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Watching your child open a college acceptance letter is one of the proudest moments in a parent’s life. But with college comes a host of financial decisions that are further complicated if your child is planning to study abroad.
Paying for tuition, textbooks and room and board isn’t as simple when a child is in another country — especially with foreign exchange rates complicating the process. Fortunately, parents can greatly simplify the process by starting research early and approaching international tuition fees with a plan in mind.
Parents should peruse the university’s policies and instructions on international tuition. Many have advice sections for international students, detailing when and how international payments can be made. Some universities prefer that payments be made through a specific provider.
— Chris Shepherd, co-founder and managing director of The Education Abroad Network
Parents should also research government regulations in their home country and the country where the university is located. Some have more red tape than others regarding sending money overseas, says Chris Shepherd, co-founder and managing director of The Education Abroad Network, which is headquartered in Chicago and places American students in universities across the Asia-Pacific region. For example, due to restrictions, it can take several days or more for wire transfers in Thailand to be received. Delayed tuition payments can have consequences for students who may be barred from attending class until payment is in. “It’s important to know [restrictions] beforehand to plan for them,” Shepherd says.
Foreign exchange rates can significantly affect how much individuals pay. “[Rates] can fluctuate over the course of a student’s program,” says Suying Hugh, international transition advisor at the Centre for International Experience at University of Toronto. “It’s important to have some flexibility built into your budget.”
Fluctuations result from shifts in demand for one currency over another in the global marketplace. When a country’s economy is more stable, demand for currency is typically higher, making it more valuable — and vice versa. Since changes can occur, Hugh recommends using an online currency tracker to get an idea of where the currency stands, relative to where it’s been in the past.
When exchange rates work in favor of their home currency, parents should consider taking advantage by purchasing a larger sum of the host currency and saving it for future international payments. “If you have the financial means to do so, you could prepurchase the tuition you think you will need if the rate is especially favorable,” Shepherd says. In order to facilitate the transfer of funds, the family would need to set up a bank account for the currency they are purchasing. The bank account doesn’t necessarily need to be in the host country, Shepherd says, but that is typically the easiest option.
“The important thing here is they will then not need to worry about foreign currency fluctuations, which can be volatile — they will be fully hedged,” Shepherd says. “In addition, other countries have much higher interest rates than the U.S., so there would be additional interest earnings by having the money in another currency versus the U.S. dollar.”
Although it may be convenient to send funds from a personal bank account, know that banks add a markup on foreign currency exchange transactions. Alternatively, online foreign exchange services offer direct transfers to bank accounts at lower rates than banks.
Students who plan to study abroad for over a year should consider opening a foreign bank account so they can easily access funds for education and living expenses. When choosing a bank, parents should consider its proximity to their child’s campus for routine withdrawals and speedy resolution of potential banking issues.
While there is a bit of due diligence involved in making international tuition payments, it’s a small investment of time compared to the education and opportunities a child will experience.
Example: 1USD = xx INR
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