounting for the moratorium, gross NPAs remained well contained at 0.7%. However, the high growth seen in recent years, combined with the fact that approximately 15% of the portfolio is expected to exit the moratorium this fiscal year, raises some asset quality concerns. "The ability of NBFCs to scale up and maintain asset quality in newer domestic segments will be critical," Gupta said.
Finally, NBFCs' agility in navigating an increasingly complex global landscape—marked by policy shifts and changing student preferences—will be critical for long-term growth and success.
