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<ul><li>Over 90% of education loans are provided by public-sector entities in India, according to the Reserve Bank of India. </li><li>For most PSUs and private banks, there is no security or marginal requirement value upto ₹400,000 loan amount. </li><li>The <keyword id="6360098" type="UNKNOWN" weightage="20" keywordseo="Education-loan">education loan</keyword> market witnessed a 25% dip in the last four years — with 250,000 students availing education loan as on March 2019.</li></ul>Most private banks now lend only to students enrolling in the partnered universities including Indian Institute of Technology (IITs), Indian Institute of Management (IIMs) and National Institute of Technology (NITs). In spite of that, a large chunk of education loans are provided by state-owned entities. Over 90% of education loans are provided by public-sector entities in India, according to the <a href="https://timesofindia.indiatimes.com/business/india-business/edu-loans-in-india-shrink-25-in-4-yrs/articleshow/69490291.cms">Reserve Bank of India</a> data. This may also be due to the lower interest rates offered by the public sector undertakings. The State Bank of India (SBI) offers upto ₹4 million loan, which is valid for a year after the completion of the course. The interest rate applicable on the loan ranges from 8.6% to 10.7% per annum. Others like Punjab National Bank (PNB) and Andhra Bank have no cap on the loan amount, with interest rates varying from 8.4% to 11.5%. While the private entities — HDFC Credila and South Indian Bank — offer slightly higher interest rate on education loans. HDFC Credila’s interest rates stand at over 12.55% on loans above ₹100,000. The South Indian Bank has interest rates between 9% to 16% on education loans. For most PSUs and private banks, there is no collateral (security or marginal requirement value) upto ₹400,000 loan amount. However, banks do require a collateral security of up to 5% for the loans exceeding the given amount. Drop in Loans In the larger picture, the education loan market witnessed a 25% drop in the last four years — with only 250,000 students availing education loan as on March 2019, TOI <a href="https://timesofindia.indiatimes.com/business/india-business/edu-loans-in-india-shrink-25-in-4-yrs/articleshow/69490291.cms">reported</a>. This is due to the increased defaults in this sector, adding to <keyword id="126418" type="ORGANIZATION" weightage="20" keywordseo="non-performing-assets">Non Performing Assets</keyword> (NPA) of banks. Indian banks saw a rise in education loan defaults, with the number of bad loans in education increasing from 7.3% to 9% in 2014, according to <a href="https://www.businessinsider.in/study-abroad-education-loans-in-india-see-rise-in-defaults/articleshow/68095265.cms">Indian Banks Association</a>. The Indian government is now stepping up its efforts to address challenges in the education sector. The expenditure on education has <a href="https://economictimes.indiatimes.com/industry/services/education/education-spend-rose-to-4-6-of-gdp-target-6-javadekar/articleshow/68245671.cms">reportedly</a> increased from 3.8% of GDP in 2014 to 4.6% in 2018, according to Prakash Javedekar, Union Human Resource Minister. See also: <a href="https://www.businessinsider.in/study-abroad-education-loans-in-india-see-rise-in-defaults/articleshow/68095265.cms">More Indian students are defaulting on their overseas education bank loans: Report</a> <a href="https://www.businessinsider.in/modi-government-announces-50-million-scholarship-for-minority-students/articleshow/69750288.cms">Indian government introduces ₹50 million scholarship for minority students — dedicating half of it to girls</a> <a href="https://www.businessinsider.in/budget-2019-what-is-eligibility-for-education-loan/articleshow/67734560.cms">Applying for an education loan? Here’s what you need to know</a>

