By Suneet Singh Kochar
The landscape of banks and financial institutions has moved towards the philanthropic side with hyper-personalized and student-friendly education loans catering to a diverse global student population. Private sector banks, public sector banks, Non-Banking Finance Corporations (NBFCs), and private lending organizations have emerged as predominant players in the student loan segment, assisting students with a strong willingness to succeed.
Outlook of Education Loan Providers
Education-focused financial institutions hold a student-centric approach while planning and offering customized education loans to students. The amount of the loan to be sanctioned not just covers stratospheric tuition fees but also extraneous living and travel expenses.
Although they keep a few important factors in mind before sanctioning them, which include but are not limited to a co-borrower presence (mainly a parent) with a good credit score and income, the relativity of the student’s profile in terms of academic achievements and experiences, student’s IELTS or GRE score and durability of a student’s desired course, as the preference remains STEM courses while a conscious analysis of university’s global ranking and accreditation is also a contributing factor.
Further, if all these aspects and the student’s documents turn out to be genuine, the entitled entity will suggest a monthly instalment plan and the student will be ready to fly.
In terms of education loans, NBFCs are considered more flexible in their conditions, as while following the standard norms of RBI, they allow students the chance to provide alternate documents, follow suits with the university deadlines, and offer more procedural transparency.
Moreover, they dominate the financial market, even in the study abroad segment, due to their efficient loan disbursal and structured repayment terms. As stated by the credit rating agency in India, the education loan assets under management (AUM) ofNBFCs are expected to increase by 35-40%, amounting to Rs. 35,000 crores in the fiscal year 2023-24with more students moving abroad.
Education Loans Without Collaterals: A Good Business Strategy
A collateral is a security to the banks or NBFCs on behalf of the student. Although this is a standard route followed by financial institutions while extending loans, there are banks and financial institutions that shell out educationloans without any collaterals.
Reputable private banks like ICICI Bank, HDFC Bank, and Axis Bank offer overseas education loans up to 40 lakhs with a repayment period of 10–12 years and an interest rate between 10–12% without collateral. Notable public banks like the State Bank of India extend loans up to 7.5 lakhs without collateral. Moreover, NBFCs (Non-banking financial companies) like Auxilo provide loans up to 40 lakhs with interest rates ranging between 10-18% without collateral.
The Need for Funding
With countries like the UK, Ireland, the USA, Australia, and Canada making giant strides in the educational sphere, more students are beckoning to these lands for higher education. However, to meet the swelling tuition fees and living costs abroad, they turn to banks and financial institutions to avail of financial assistance.
According to a recent report by the Reserve Bank of India (RBI), education loans in India increased by17% to 96,847 crores in the fiscal year 2022-23, owing to the demand for big-sized study-abroad loans and the willingness of education loan providers to cater to that segment.
The ease and convenience accompanying education loans have encouraged more students to complete their higher education through a student loan rather than exhausting their parent’s savings.
Ensuring Upward Mobility of Student Fraternity
In a nutshell, banks, NBFCs, and other financial service providers’ expansion into the education loan segment is a positive development for students. Having such facilities available around the corner, students are no longer restrained from completing their higher education in their desired global institution due to funding barriers. With the constant support of these financial institutions, from fee payment to the repayment of loans, students can achieve what they have long been dreaming of “Success”.
(Author is CEO, Fateh Education)