Surviving on Flex

Laid Bear

I visited Walgreens yesterday afternoon with some friends. Two were out-of-state students, but the rest were California locals. As they went on a buying spree in the foods and amenities sections, cradling packets of Doritos and carrying baskets of juices and candies, I grabbed a gallon of chocolate milk and read the price. I began my instinctive mental calculations and started converting dollars to Indian rupees.

With an uncanny sense of timing, my phone buzzed with a news alert: “Rupee hits a record low of 72.98 per dollar.” Pursing my lips, I looked at the bottle of milk again, my appetite gone.

“Hey Abhishek, are you going to buy that? Come stand in line with us.”

“No, it’s fine, you guys carry on,” I said, and put the milk back.

I remember the day Berkeley admission results were released last March. I was in my house in Mumbai, India, when I got the big news. My parents, as excited as they were, checked the conversion rate for the U.S. dollar to the Indian rupee when the information for tuition fees came out and were pretty relieved to find it at a comfortable 65.2 rupees to a dollar. Never had they imagined the rupee would slide so drastically just in the next few months.

My prudence is shared by many of my classmates. The past few months have driven icicles into the hearts of currency speculators and investors. There has been an unprecedented fall across the entire basket of Asian and emerging market currencies. While most economies have been hit with a depreciation of no more than 7 percent, India has taken the brunt of the force with a depreciation of more than 10 percent, primarily because of several intrinsic factors of its economy. 

Whether it’s buying groceries or calling an Uber, there is an unconscious effort to convert the price into rupees. I anxiously perform these conversions, often expecting an exorbitant price. Often I notice a fellow international student, from somewhere in Asia, pausing and looking at the price of a box of cookies or a packet of chips, perhaps performing the same dreadful calculations in their head.

This depreciation is like a chain around our necks that yanks us back tightly throughout the day, whenever we think of spending those valuable pieces of fresh, green paper. Until now, I had viewed such large-scale macroeconomic problems only on television or read about them in our economics class. Being in the midst of one such emerging economic crisis and being directly affected by it has made me perceive these issues from a view different from the clinical eye of an academic.

There is a massive annual influx of students from Asia into the U.S. Compared to most other U.S. universities, UC Berkeley has a large Asian population (42 percent of the international student body). A 10 percent drop in local currencies causes an $8,000 impact per year for the undergraduate students. This money is enough to feed eight middle-class families of four in India for a year. Or to fund the whole undergraduate fees for 12 engineering students in India for a year.

According to U.S. Immigration and Customs Enforcement, 77 percent of all international students in the U.S. are from Asia. The depreciating value of the yuan and the rupee is  therefore causing an immense exodus of funds from the countries we hail from.

This exodus is the root of the classic dilemma of the method of payment of the fees for international students. I remember a heated discussion between my parents and a friend’s parents about the advantages and disadvantages of paying the fees in full versus opting for the Fee Payment Plan and paying in installments. My parents believed that the Indian currency could weaken, thus hoping to send the money in full, whereas my friend’s father felt it would strengthen. Most of us ended up opting for the Fee Payment Plan, and now every month we get fees that are consistent in dollars but incrementally increasing in rupees. With every installment, I end up paying more and more.

There is a way to bypass the risks by purchasing financial packages called ETFs (exchange-traded funds). These innovative instruments hedge the owner against currency fluctuations in the exchange market. So, if I bought this at 66 rupees to a dollar, I would have been safe even when the rupee slides to the low 70s. However, buying ETFs needs planning, since these devices affect your long-term investment plans and do not come cheap.

Mitigation is not simple. Short-term solutions include tightening currency and monetary policy, but long-term effects of such measures may adversely impact trade and industry. I don’t know what path this crisis will take or how it will affect me. I have no solution at hand other than frugality.

Right now, the only stable currency I can use without fearing any depreciation or appreciation are the Flex dollars on my Cal 1 Card that I use to buy food from university-owned stores. Will sanctions and trade wars continue, or will the Asian countries find a way to regain the strength of their currencies? Or will I simply have to continue surviving on Flex?

Abhishek writes the Friday blog on the financial and economic aspects of being an international student. Contact him at [email protected] .