Education Loan: Food for Thought

Education Loan: Food for Thought

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education loan

One of the most important considerations for parents these days is to check their savings for their children’s education. Financing for education has been draining the pockets for quite some time and these days even school education financing could go above their head. People have no choice but to head towards additional revenue just to support the payment of fees. But not many are successful in this and thus they have to resort to getting loans for their children.

A student can get a loan for higher education for fees payable, accommodation charges, exam fees, book fees and other reasonable expenses required to complete a course. The cap is Rs. 10 lakh for studying in India and Rs. 20 lakh for studying abroad and this amount may vary with respect to the college chosen by the student. There is no requirement of security up to Rs. 4 lakh while parents need to guarantee for an amount up to Rs. 7.5 lakh. Any amount more than Rs. 7.5 lakh would need parents being a co-borrower and a collateral security for a suitable value. The Top Engineering colleges in Andhra Pradesh, Karnataka, Delhi, Uttar Pradesh, and Universities in other metropolitan cities also provide these loans, so as to help the students with the payments.  The repayment starts within 1 year after college or 6 months after their first job, whichever is earlier. The tenure can even go up to 10 years for repayment. This repayment of loan can be used for income tax exemption.

Students who have opted for loans have risen exponentially within half a decade. Thanks to the efforts of the government, banks have been made to give loans for education. But do banks give loans to all students without profiling?  We need to dwell deeper. According to RBI rules, the Education loans have been included as part of priority sector lending which has made banks to provide need-based finance to meritorious students. This means that a student has to show his “creditworthiness” as a borrower and banks can either sanction or reject if not satisfied. Colleges such as Ashoka University Sonepat, Gitam University, Bangalore, etc have tie-ups with a lot of banks, making it easier for the students to get loan easily.

Bad Education loans have risen by 142% in just 3 years. This has burdened the State-owned banks which own for 90% of the education loans. The total NPAs for default of payments stood at Rs. 6336 crores at end of December 2016 which is 8.76% of total education loan outstanding. This has made banks to think twice before giving a loan and they have reduced their risk lending money for the students. One major reason is that the number of educational institutions has increased drastically while the quality of the education has gone down and another reason is the slowdown in job creation and the quality of students have gone down significantly. Even the top companies choose only premier colleges and even the second-tier institutes are finding hard for placements. Thus a whole batch of students comes out as graduates and postgraduates being jobless but with a large sum of loan that has to be repaid.

After looking at both the perspective of students and banks, we see that both are stressed and pressurized when loans are not being paid. The primary reason for this stress is the poor selection of college which has an effect on the prospect of getting a job for loans repayment. Is there a solution for this? Yes, it would be none other than GetMyUni.

GetMyUni is a one-stop solution provider for students of all disciplines to find a college for both graduation and post-graduation. It shows all the information of each and every college from fees, infrastructure, admission procedures and placements. Students can enquire from the experts or directly see the rating of students of the particular institution and the Institutional ranking given by various forums. For the ones who are not able to choose, there are options to compare different colleges on various parameters by providing latest and complete information. A student can even apply for college from the website directly. The students who need clarity on courses can go through the educational blogs and its reviews to know its current standing in the industry. Thus, GetMyUni is the best, for the students, to become the best.

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