As per a latest study, there is an astronomical rise in interest in foreign education. Almost 83% of Indian students believe that studying abroad is going to help them land better jobs. However, financial hurdles can sometimes put a dent in these dreams. Student loans have emerged as a viable option, but students and their guardians remain reluctant to avail of this facility due to a lack of awareness.
Financial infrastructure in the student loan domain
Reserve Bank of India data shows that the approval rates of student loan applications in public sector banks have dipped to almost 25% due to a higher rate of delinquencies. It is reported that banks carried almost 3.5 times NPAs in student loans compared to their retail loan portfolios.
It is projected that a whopping 2 million students would be flying abroad spending over 100 billion dollars (approximately 100,000 crores in INR) on international education. If we add the domestic need for education funds, these numbers are much higher. In the current year, banks have so far disbursed approximately 11,000 crores which is nowhere close to the actual demand for such loans.
What is the current situation of Education Loans in India?
Current processes of getting a student loan involving multiple visits to branches and a high rate of declining loan applications dissuade students from applying for loans. The conventional policies of the banking system requiring third-party guarantees, collaterals, and minimal moratorium period act as major barriers for students looking to avail student loans.
How taking a student loan is beneficial:
However, one should understand some advantages of taking a student loan:
1. It helps you become self-reliant
2. Tax benefits u/s 80 E of Income Tax Act which allows entire interest paid on student loans tax-free.
3. By taking a loan, you can build a healthy credit score which will help you get cheaper loans in future
4. You take the burden of funding your education away from your parents and gift them their future back.
What is the future of student loans?
Recognizing the lacuna in the current system and the wide gap in demand and supply, there have emerged many new-age online student loan platforms that want to make education accessible for all by providing agile and student-friendly loan products for all types of education loan needs.
Through a dedicated focus on technology, they are reshaping the customer experience and customer journeys in this domain. Some of the features include
Quick & online Processing
Real-time status of your application
No requirement of parents as co-applicants for some products
Up to 100% funding of the cost including tuition fees, living and travel expenses etc.
No requirement of collateral security against the loan for good students
Flexible repayment options
Edu-fintech companies are relentlessly working to utilise tech innovation to create agile and modern loan products keeping student needs at the forefront. By reducing the need for collaterals and guarantees through effective underwriting, they are trying to broaden the reach and access to financial assistance to middle-class and lower-class families that genuinely need it.
Private players and technology-driven NBFCs focused on student loans can play a critical role in bridging the gap in demand and supply in the education loan sector.
Since many new options are now opening up providing loans at reasonable rates through easy and efficient processes, any aspiring student must do diligent research and analysis and choose the best financial institution for their funding needs.
The author is the Founder & CEO of Kuhoo Fintech
(The Free Press Journal publishes articles by study abroad consultants, Consulates, foreign universities, international students, and much more every Saturday to give its readers a glimpse of the world of overseas education.)
(If you have a story in and around Mumbai, you have our ears, be a citizen journalist and send us your story here. )