Millions of students in India who cannot pursue higher/vocational education due to lack of finance is a matter of grave concern, and a major obstacle in fully harnessing the potential of young population of the country. The one who cannot afford cost of education thus remain skill-less and unemployed, which leads to distortion in socio-economic development of the nation. The problem is more striking for students from rural areas majority of who are deprived of loan facility. Also, the current system has failed girls because gender bias in the society keeps them out of education ambit due to unavailability of finance for education.
Here is what I expect from government on education front:
Credit guarantee fund
Create a credit guarantee fund similar to one created for MSME sector in India. With this trust, banks can finance education loans without any collateral from students. For rural students, banks should offer loans at concessional rate and with 100% guarantee from the trust. Also, in case of default, the trust will need to pay 75% of the loan to banks.
Mandate Mahila Bank to finance education loans of girls pursuing higher/vocation education, particularly in rural areas. Banks should offer loans on personal guarantee of parents and without any collateral.
Lien on future earnings
Student loan financing should move from collateral based to lien on future earnings.
Guaranteed by self-help groups, micro-finance facility to students could provide a breakthrough in financing millions of socio-economically underprivileged students.
– Ninad Karpe, MD and CEO, Aptech Ltd
(The views expressed here is the author’s own)