Investing In Education: A Closer Look At Student Loans In India

In 2022, the education loan disbursement scenario witnessed a remarkable surge, with 1,200 students availing themselves of educational loans, a 400 per cent increase compared to the previous year

An in-depth analysis of the loan amounts requested by students reveals a wide range, with figures ranging from Rs 10,00,000 to Rs 50,00,000 in 2022. ( Image Source :Getty )

Pursuing higher education abroad has become a top priority for an increasing number of students in India. In 2022, approximately 7.7 lakh Indian students opted for international education, marking a six-year high. This trend towards global learning opportunities is a testament to the fact that students in India are seeking out the best education options available, regardless of geographic location.

The growing interest in international education is not just limited to students fresh out of high school but also experienced professionals looking to upskill and enhance their career prospects. As a result, the demand for education loans has increased significantly in recent years, with more and more students relying on financial assistance to fund their education abroad. This increase indicates the growing need for accessible financing options to help students pursue their academic and career goals.

Changes in the Education Loan Landscape: 2022 and Beyond

Over the past decade, the education loan trend in India has steadily risen, with an increasing number of students availing of education loans to fund their higher education. However, the pandemic significantly impacted India's education loan disbursement scenario, with fewer students taking out loans in 2020 than in the previous year. Nevertheless, the situation showed improvement, with 69,898 students opting for education loans the following year.

In 2022, the education loan disbursement scenario witnessed a remarkable surge, with 1,200 students availing themselves of educational loans, a 400 per cent increase compared to the previous year.

The average loan amount requested increased by 10 per cent, while the loan interest rate fluctuated between 9 per cent and 15 per cent. Despite the pandemic's initial impact, the education loan trend in India is on a positive trajectory, with more and more students relying on education loans to finance their higher education aspirations.

Exploring the Range of Education Loans Available in India

Recently, there has been a considerable surge in the education loan industry in India, with more and more students opting for loans to finance their academic pursuits. An in-depth analysis of the loan amounts requested by students reveals a wide range, with figures ranging from Rs 10,00,000 to Rs 50,00,000 in 2022.

Interestingly, there has been an 18 per cent rise in the average loan size from 2021 to 2022, with students increasingly opting for higher loan amounts of around Rs 25 lakhs to meet their educational expenses. This trend mirrors the evolving dynamics of the education sector in India, where the demand for quality education and specialised training is rising.

Diversity among Student Loan Borrowers: Understanding Demographics and Gender

India's education loan disbursement landscape is evolving to keep up with students' changing demands and aspirations nationwide. The latest data reveals that regions such as Telangana, Karnataka, Punjab, and Maharashtra have become the go-to places for students seeking loans, primarily due to the high demand for higher education in these areas. With education costs skyrocketing, many students are pursuing loans to fund their studies.

Regarding gender distribution among loan beneficiaries, there has been a noticeable shift in recent years. While male students still dominate the statistics, the gap between male and female students availing education loans has reduced considerably. Encouragingly, more female students are pursuing higher education and turning to loans to finance their studies.

Unlocking Opportunities: Tips for Availing Education Loans

Securing an educational loan for studying abroad can seem daunting due to the various factors lenders consider, such as credit history, loan amount, and the institution where the student plans to enrol. Nonetheless, the good news is that the process has become more accessible in India due to the availability of government schemes and partnerships between institutes and financial institutions:

• Government schemes: The Credit Guarantee Fund Scheme for Education Loans (C.G.F.S.E.L.) is a government programme that offers education loans up to Rs 7.5 lakh without requiring any collateral or third-party guarantees. This scheme can help students make the loan application process more accessible.
• Partnerships: Many institutions and banks or Non-Banking Financial Companies (N.B.F.C.s) offer education loans through alliances, resulting in quicker loan processing and lower overall student costs. Students should check with their institution to see if such partnerships exist.

Students should explore all available options and choose the best that suits their financial needs. Navigating the Complexities of Education Loan Interest Rates in India The disbursement of education loans in India is subject to significant influence from lending institutions' interest rates. Recently, there has been a noticeable upswing in interest rates over the last two fiscal years attributed to global economic instability and the RBI repo rates.

As a result, many lending institutions have raised their interest rates by 2.5 per cent -3 per cent, directly impacting borrowers' loan repayment process.

Higher interest rates come from higher EMIs and more extended repayment periods, making it crucial for borrowers to prioritise loans with lower interest rates to significantly reduce their overall loan expenses. Therefore, it is imperative for borrowers to carefully evaluate the interest rates charged by various lenders before applying for an education loan.

Conclusion

In 2023, India's education loan disbursement experienced significant improvements, thanks to measures from the government and financial institutions. The streamlined process offers better accessibility and transparency to students seeking financial aid. However, to avoid future financial troubles, students must be cautious. They should conduct thorough research, compare loan options based on interest rates, repayment periods, and terms, and consider their total education cost and projected income after graduation. Moreover, exploring alternative funding sources (such as scholarships and grants) and creating a realistic repayment plan can help students minimise their reliance on loans and avoid defaulting on them.

The author is the founder of UniCreds.

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