Indian students are still relying on government banks for education loans

<ul><li>The number of bad loans in education reportedly increased to 9% in March 2018 from 7.3% as of March 2016. </li><li>As of 2016, over five million international students were studying abroad out of which 300,000 were Indians. </li><li>As per data by Reserve Bank of India, spending on tuition and accommodation have increased by 44% during 2013 and 2018. </li></ul>With more Indian students flying abroad to finish their studies, many have relied on hefty education loans but have been unable to pay down their student debt. According to a LiveMint report, which <a href="https://www.livemint.com/money/personal-finance/is-the-education-loan-burden-worth-that-course-abroad-1550502001583.html">cited</a> data by the Indian Banks’ Association, Indian banks have seen a rise in education loan defaults. The number of bad loans in education increased to 9% in March 2018 from 7.3% as of March 2016, said the report. There were about 2.79 million active education loans as of March 2018. While securing an education loan may have become easier than before but repaying them has seemingly become difficult primarily because of a shrinking job market, say experts. Additionally, tighter visa rules for working overseas in the West has forced many Indian students to return home after finishing studies, with huge debts and find work in a market where the wages often aren’t as high. The US, for instance, has a cap on the H1B visas for people including students who have studied there. Increasing costs of higher education, particularly overseas, has partly driven more students to avail education loans. According to CRIF High Mark, a credit bureau, there has also been an increase in the average size of new loans given each year, said the LiveMint report. The average size of new education loans varied -- from ₹895,000 in September 2018 to ₹708,000 at the end of FY18. In comparison, the average loan size for new loans was ₹503,000 in 2015, according to the media <a href="https://www.livemint.com/money/personal-finance/is-the-education-loan-burden-worth-that-course-abroad-1550502001583.html">reports. </a> Spending by Indian students <a href="https://www.livemint.com/money/personal-finance/expenses-you-shouldn-t-overlook-when-planning-to-study-abroad-1548784318439.html">has also spiked</a> in recent years. As per data by Reserve Bank of India, spending on tuition and accommodation have increased by 44% during 2013 and 2018. India also has high interest rates on student loans that range from 8.50% to 10.30% per annum. Indian students make up the second largest pool of international students globally after China, said CNBC. As of 2016, over five million international students were studying abroad out of which 300,000 were Indians, <a href="https://www.cnbctv18.com/economy/a-new-wave-of-indian-students-now-studying-abroad-2096281.htm">according</a> to UNESCO data. The number of Indian students studying overseas increased to 553,000 in 2017. See also: <a href="https://www.businessinsider.in/campus-placements-at-iim-mdi-tiss-iift-see-salary-packages-above-2-million/articleshow/67898696.cms">India’s B-schools are seeing higher salary packages for graduates — and it’s not just IIMs</a> <a href="https://www.businessinsider.in/careers/accenture-bcg-dominate-campus-placements-at-business-schools-in-india/articleshow/68045145.cms">Consulting firms Accenture, BCG dominate campus placements at India’s B-schools this year</a>

More Indian students are defaulting on their overseas education bank loans: Report

Educational loans are highly sought after by students aspiring to pursue their higher studies. Banks have programs to offer these loans to deserving as well as meritorious students who will need financial support to continue their higher education. But, not all students are eligible for educational loans. Here we list the criteria set by the banks that will decide a student’s eligibility for educational loan. Factors considered for educational loan eligibility When the banks will decide to accept a candidate’s application for educational loan, the following criteria will be considered. <ul><li>The academic history of the student, qualifications earned, the performance evident through marks, achievements and credits. </li><li>The course for which the student seeks the loan. The courses applied for must be accredited and also worth pursuing endowed with good career prospects. The courses that have a good chance of placement will only be considered in order to ensure that the student will be able to repay the loan. </li><li>The institution in which the student wants to pursue the course should enjoy a good reputation and accreditation.</li><li>If the student can provide a collateral and the value of the collateral offered by the student</li><li>Who is guaranteeing the loan – including the parents, acceptable third parties, and co-borrowers and if the co-borrowers have the required credibility and job profile </li></ul>Courses that are eligible for getting an educational loan The students applying for an educational loan can choose to study any course provided that the course and the institution are accredited by the concerned authority. The courses that can fetch educational loans include. <ul><li>Undergraduate degrees or diplomas and some specialized courses</li><li>Postgraduate degrees or diplomas and some specialized courses</li><li>Phd research study and Doctoral Programs</li></ul>Banks come forward to sanction educational loans for some specialized courses, diplomas and training programs. Since not all banks will be ready to offer loans for such courses, a student can research to find the bank that will provide the loan necessary if there are strong job prospects or chances to advance the present career connected with the course opted for. Here is a list of some special courses that are eligible for loans by some banks. <ul><li>Certificate programs in computers</li><li>Diploma in engineering</li><li>Certificate courses offered by ITI</li><li>Data entry operator training program</li><li>Nursing or teacher training certificate courses and B.Ed</li><li>Diploma in agriculture</li><li>Diploma in veterinary medicine</li><li>Diploma or certificate courses that are job-oriented</li><li>Degree or diplomas in the fields of aeronautical engineering, pilot training, and shipping that are provided by some reputed and accredited institutions for the purpose of jobs in India and abroad. </li><li>Vocational courses offered by a Government department or body</li><li>Courses offered by skill development organizations like State Skill Corporations, State Skill Missions, or National Skill Development Corporation.</li></ul>

