M A I N   N E W S

By 2020, 42m students will need Rs 1.6 lakh crore loans
Aditi Tandon/TNS

New Delhi, June 30
The Centre may have promised 26 per cent Gross Enrollment Ratio in higher education by 2017 and 30 per cent by 2020, but educating young India is no mean job.

If all the expected 36 million students (19 million at present) are to be taken to colleges in 2017, loans worth Rs 1, 22, 838 crore would have to be made available. The corresponding requirement would jump to 1.66 lakh crore in 2020, when 42 million students would seek higher education.

Of these estimates, worked out by the Union Government, 26 per cent loans would be extended by the proposed National Education Finance Corporation (NEFC), which will support student loans and also offer concessional loans to philanthropic institutes wishing to set up colleges. The NEFC’s financial model has been worked out — it would have an initial equity of Rs 5,500 crore to be obtained from the non-lapsable pool created out of the 1 per cent levied on all taxes.

The Centre has also asked states to make equity contribution to the corporation, whose concept remains to be vetted by the Planning Commission. The commission is figuring out whether to have the corporation as a whole finance both students and sectors interested in setting up institutions or have a separate arrangement for the two within the NEFC.

As per the NEFC financial module — annual increase in the corporation’s equity would be Rs 3,000 crore from cess proceeds till 2020-21. That means by this year, the equity base of NEFC would have risen to Rs 35, 500 crore to help the Centre finance education.

At present, the education loan market appears hugely shrunken. In 2008, the percentage of students seeking loans for higher education was a meager 3. The figure improved to 9 per cent last year but the average size of the loan remained very low at less than Rs 2 lakh, shows the data published by Indian Banking Association. This because students seeking loans less than Rs 4 lakh do not have to provide any security or guarantee as per the instructions of the banks. But with the Union Government firming up the new loan offer under NEFC, the scenario is set to change, with the availability of loans rising from the current 9 per cent to 18 per cent for general higher education and 35 to 40 per cent for professional education.

The NEFC would offer the following loans - student loans at the rate of 4 per cent for those with parental income less than 4.5 lakh per annum (first bracket); loans at the rate of 7 per cent a year for those with income over Rs 4.5 lakh and a total loan not more than Rs 12 lakh. Repayment period for both brackets is 6 to 12 years. However, for loans in the first bracket, default to the extent of 75 per cent of the principal would be guaranteed and in the second bracket, the guarantee would be 50 per cent of the principal amount.

In respect of institutions - the Ministry of HRD has proposed concessional funding for philanthropic institutions and those established to remove imbalances at 2 per cent per annum below prime lending rates. Here, the repayment period would be 15 to 20 years. 

Pricey Education

n India needs Rs 11.09 lakh crore to achieve envisaged GER of 100 pc in secondary education and 30 pc in higher education by 2020

n Present GER (18 to 24 year olds enrolled in higher education) is 12.4 pc

n Student enrollment to increase from 19 
million at present to 42 million by 2020.

Needed: Additional 31, 830 colleges, 803 universities; 70, 234 secondary schools by 2020

In higher education alone, Rs 9.04 lakh crore required for institutional expansion 





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