LoanLENIENCY: Demand for a longer moratorium for students loans may not be unreasonable

By: |
April 08, 2020 9:52 AM

A longer Covid-19 moratorium for student-loan repayments, as the IIMs are demanding, doesn’t seem entirely without merit.

student loans, student loans moratorium, loan repayments moratorium, Coronavirus impact on loan repaymentsIIMs have asked for extending the moratorium on repayment of student loans.

With no way of knowing what course economic recovery will chart after the Covid-19 pandemic eases its hold, and what the pace of this recovery will be, there are too many uncertainties the banking sector faces. Despite this, the government has allowed for significant moratorium in loan repayments. RBI, too has taken steps to give some relief to the banks and consumers. Against such a backdrop, the IIMs have asked for extending the moratorium on repayment of student loans, given the graduating batch for the academic year 2019-2020 may find employment offers shrinking or, at the very least, onboarding at companies postponed indefinitely owing to Covid-19.

It is true that there is already a 3-month moratorium for term loans—education loans come under this category—and education loan repayments, in any case, typically kick in six months to a year from the date of graduation. But, given both educational institutions and companies see Covid-19 aftershocks on placement continuing well into 2021, there could perhaps be a case for extending the moratorium for student loans. The historical default in this segment is high relative to other retail loans. However, given the loan is also an investment in building intellectual capital, there is a strong reason for some forbearance here, especially for students enrolled in top-rung institutes.

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