A few years ago, Neha Virmani, 26, took a loan to finance an MBA course at the Indian Institute of Planning and Management in Pune. “It was a very painful process,” said Virmani, who now works at an IT firm in Mumbai. “It’s a very lengthy process and the paper work is killing.”
Several students face the same plight as Virmani, according to a report by Parthenon Group, a consultancy firm, which conducted a survey of 205 students across the country on how they financed their higher education (includes graduate and postgraduate education). According to human resource development ministry estimates, around 24.9 crore students are expected to enroll in higher education in India by 2016.
Of those surveyed, 25% said they needed loans for higher studies, but faced several difficulties such as unfavourable loan terms and lack of awareness.
The report, which was released recently, also compared the financing system for higher education in India and the US. While approximately 60% students in the US took an education loan in 2010, in India, the figure was less than 10%.
“There are issues for students and for banks,” said Karan Khemka, who leads the Emerging Markets on Educa-tional Practices at Parthenon Group. “Students who want loans are unable to get them, while banks face problems of high default rates.” Also, banks do not actively push student loans as a product, added Khemka.
The report found the average default rate on student loans higher in India. It was about 16% to 17% compared to 7% for federal student loans and 3.5% for private student loans in the US. Also, Indian banks gave loans for shorter time periods between two and seven years while it was 10 to 30 years in the US for federal loans and 5 to 20 years for private loans, said the report.