Applying for an education loan? Here’s what you need to know

Going overseas for higher education is quite a common trend now. But as common as it is, going abroad for further studies is equally expensive and can literally burn a hole in your pockets. While most banks are willing to offer education loans for higher studies, but is it enough for us to just sign the documents without any planning? 
	 
	BI India lists down a few tips for a better financial planning before you go overseas for your higher education. 
	 
	Scout for the best loan option 
	 
	It is a tedious job but it is extremely important for anyone to go through and compare the various loan options available to you. And once, you zero in on the offer that you feel suits you, you can negotiate the terms and conditions. 
	 
	Read the document carefully 
	 Understand your loan’s terms and conditions and then sign the papers. There are times when your <keyword id="6388045" type="COMPANY" weightage="20" keywordseo="emis">EMIs</keyword> have to be paid immediately after you complete your higher education, unlike in most loans where the EMIs start only after six months or more of course completion. 
	 
	Remember fluctuating rupee 
	 
	It is important to remember that fluctuation in rupee value will impact your loan. One must remember that the loan will be rupee denominated and hence on conversion into your desired foreign currency, the amount will be lower. 
	 
	“A student has to be prepared to bear this foreign exchange risk. For example, a student applies for an education loan of Rs 20 lakh. However, if the rupee weakens further due to exchange rate fluctuations, there would be an increase in the cost of education from the rupee perspective,” said Harshala Chandorkar, senior vice president, Consumer Services at <keyword id="6380215" type="ORGANIZATION" weightage="20" keywordseo="CIBIL">CIBIL</keyword>. 
	 
	Plan your course of action 
	 In most cases, parents often sign up as a guarantor for the loan availed by you. So, its better to plan your course of action beforehand because if you delay the EMIs or default on them, it will adversely impact their <keyword id="2405124" type="UNKNOWN" weightage="20" keywordseo="Cibil-Report">CIBIL report</keyword> as well. 
	 
	“Rupee depreciation also adds to the woes of many parents who fund their children’s education from their savings as they have to shell out more money. As a guarantor on your education loan your father / mother is liable for its repayment in case you fail to pay the EMIs. His / her credit report will show the details of this education loan and defaults will also show if you do not repay the EMIs on the loan. Thus, your repayment behavior will also impact your parents’ credit score,” she added. 
	 
	Spend carefully 
	 
	While you are overseas, pursuing your higher studies, it is important to do budgeting and know how much can you spend. Becoming a spend thrift can put additional burden on your financials, thus forcing you to delay or default on your loan repayments, negatively affecting your CIBIL report. In case, you cannot avoid certain expenses, consider taking up a job to meet your additional expenses. 
	 
	“If you have taken a loan to study abroad, timely repayment should be the top most priority. Like any other loans and credit cards, education loans are also reported to the CIBIL and get reflected in the borrower’s CIBIL Report. Transactions related to repayment of your education loan will also get reflected in your CIBIL Report and impact your CIBIL Transunion Score. Irregular or non-repayment of EMIs on your education loan will lead to an unhealthy CIBIL Report which can hamper your chances of availing any other loan or credit card in the future,” said Chandorkar. 
	 
