Donald Trump, the 45th and 47th president of the United States of America, has recently proposed a new remittance tax of 3.5%. This initiative significantly affects non-US students, including Indian students studying in the US. 

This new tax increases the cost of remittance from the US to India. In this article, we will explore the impact of this new remittance tax on education loan repayments of students studying in the US. We have also provided the remittance meaning and the education remittance tax in India. 

Education Remittance Tax in India

Before learning about the United States' new remittance tax proposal, let’s understand the remittance meaning and what the education remittance tax means. Remittance is the process of transferring money from one location to another, domestically or internationally. 

Education remittance refers to the money transferred from one country to another to cover educational expenses abroad. Students often remit their student loan funds to cover various expenses while studying abroad, including the tuition fees, living expenses, purchase of study materials, and other course-related equipment. TCS, or Education remittance tax, is the tax charged on the funds transferred from India to another country for educational purposes. 

The TCS of 5% is charged on education remittance exceeding ₹10 lakhs for funds from sources other than student loans. However, the TCS on funds transferred through education loans is 0%. This means there will be no education remittance tax when using an education loan to cover your educational expenses while studying abroad.

Trump’s new 3.5% Remittance Tax Proposal

The US House representatives have passed the ‘One Big Beautiful bill’, which includes a new tax on non-US citizens. The US President Donald Trump has proposed a new 3.5% remittance tax in this bill. The new tax will be imposed on non-US citizens for sending money abroad(out of the US), including remittances from the US to India.

Although it has reduced to 3.5% from the initially proposed 5%, this new tax significantly affects the indian citizens, including Indian students, living in the US. This impacts the education loan repayments of students currently studying and planning to study in the US. Keep reading to find out how this new tax proposal can affect your education loan repayments when you are planning to study in the US.

  • The bill is currently awaiting approval from the US Senate. 
  • Once approved, the bill is expected to be effective from 1st January 2026. 
  • No minimum amount is specified for this new tax.
  • This remittance tax is exempt for U.S. citizens.
  • This tax is applicable only to non-US citizens transferring money out of the US.

Who will be affected by this Remittance Tax?

Once Trump’s remittance tax proposal goes into effect, it will be imposed on the following people:

  • Individuals with H1B and L-1 Visas.
  • International students with F-1 Student Visas.
  • Any non-US citizens, including green card holders.

How It Affects International Students

The United States is one of the most popular higher education destinations for students across the world. With diverse career opportunities and top global universities known for offering high-quality education, students from different countries go to the US to pursue higher education and find high-paying jobs to support their families back home. 

Many international students earn money through various work opportunities to save up for their education loan repayments and to support their family members. However, the new remittance tax of 3.5% significantly affects these students studying in the US who are non-US citizens. This tax increases the cost of sending money to their home countries. Here’s an example to help you understand how the US’s new remittance tax proposal could affect international students.

Example: Suppose you are a student studying in the US and have earned some money through work. Now, when you transfer USD 500 to your family in India, 3.5% of that money will be deducted as tax. This means that your family in India will only receive USD 482.5, a USD 17.5 less than what you have transferred.

Impact on Education Loan Repayment

Here’s how Trump’s new remittance tax proposal impacts the education loan repayments of students studying in the US:

  • Increased Repayment Cost: Students pursuing higher education abroad often rely on remittances to repay their education loans. The new remittance tax significantly affects the education loan repayments of students studying in the US. The new remittance tax increases the cost of transferring money from the US to India, ultimately increasing the overall education loan repayment cost for the students. 
  • Affects EMIs: Students generally repay their education loans in the form of regular EMIs. They regularly transfer their student loan EMIs to repay the loan. When the new tax goes into effect, the tax could apply to the EMI amount transferred. Students should transfer an additional amount, considering the tax, while transferring their EMIs.

How to Minimize This Impact on Your Education Loan Repayment

The following are several strategies you can use to minimize the impact of the US’s new remittance tax on your education loan repayment:

  1. Budgeting: Creating an effective budget plan can help you minimize the effect of the US’s new remittance tax. Maintain a buffer amount so that you can transfer an additional amount while transferring your student loan EMIs.
  2. Planning: Planning early can help you manage the impact of this remittance tax on your education loan repayment. Making an effective repayment plan by factoring in tax can help you manage your finances during your education loan repayment period.
  3. Talk to a Financial Expert: Seeking advice from an education loan expert can help you manage the impact of the new remittance tax. They can help you get an effective repayment plan and provide various repayment strategies, helping you manage your education loan repayments.

Contact WeMakeScholars for expert student loan guidance. Our team can help you manage your education loan repayments by providing the right guidance. When you apply for an education loan through us, we have a dedicated post-sanction team to help you resolve your repayment issues. Contact our team by requesting a callback and get a stress-free education loan journey till the end of your tenure. Since WeMakeScholars is supported by the Ministry of IT, we offer our services for free to students.

Conclusion

Whether you are currently studying or planning to study in the US, the new remittance tax proposal significantly affects your student loan repayments. It affects your education loan repayment cost by increasing the cost of transferring money from the US to India. However, seeking advice from a financial expert and making an effective repayment plan can help you minimize its impact on your student loan repayments.

Get in touch with WeMakeScholars, an organisation partnered with over 15 public and private lenders. Our experienced team can help you throughout your education loan journey from the application process to the repayment of the last EMI. Request a callback today to contact our team and get a stress-free education loan journey.