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Education Loan- A Blessed Burden

Student Loans: A Blessing or a Burden? - Lynchburg Business Magazine

MBA, B-TECH, MSC, MBBS… the list of laurels goes on. Aspirations turn into an ambition to act as the stepping stone to the professional world ensuring dignity and fulfilment of heart ridden sacrifices and dream. This connectivity to aspiration and fulfilment has a bridge in between – Education Loan.

A loan which is still now the most honoured and respectful compared to the other borrowing verticals in context to our socio-political and status-driven society. This specific “loan” has garnered interest among the people and mostly among the lower and upper middle class. This loan has a wide acceptance across the country and also in regard to higher education or abroad studies this format really plays a crucial role in future making. All good till now, yes! The question that arises is in regards to the consequences after completion of the study/course for a major section of the society. If we take a glance at the interest rates for few other loans, for example, a housing loan almost takes a start and wraps up within a maximum of 11%, which is still almost negligible, in most cases it wraps up within 10- 10.6%. [As per the current rates, SBI, Bank of Baroda, United Bank of India, PNB offer the lowest home loan interest rate of 8.65%.]

Now, the question that arises is if we compare the interest for education loan and with that of the other financial aids like home or car loan, we would see that the interest rate on this education loan is much higher compared to the former ones.

If we take a check at the car loan derivatives from some lenders, we can see that almost the rates start within the bracket of 8.5 and ends almost by 12 -13%.

Now on contradictory the subject for education loans has been put on a much stringent side, likewise, we can see the interest rates for education loans as well. Like, if we take a look at the interest rate for the nation’s most favoured bank, the rate stands at 10.25% p.a. for up to 7.5 lakhs and 10.50% p.a. above 7.5 lakhs.

Also, if we take a close look at other lender rates also, we would see that for private banks the rate for education loan interests is the highest. For instance, HDFC Bank has an interest rate of more than 12%. For another in line, named Axis- the scenario suggests:- 15.2% p.a. up to 4 lakhs and 14.7% p.a. till 7.5 lakhs and 13.7% above 7.5 lakhs.

Thus, my question to the banks/institutes (financial and non-financial) is that why the rates for education loans are such high in consideration to the people applying for it and also in respect to other loans. If we just have a look at some other nations’ look at education loan and schemes, to name a few like Australia has HECS-HELP scheme, where the repayment is on supplementary tax and the result is students repay only when they have the income to support repayment. While in New Zealand, if the borrower is a resident of the nation, he/she is not charged with any interest. The student can pay the loan only when the candidate has the minimum threshold income. In the so-called dreamland USA, there are provisions like Income-based repayment (IBR)- where under the federal system the students pay back on how much they make and not on how much they owe.

Why do we the students would be put under higher interest rates in a country where any form of education is still a dream for many sections of the society? Yes, we also do have certain scholarships, schemes and interest subsidy schemes but also if we look there are families whereby a single earning member whose father has passed away and an ailing mother, and upon that an interest rate of 12.25% on a loan of 398950/- gets him to repay Rs.8900+ per month. This really happens and is not a humane factor standing on a soil where education is required to be harnessed on a larger scale. Even for NBFCs, the rates are much higher and even touch the ceiling of (14-15)%.

According to Vinay Deshineni, founder at Lendsmart since the risk for education loan is higher, hence the rate of interest is more than that of the others.

In a nutshell, what I ask is if any step can be taken to reform the interest rate structures, then we the students who try to balance every need and consequences leading to various income and tax issues would be really helpful and also most importantly the burden that falls on us would be reduced. To all the students, professionals and working classes it’s my earnest request to think on the issue for a better and educated tomorrow.



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