	Negotiate 
	 
	This should be your last resort if you find repaying the loan difficult. Try negotiating with your banks for increasing your loan term or lowering your EMIs. “With the impact of rupee fall, one can also ask for further loan from banks. Recently banks have also introduced top-up scheme for education loans where they fill the gap created by the exchange rate fluctuation. This will certainly increase the payback amount but it will help students continue with their studies,” she noted. 
	 
	Image Credit: www.shandelyaoverseas.com

Planning to study abroad but no financial planning? We are happy
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<ul><li>On an average, a loan could get extended by around ₹3.5-5 lakhs depending on the rupee exchange value at the time of the loan, said Ashwini Kumar, VP at MPower Financing.</li><li>Apart from tuition cost, Indians students also have to support themselves abroad and living expenses are going up as well.</li><li>The third part of the triple whammy is from rising interest rates. </li></ul>19-year-old Sakshi Shewale from Mumbai has been planning to go to Georgia in Europe for her medical course. The course costs around ₹30 lakh for the five-year course and unlike many others, her father is bankrolling it, without her having to take a loan. Yet, in the last few months a lot has changed. Europe is in the throes of a possible recession, the value of Indian rupee is depreciating and more importantly, inflation in the continent is also impacting budgeted expenses. “Looks like I might have to take a loan after all because my living expenses will change drastically. I have spoken to students who live there and they all tell the same story,” Shewale sighs. Her story is similar to a number of Indian <keyword id="15304331" type="General" weightage="20" keywordseo="students-wanting-to-study-abroad" source="Orion">students wanting to study abroad</keyword> but those who have already taken admission this year have it worse – on rupee depreciation alone. Since the beginning of 2022, the rupee has fallen more than 7% against the dollar. <div type="image" title="rupee" height="900" width="1200" msid="94974075" hostid="261" sizebytes="49035"></div> ‘Loans could balloon by ₹3.5-5 lakh’ If a student had taken a loan in March this year, when rupee was at 75 against the dollar, it would add a few lakh into the loan, as per Ashwini Kumar, VP at MPower Financing, a public benefit corporation that helps students to study abroad. For every dollar of the loan, an extra ₹7 is added and it would inflate the loan and the interest as well. “On an average, a loan could get extended by around ₹3.5-5 lakh depending on the rupee exchange value at the time of the loan,” Kumar told Business Insider India. The problems don’t end there. Apart from tuition costs, Indian students also have to support themselves there and living expenses are going up as well. The Eurozone inflation is being <a href="https://www.euronews.com/next/2022/09/30/record-inflation-which-country-in-europe-has-been-worst-hit-and-how-do-they-compare">pegged at 10%, as per estimates</a>. Inflation in the US too has recently <a href="https://economictimes.indiatimes.com/news/international/us/us-inflation-soars-to-8-2-per-cent-highest-in-40-years/articleshow/94842348.cms">hit a 40-year high</a>, messing with economics of students abroad. Most Indian students head to these destinations. The third part of the triple whammy is from rising interest rates. This financial year, the Indian central bank raised repo rates four times and the base rates now stand at 5.9%. More interest rate hikes are expected in the near term and most experts see base rates stabilising once it’s around 6-6.5%. “Loans linked to MCLR and BPLR will see a gradual increase in the interest rate in the near future. The EMIs of current and future borrowers will rise due to this,” said Ankit Mehra, CEO and co-founder of GyanDhan, an education loan market place. Moreover, the psychological impact of a possible depreciation in rupee will also largely play on the minds of US and Europe-bound students and their parents, said Kumar. Students still eye foreign degrees Studying abroad is going to become much more expensive. However, experts say that this is not discouraging students from pursuing their higher education dreams. Shewale too intends to absorb the extra costs but does not intend to change her plans. “The return on investment in terms of quality of education, career growth, international exposure, skills developed, and networking has more intrinsic worth,” said Mehra. Kumar too says that students who are planning to go abroad this year and the next, have been planning it two years before, and it’s unlikely that the road bumps will change their plans, though some may choose to delay it. “There are a few sections of society wherein parents are managing the EMIs on the border, which is due to get affected. A student who had to arrange ₹25 lakh for their overseas education prior to the rate hike will find it difficult to arrange for additional funds given the parental income has not increased proportionally to the hike in the interest rates,” said Mehra. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/maggi-maker-nestl-indias-net-profit-grows-8-3-to-668-crore-in-q2/articleshow/94960866.cms">Maggi maker Nestlé India’s net profit grows 8.3% to ₹668 crore in Q2</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/ultratech-cements-profit-tumbles-42-yoy-to-756-crore-due-to-higher-power-raw-material-costs/articleshow/94964556.cms">UltraTech Cement’s profit tumbles 42% YoY to ₹756 crore due to higher power, raw material costs</a>

