Mumbai, Oct 31
The recent clarification by the United States on the applicability of H-1B visa petitions for foreign nationals has partly alleviated concerns over the asset quality of the education loan portfolios of non-banking finance companies’ (NBFCs), according to a report released on Friday.
The steep increase in the one-time petition fee for new H-1B visa applications, effective September 21, 2025, has a bearing on the employability of foreign nationals as it will substantially increase the cost of hiring foreign workers.
The Crisil report highlights that given that the US is the largest market for NBFCs focused on education loans -- accounting for 46 per cent of the outstanding loan book as on June 30, 2025 -- this development had sparked concerns over the asset quality of these entities.
However, the US has clarified that the new increased one-time fee applies only to foreign nationals outside the US. Further, it applies only to new H-1B petitions filed and not for transition from one type of visa to another, such as from F-1 to H-1B, the report points out.
Nevertheless, the evolving and uncertain policy environment for foreign workers has already made the US, the largest market for higher education, a less attractive destination, which will lead to slower education-loan book growth for NBFCs, the report states.
Crisil Ratings director Malvika Bhotika said, “The recent clarification indicates that the increased H-1B visa fee does not apply to students who are already in the US. Additionally, these students can still work in the US for up to 3 years on an F-1 visa after completing their course under the Optional Practical Training (OPT) programme. This significantly mitigates concerns over future employability of these students and allays asset quality fears over existing loan portfolios of NBFCs in the education loan sector.”
Although the H-1B visa fee clarification brings relief to education loan-focused NBFCs, other evolving policy uncertainties in the US require close monitoring. A key policy under scrutiny is the OPT programme. Restriction or elimination of this programme altogether could exert substantial pressure on the asset quality of education loans, as students may struggle to secure employment and repay their loans as previously anticipated, according to the report.
Further, around 85 per cent of the overall loan portfolio is under contractual moratorium, where equated monthly instalment (EMI) payments have not yet commenced. Specifically, for the US-linked portfolio, it is estimated that around one-third of the portfolio will be EMI paying by the end of fiscal 2026. But as a larger proportion of the portfolio becomes EMI paying with each passing year, any future policy changes impacting employment can have a significant impact on asset quality, the report states.
To be sure, the education loan portfolio of NBFCs has performed well so far with over 90 days past due (dpd) being low at around 0.2 per cent as on June 30, 2025. Even adjusting for moratorium, the 90+ dpd for the EMI-paying portion was also low at about 1 per cent.
Amid these developments, students are exploring education opportunities in other geographies due to the increased perceived risk associated with pursuing higher education in the US.
This, combined with conscious diversification by lenders, has led to a decline in the share of the US in incremental disbursements of education loans -- this number was 15 per cent in the first three months of this fiscal compared with 36 per cent in fiscal 2025 and 55 per cent in fiscal 2024, the report added.
