The growing popularity of education loans in rural cities reflects a significant shift in how families view education as a pathway to economic advancement. Despite rising inflation, which puts pressure on household budgets, more families in rural and semi-urban areas are turning to education loans as a strategic investment. This trend highlights a combination of factors that have led to increased confidence in borrowing for education.
Education as a long-term investment
According to Sowdamini Bhat, CEO of LoanXpress, rural communities increasingly recognise the long-term benefits of higher education, especially in securing better job prospects and higher salaries. Education loans provide a way for families to access higher education without the burden of immediate fees. Even with inflationary challenges, families are more willing to invest in education because of the potential returns over time.
Bhat also notes that financial institutions have adapted to the needs of rural customers by offering tailored loan products. Simplified application processes, competitive interest rates and flexible repayment options make education loans more accessible. Additionally, government initiatives, including schemes and subsidies, have played a crucial role in making these loans more affordable.
Financial independence and digital accessibility
Prashant A. Bhonsle, Founder of Kuhoo Edufintech, points out that many rural families now see education as key to improving their socio-economic status. With inflation eroding savings, taking out a student loan is increasingly viewed as a more responsible financial decision, allowing students to take control of their future while reducing the burden on their parents.
The digital revolution has also made it easier for students in rural areas to research and apply for education loans. Increased internet penetration and smartphone usage have simplified access to information, while financial institutions offer more flexible and student-friendly loan structures. Bhonsle highlights cultural shifts, where success stories from rural backgrounds inspire a positive view of borrowing for education, further driving demand.
Growing demand and accessibility in smaller cities
Ankit Mehra, CEO and Co-Founder of GyanDhan, underscores that education loans are becoming more common in smaller towns, with a notable 17% growth in education loans during 2022-23, according to the Reserve Bank of India. In regions with limited access to top-tier educational opportunities, these loans level the playing field, enabling students from diverse backgrounds to pursue quality education both in India and abroad.
The pandemic highlighted the importance of financial solutions that allow families to continue educational pursuits without compromising other financial needs. Mehra also mentions that the digitalisation of loan services has made the process of securing loans more transparent and accessible. The availability of smaller loans and ‘Buy Now, Pay Later’ options further enhance the feasibility of financing education for students in rural areas.