Indian students going abroad to face a triple whammy of inflation, forex and interest rates

<keyword id="2654844" type="UNKNOWN" weightage="80" keywordseo="Ananya-Birla">Ananya Birla</keyword>, daughter of <keyword id="6354955" type="PERSON" weightage="80" keywordseo="Kumar-mangalam-birla">Kumar Mangalam Birla</keyword>. Boom! You’re already thinking of a spoilt rich brat born with a golden spoon. You can’t be more wrong. 
 Miss <keyword id="39439" type="COMPANY" weightage="80" keywordseo="birla">Birla</keyword> ain’t that in any way humanly possible. This Oxford-educated 21 year old has actually stridden into the world of <a href="http://www.businessinsider.in/searchresult.cms?query=micro-finance">micro-finance</a> with <keyword id="3238407" type="UNKNOWN" weightage="60" keywordseo="Svatantra-Microfin">Svatantra Microfin</keyword>, her own enterprise that aims to empower women in the under-served rural areas of Maharashtra and Madhya Pradesh. 
 
Her Mumbai-based startup was officially launched on March 1, 2013, and offers micro loans at one of the lowest interest rates in the industry. Livelihood related loans are offered at 22%, while the standard interest rates are 25-26%. 
 
How do rural women reach you? 
They have phones, and we have hoardings all over <a href="http://www.businessinsider.in/searchresult.cms?query=rural+India">rural India</a>. 
 
They can call, or come into one of our branches at any time. Our officers are also constantly on the lookout. 
 
Can women pay back the loan amount? 
We’ve got 100% repayment rates. It all boils down to the organization. 
 
It’s more about whether we’re lending to the right people than what they’re doing wrong. The onus is on us, and not on them. We only lend to people who can handle these loans and have running businesses. We also do loan utilization checks on a regular basis. 
 
Don’t people object to constant checks? 
Quite contrary to the stereotype, they’re very open-minded. They never object to any checks at all. They’re actually grateful to have got that loan. 
 
The other substitute really is money-lenders who give out loans at 100-200% interest rates. 
 
How big is the challenge to go cashless in a majorly cash-driven economy? 
The entire idea of an <a href="http://www.businessinsider.in/searchresult.cms?query=entrepreneur">entrepreneur</a> is to drive change. If you challenge a system, it’ll take time, and you cannot give up. 
 
There was a li’l bit of a hiccup, and in less than a month people realized the benefits, and now we’re completely cashless. 
 
We’re actually moving towards cashless collections as well. It’s the way forward. 
 
Most common problem for Rural Women 
Children’s education is a huge issue that pops up every time I talk to them. 
 
They’re very keen to educate their children. I haven’t seen so much of ‘my husband doesn’t give me money’ and all of that. 
 
Getting <a href="http://www.businessinsider.in/searchresult.cms?query=educational+loans">educational loans</a> is a big challenge for the rural crowd. They want to send their kids to under-grad and post-grad colleges, but don’t have the money for that. 
 
