This paper attempts to know about the students who have availed for student loan facility provided by banks, how many students have actually felt satisfied after availing for student loan. It also provides us information about if they aren’t satisfied from the student loan facility then what the major reasons for their dissatisfaction are. The following project states that how student loans have become a dominating source of financing higher education and also gives us knowledge about the scope of student loans in the coming future. This leads us to explore various factors that influence, viz., enrolment growth, growing private sector, bulging youth population with growing middle class with a wider acceptability of loan culture and increasing earning premium of higher education and the willingness to pay. However, various suggestions are provided in the report like how to boost confidence of students in student loan facility and make them aware about the various student loan schemes provided by government for their benefit.
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Need for the study : The growing demand for educational loans because of the cost of various professional courses going up rapidly. Education has become a costly affair recently. The problem of finance, which prevails among the students, is solved by the student loan facility provided by many banks such as public sector banks and private sector banks by the granting of student loans by them. Students earlier used to compromise their further studies since finance being a major obstacle. But the increase in growth of student loan at present and in future will help them to complete their further studies and which indirectly will result in getting a better job with a better income. The student loans however provided by banks will then result in satisfaction for students if they land with an admission in the best institute and with a great profile thereafter in their job. Sometimes, there are some problems faced by students when it comes to applying for student loans whether it may be documentation problem or credibility problem or the long hassle procedures
A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school. Education assumes significance as a provider of input for economic, political and social development, besides as a source of knowledge. Economic growth in recent years has been based on availability and quality of knowledge in any country, which in turn depends on access and affordability to education.
Hence, importance of education has increased to supply adequate and qualitative human capital. Functioning of education sector depends on availability of various resources, of which to a large extent on financial resources. Finances for education are mobilized from different sources like government spending, fees, educational loans, and others. Among these, educational loan has been seen as an alternative way of financing for education. In this background the present paper tries to analyse the trends and patterns of educational loan in India. Further, an attempt has been made to understand pattern of student loans provided by selected commercial banks. The study finds that educational loan is increasing over the year.
Some basic requirements need to be fulfilled while taking a loan. These conditions are as follows: The main determinants are the fees of the course to be pursued and the applicant’s annual family income. There must be a co-applicant, which can be either one of the parents or sibling or spouse. Loans below Rs.4 lakhs do not require a guarantor or security. For loans above Rs. 4 lakhs, there should be a third-party guarantor. For loan amount more than Rs. 7.5 lakhs, a collateral is necessary. For studying abroad, a student must also look for part-time jobs or sponsorship as the loan amount itself is not sufficient. Insurance is compulsory for studying abroad.
The repayment process should immediately start after 6 months to 1 year of completion of the course, though it can be extended to 5 to 7 years. In case of non-repayment, the student’s own credit history as well as his co-applicant’s history gets affected. Popular banks offering education loans in India State Bank of India Axis Bank United Bank Of India HDFC Bank Avanse Financial Services Credila (HDFC Bank Company) ICICI Bank Indian Overseas bank Punjab National Bank Dena Bank Vijaya Bank etc. Interest rates of education loan In India, interest rates for education loans vary according to banks. However, it can be anywhere between 12.00 % and 16.00 %, which of course depends on the bank’s base lending rate and other factors. The base lending rate for banks in India, as directed by the RBI, is around 9- 10%.
A. Chung (2003) – states that the allocation of student loans in Hong Kong has been mainly based on considerations of equity, efficiency and adequacy. The students from less well-off families receive greater financial assistance. The loan entitlement varies according to a formula, which takes each applicant’s family financial situation into consideration. The goal of the system is to ensure that no qualified student is deprived of higher education because of lack of funds which fulfils the social objectives. Second, the maximum amount of loan is adjusted so as to correspond to the general living needs of a student through regular surveys of student expenses and the compilation of a Student Price Index. The allocation of financial assistance has also been used to encourage development in areas of study required by society. At different stages, various grants and loans in Hong Kong have been targeted at students in teacher training, information technology, financial services and creative media. Moreover, the development of the government student loans scheme has not reduced the government’s financial commitment to higher education.
B. Ziderman (2003) – states that the Thai loans scheme, which began operating in 1996, is aimed at disadvantaged students, enrolled in upper secondary general and vocational schooling as well as tertiary education, in both the public and the private sector. While the scheme is aimed at the needy student, targeting is not effective. The family income ceiling set for loan eligibility is three times the income officially designated as defining poverty. Loan budget allocation to educational institutions is only very loosely tied to the social profile of the student population at a given institution. The Thai loans scheme receives a considerably higher level of government subsidy than the loans schemes in the other case study countries.
