Problems Students Face When Taking an Education Loan in India

Planning

oi-Sunil

By Sunil Fernandes

Updated: Wednesday, November 19, 2014, 9:58 [IST]

We often talk of promoting education in India and it has an often talked subject these days along with infrastructure development. But, the realty is that it is not that easy, particularly to raise finances to help children study in India or Abroad. Take a look at some of the problems faced on raising resources and why we must overcome them in the best interest of students and the country at large.

Raising Margin Money

Banks collect some form of security against the education loan. This could be bank deposits, post office deposits and various other form of securities. The list of securities and the amount of margin needed depends from bank to bank. At times a student through parents or guardian cannot raise this money. Perhaps an intervention is needed by authorities and more flexible terms are needed to help students raise money for education.

Cibil History

Sometimes, parents, guardians or whoever is initiating the loan on behalf of the student does not have a credit history. This makes it very difficult for the bank to understand the creditworthiness of the individual. You get a Cibil score only when you have taken a loan earlier. This may lead to the loan application being declined by the bank.

Proving it's a Recognised College

If you get through to an IIT or an IIM your job is easy as you do not have to establish the reputation of the college. The real problem starts when your college is not as recognised. Somehow, you may need to convince the banker on the institution that your child is joining.

Big Problems for Students Wanting to Study Abroad

For students planning to study abroad getting a loan sanctioned is not going to be easy. For one the amount involved is higher. Secondly, its difficult for the banker to ascertain that there is no fake institution involved. And lastly, there is also no guarantee that students in the end would get a job.

Never Too Easy for Bankers

It's never too easy for bankers as well. In fact, banks have seen non performing assets rising on account of education loans. They say that especially for students studying abroad, they frequently change their address and it's difficult to trace them for payment. Also, many students get salary that is just about equal to their equated monthly installment and defaults are high.

In the past there has been implementation of the education loan model of the Indian Banks Association. Whatever the model, it's not going to be easy for either students or bankers when it comes to education loans.

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