Getting Education Loan Has Become Tougher Now

Nowadays, getting education loan has become tougher for students as banks have been reducing exposure to education loans due to soaring non-performing asset levels and changes in rules, regulations, and guidelines issued by the Union HRD ministry.

Students enrolling for professional and technical courses in NAAC-accredited colleges and universities, institutions of national importance and centrally funded technical institutions only are eligible for the model educational loan scheme of the Indian Banks’ Association, a guideline, issued by Union HRD ministry. Also, the programs that have been accredited by the National Board of Accreditation (NBA) are also eligible for education loan.

From the above guideline, it is clearly evident that any professional or technical course beyond this would need not be approved for education loans such as Nursing Council of India for nursing courses and the Medical Council of India for medical courses.

In addition, banks are reducing their exposure to educational loans due to soaring non-performing asset (NPA) levels which has increased from 17 to 22 per cent in the last three years, especially in Karnataka. Economically weaker sections of the society are also not being able to get the benefit of education loans.

Public sector banks are witnessing highest default rate for loans below Rs 4 lakh where the banks take no collateral.

Mrutyunjay Mahapatra, Syndicate Bank MD said, “Students at times find it difficult to get jobs after graduation which increases the time taken to repay the loan. There have been many willful defaulters as they change cities, countries, and see no urgency to pay back the loan.”

Bankers say students from NAAC and NBA institutions stand a better chance to repay the loans as they get campus placements. Therefore preference of giving education loans has shifted in this kind of institutions and departments resulting in avoidance of many sectors. India has 59 accredited universities and 997 colleges.

According to one of the officials of Canara Bank, Chennai, the employment prospect of a student is the main criteria while sanctioning an education loan.

Students are allowed to pick three banks each in their respective fields while applying for a loan. The status of an application shall be intimated by the banks within 15-20 days to a student. But in reality, banks often do not respond within the stated reasonable period. There is no proper grievance redress mechanism in the process which makes student difficult in getting loans.