Managing cost of education is not simple. It’s simple onlywhen you ride on an education loan scheme to fund the expenses. But these fundsare not free. Education loan comes at a cost. If current burgeoning bad loanscenario is taken into account, chances are that the loan would become a debttrap for student borrowers.
In the context of J&K, a trend is catching up fast amongthe students to fly abroad for pursuing studies irrespective of their parents’financial position. Here they capitalize on the easy access to funds througheducation loan. Precisely, pursuing a degree from a foreign university is a newemerging passion among the local student community and gives less importance torelevance of such degrees to their career building. Most of the foreign degreeholders are not matching the local job requirements and they continue tostruggle to get a job or get engaged into any other self-employment venturematching to their skill and education qualifications.
Basically, it is relatively the easier access to educationloans, which has pushed the student community to explore frontiers in educationwhich are normally beyond their horizon. In normal course, education loans arefast turning into a burden for student borrowers with a direct impact on theirfuture. Instead of guiding them into jobs, the loan burden has engaged them tostruggle to get out of the debt trap. Indian Banks’ Association (IBA) hasreleased a data which shows the percentage of defaults on education loans atabout 9% as of March 2018. In March 2016, it was 7.3%.
However, there are a few important things to consider for thestudents before availing education loan facility for studies abroad. Firstly,they should not look at a foreign university because someone in their vicinityis already there. They have to understand that going abroad for studies is at ahuge cost. The courses in foreign universities are very expensive. Since theyare borrowing money to fund the expenses, they have to repay it along withinterest. Higher the repayment period, more they have to pay back. So, what ismore important for the students is to evaluate their future employabilitybefore boarding for studies abroad. Employability aspect is more important andshould not be compromised.
For parents sending their wards abroad for studies hastendency to wipe out all their savings in a jiffy and load them with hugeburden in the form of outstanding education loan. It would have been better forthem to plan early to get enough time to save for their education abroad.
Secondly, access to education loan is easier as compared toother form of loans. But its repayment can be more stressful. Since these loanscome with a repayment holiday which includes course period and some more monthsafter completing the course, the student borrowers should use this moratoriumperiod for saving a portion of their earnings. Out of this saving, they canlater on fund their EMIs. It would also be better to repay interest portion onmonthly basis. They would avoid accumulation of their loan amount at the end ofrepayment holiday and would also earn rebate on interest rate. Subsequently,EMI will also reduce.
The student borrowers have also to keep in mind that theirgood repayment history of education loan would help them to secure good credit score,which means they can get easy access to other form of loans in future.
Lastly, as far as education loans for studies abroad areconcerned, the banks have a responsibility to help students as a career guide.They should also consider chances of employability of the student in foreigncountries, at least in the country where he/she would be pursuing the degreebefore sanctioning the education loan. This is imperative, as the opportunitiesto avail employment in countries like US for Indian students have narrowed.This would directly hit their ability to repay their loans in future.
Precisely, funding a students’ education abroad is risky forthe bank as much as it’s for the student. A case in point is US where changesrelated to currency devaluation and tighter immigration policies havenegatively affected students. Earlier the students from this end would work forfew years to recover at least a portion of their overseas education expenses.
(The views are of the author and not that of the institution heworks for)
sajjadbazaz@greaterkashmir.com