Erik Cantona and Andreas Blom (2004) – Financial aid to students in tertiary education can contribute to human capital accumulation through two channels: increased enrollment and improved student performance. The author analyzes the quantitative importance of both channels in the context of a student loan program implemented at private universities in Mexico. With regard to the first channel, enrollment, results from the Mexican household survey indicates that financial support has a strong positive effect on university enrollment. Given completion of upper secondary education, the probability of entering higher education rises 24 percent. Two data sources are used to investigate the second channel, student performance. Administrative data provided by SOFES are analyzed using a regression-discontinuity design, and survey data enable us to perform a similar analysis using a different control group. Empirical results suggest that SOFES recipients show better academic performance than students without a credit from SOFES. However, the results cannot be interpreted as a purely causal impact of the student loan program, since the impacts also could reflect selection of students.
C. Jamie Hyatt, Paul Gini and Roger Smyth (2005) – This report provides new information on the impacts of the Student Loan Scheme by looking at the income of those who used the Scheme between 1997 and 2000. One of two analytical reports published using previously unavailable information from Statistics New Zealand’s Integrated Dataset on Student Loan Scheme Borrowers. This report, Income of Student Loan Scheme Borrowers, analyses the incomes of those who used the Student Loan Scheme between 1997 and 2000. It looks at the income of people while they are studying, their income in their first year out of study and, for those who last borrowed and studied in 1997, and their income three years after they left study. It also looks at how incomes change over time and it examines the composition of borrower’s post-study income – including the incidence of social welfare benefits. The report also analyses patterns of residence overseas by borrowers.
A. Jandhyala B. G. Tilak and N. V. Varghese (1991) – It is argued here that given the resource constraints and equity considerations, financing higher education mostly from the general tax revenue may not be a desirable policy in the long run. Accordingly some of the alternative policy choices are discussed, including financing higher education from the public exchequer, student loans, graduate tax, student fees, and the role of the private sector. Among the available alternatives, it is argued that a discriminatory pricing mechanism would be relatively more efficient and equitable. While given the socio-economic and political realities, the government has to continue to bear a large responsibility for funding higher education, instead of relying on a single form of funding, efforts should be made to evolve a model of funding that provides a mix of the various methods. It is also argued that fee and subsidy policies need to make distinctions across various layers and forms of higher education.
B. Ved Prakash (2007) – The Indian higher education system is presently facing several challenges. The challenge of global competitiveness has been added to other demanding tasks such as access, equity, relevance, quality, privatization and internationalization in the face of a resource crunch. This article gives an overview of trends in the expansion of higher education and examines variations in participation across states, gender and social groups. An attempt has also been made to discuss the trends in the financing of higher education and the required resources to meet the target of allocating 6 per cent of the GDP to education. It argues that without appropriate policy interventions in school education, it would be of little use to have interventions at the higher educational level, which discriminate in favour of girls, SCs and STs.
C. Sudhanshu Bhushan (2008) – The study is one of several studies, commissioned by UGC, with the objective to provide inputs to the plan preparation so that the Planning Commission could assess it more objectively while making actual allocation. This study makes an attempt to estimate the huge investment and expenditure gap after allowing for plan support and the present level of privatization which generates potential for commercialization. The inadequate plan support is understood in terms of policy failure. It is attempted to show that huge financial gap needs to be managed through a proper strategy. Ways and means should be found to bridge this gap so that inclusive growth is taken care of. Given huge investment gap, the absence of a proper strategy will have adverse consequences on higher education. Therefore, managing investment gap through cost sharing with students should be given utmost attention.
D. Harsh Gandhar (2010) – Education loans form a part of the priority sector advances of the Public Sector Banks and most of the educational loans are taken for pursuing higher education courses. In the knowledge era, higher education has gained significance all across the world. Like other developing nations, India also faced financial crunch in the early nineties and higher education suffered in terms of allocations. And in the pursuit of raising access ratio in higher education, private institutions entered the field and there has been steep rise in user charges in most-sought-after professional courses like engineering and management in India in the post-reforms period. In the light of the facts that scholarships going to higher education have declined, in real terms, and it is a vehicle of upward mobility, the education loan scheme comes in to focus in order to raise access ratio in higher education. The main conclusion of the study is that the scheme is run purely on commercial basis and does not offer any soft options for the meritorious and the needy.
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