How do you see the ‘Birla’ tag? 
I take that in a positive manner. It’s very important to stay grounded, understand your values and ethics, and use the money you’ve got in the right manner. 
 
This is my first venture. I’m coming up with an e-commerce venture very soon.

Exclusive: This Junior Birla’s
packing in a Big Punch, meet Ananya Birla

In its annual monetary policy announced on April 1, the Reserve Bank of India (RBI) issued an advisory to banks asking them to consider abolishing pre-payment penalty on floating rate loans. The regulator has also indicated that if banks failed to implement the advisory, it might make it mandatory. If implemented, the move will benefit borrowers of auto, personal, education loans, who are unable to switch over to cheaper loans due to the stiff prepayment penalty of 0.5% to 4%. 
 
Earlier, the RBI had scrapped the pre-payment penalty on floating rate housing loans. The regulator's working committee's draft report on credit pricing also calls for more transparency, fairer pricing and penalty structures. Clearly, it indicates the path the RBI wants banks to follow. 
 
"In spirit, the advisory's objective is to promote transparency in pricing. Often, we have seen that the interest burden on car loans or personal loans never goes down, as rate cut benefits are rarely passed on to the customers. An option to switch or pre-pay without any obstacles could force banks to treat their existing customers on par with the newer ones," says Harshvardhan Roongta, CEO, Roongta Securities. 
 
In the absence of this penalty, the customer can shift the loan to another bank that offers a cheaper rate. "The process (of transferring loan) will be easier if pre-payment penalty is abolished. At the same time, the pricing of loans by banks will also be competitive to ensure that good customers remain with the bank," adds VN Kulkarni, chief credit counsellor with the Bank of India-backed Abhay Credit Counselling Centre. 
 
Clean Your Portfolio 
 
Experts say borrowers shouldn't hold on to their existing "unproductive" loans like auto and personal loans in anticipation of an abolition in penalty for pre-payment of loan. They advise individuals to clear them with higher interest rate, even if it means paying the penalty. Credit counsellors call for full pre-payment of car, personal and credit card dues. "Prepaying a loan which has no benefit for holding on to is always advised. 
 
Credit card or personal loans should be closed as soon as the requirement is over, and with the first available cash in hand," says Sukanya Kumar, founder and director, RetailLending.com, a loan aggregator and advisory portal. 
 
In the months of April and May, corporates hand out annual increments and bonuses to their employees. You can use the lump-sum amount to repay your loans. However, before that, set aside an amount equal to six months' expenses for a contingency fund, and buy life and health policies if you do not have adequate insurance cover. 
 
Home loans and education loans, meanwhile, are considered 'good'. It necessitates a cost-benefit analysis before taking a call on full pre-payment. 
 
Both the loans lead to creation of assets — tangible and intangible respectively — apart from yielding considerable tax benefits. Hence, they are considered 'good' loans. The pre-payment of such loans, therefore, will depend on your assessment of actual savings, which is not the case with personal, credit cards or car loans. 
 
Points to Bear in Mind 
 
If you do decide to go ahead with full pre-payment, ensure that you see the procedure through till the end. Don't assume that your loan will be considered closed once you deposit the required funds into the loan account. "Borrowers need to inform banks when they pre-close. If you just make the payment, the loan may still remain open and incur an annual fee," points out Kumar. 
 
Then, there are other aspects to be taken care of. 
 
"Enquire about the exact amount of outstanding balance for the actual date of closure. For example, if you enquire today and go for a closure after three days, the bank may have not factored these three days' interest. So, even after you pay, this amount could be treated as 'balance due', though you believe you have closed the loan," she adds. Also, take back all blank cheques you would have given to the bank during loan disbursal.

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Indian students are still relying on government banks for education loans

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Applying for an education loan? Here’s what you need to know

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Indian students going abroad to face a triple whammy of inflation, forex and interest rates

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Exclusive: This Junior Birla’s packing in a Big Punch, meet Ananya Birla

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