By Aman Singh
If one were to list some of life’s ‘big’ decisions, studying abroad would emerge as one of the top contenders—and with good reason. A postgraduate degree from a foreign university can bolster your expertise, give you a competitive edge in the job market, and open doors to boundless opportunities. But this golden ticket to a better, richer, and fuller life comes at a cost. Here is a rough estimate. The total expense of an overseas degree can range anywhere between Rs 35 lakhs to Rs 2 crores. Making the right decision on where and how to invest your financial resources is, therefore, not just important but essential to realizing your cherished study-abroad dream.
Pre-empting poor decisions
In India, students have traditionally relied on their parents’ personal savings, scholarships, and financial aid to fund their foreign degrees. But this is not always sufficient to cover the full cost of education, which includes health insurance, housing, meals, transportation, books and supplies, and personal and miscellaneous expenses. Hence, at least 70% of students, on average, seek recourse in bank loans. What they overlook in this quest is identifying whether the educational program of their choice is even eligible for financial assistance by banks. Being turned away because the college is not ‘bank-fundable’ can lead to academic dreams dying prematurely. This uncertainty only adds to the stress among students. The problem is further compounded by the lack of access to more viable options on financing, with students settling for any loan they land, not ever knowing whether it was the best they could negotiate.
Then comes the issue of sustainability. The structure of a loan-based system assumes that the recipients will have better-paying, secure jobs in the future, and accordingly repay the amount. Inability to repay only adds to fresh student debt. More than 9% of education loans issued by public sector banks turned out to be non-performing assets by the end of 2020, according to data from the finance ministry in March 2021.
Fintech platforms bring flexibility
Like in most situations, a silver lining does seem to be emerging here as well. Smartphone penetration, convenient access to the internet, and the new wave of digital acceptance have become prominent enablers of the higher education ecosystem. Riding this wave of digitization are emerging loan-bidding platforms that are rethinking financing solutions to meet the requirements of students, banks, and educational institutions.
Using artificial intelligence (AI), these platforms are able to provide information on which colleges are bank-fundable at the very outset of your selection process. And, in case the banks are unwilling to fund the student’s current choice, the student is enabled to consider alternatives and potentially more viable options immediately. This capability can directly reduce the likelihood of students dropping out due to financial inadequacy. What will truly benefit scores of students across geography is the possibility of filing their loan application from anywhere without having to visit the branch.
When it comes to facilitating loan approvals, time is money. Many universities often ask students to reserve their seats on time and, therefore, timely securing a loan becomes necessary. Generally, the timing may vary based on factors such as the bank’s experience with lending; the borrower’s industry; the borrower’s responsiveness in submitting the necessary documents; and the accuracy of information submitted by the borrower.
The loan-bidding platforms allow students to know exactly where they stand in the loan-application process, unlike without them, where students do not have any visibility on their application approval live status. What these entities are also enabling is the seamless convergence of domestic and international lenders on one online platform, thereby speeding up the loan application process. Here, banks compete with each other by offering varied loan products to attract students; they are also able to view what their competitors are offering on the platform. This eventually helps students secure the cheapest loans and save anywhere between INR 1,00,000 to INR 5,00,000 in interest expenses. This further translates into prudent management of finance and stress-free repayment of loans.
This process has also expedited the loan approval time from, let’s say, a month to around two to three days. Banks can approve faster and also accelerate their growth as they wish. This solution pre-empts the loss of marketing resources and saves service costs for banks. Thanks to full visibility, banks do not end up losing out on students after undergoing the entire documentation process.
Furthering financial inclusion in the higher-ed ecosystem
In a fast-evolving education landscape, new-age bidding platforms are poised to be game changers, as they sit at the intersection of education and innovation. Given their disruptive nature, they can provide insightful data-driven solutions to both students and banks. By curating customized financing solutions to a larger segment of students, bidding platforms carry the potential to increase accessibility to quality education and eventually bridge the market gaps in financial inclusion.
(The author is co-founder, GradRight. Views expressed are personal)