Fuelling Dreams of Economic Class Students
Education loans play a pivotal role in realizing the dreams of economically disadvantaged students. Explore how these loan trends are evolving and the dynamics of studying abroad versus in India.
Increased Demand
The demand for education loans in India is steadily rising, driven by factors like escalating education costs, growing higher education enrollment, and increased awareness of loan benefits. But more than often times, the banks do not allocate loans to students with low credit points. So, what is the solution? NBFCs.
Rise of NBFCs
Non-Banking Financial Companies (NBFCs) are gaining prominence in the Indian education loan market. They offer more flexible terms, catering to students with lower credit scores. The benefits are significant enough to participant in the decline of the PSU bank’s shares.
Decline in PSU Banks’ Share
Public Sector Banks (PSU banks), traditionally major education loan providers, are facing a decreasing market share as NBFCs become more competitive. To counter the NBFCs, the banks have now come up with several benefits, some of which are mentioned below.
Lower Interest Rates
Interest rates on education loans have decreased, attributed to falling repo rates and intensified market competition.
Flexible Repayment Options
Lenders now offer flexible repayment plans, including deferred payments and refinancing. This aids students from low-income backgrounds in managing repayments.
Empowering Low-Income Students
Education loans enable students from low-income families to access higher education, improving their job prospects.
Access to Quality Education
These loans grant access to high-quality institutions that might otherwise be unaffordable.
Forgiveness Programs
Several forgiveness programs are available for public service jobs, assisting low-income borrowers in quicker loan repayment.
Now that we have covered the basics of education loans, where to study? Abroad or in India if you are taking a student loan?
Study Abroad:
· Higher loan amounts due to increased costs.
· Higher interest rates due to perceived higher risk.
· Longer repayment terms to accommodate job search abroad.
· Collateral may be required due to increased risk.
· Growing interest in studying abroad, leading to more private players offering competitive loans.
Study in India:
· Lower loan amounts due to lower costs.
· Lower interest rates due to lower perceived risk.
· Shorter repayment terms due to faster job placement.
· Collateral may not be required due to lower risk.
· Growing interest in studying in India, attracting more private lenders with competitive terms.
Education Loan Market Data (Last 3 Years):
· Outstanding education loan balance increased from Rs. 60,000 crore in 2019-20 to Rs. 96,000 crore in 2022-23.
· NBFCs’ market share rose from 20% to 30%.
· PSU banks’ market share declined from 80% to 70%.
· Average interest rates dropped from 10% to 8%.
· Education loan borrowers increased from 5 million to 7 million.
The education loan market in India continues to grow, driven by various factors, including increasing higher education enrollment. Choose the path that aligns with your educational goals and financial situation, considering all available options.
