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/image%2F1873071%2F20151017%2Fob_72d105_pulppephead-1000x288.jpg "Avanse Education loans aims at providing financial support to deserving / meritorious students for pursuing higher education in India and abroad.")
Delhi Govt’s educational loans to students will help expand facilities & improve quality of institutions
Published on November 23 2015
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The launch of the Education Loan Guarantee Scheme by the Delhi government to enable students of all universities, colleges, technical institutes, skill centres, polytechnics and ITI’s in the national capital to get an educational loan is a game changer that other states should adopt. Students preparing for courses like CA, ICWA or CFA and even those doing skill development courses specified by the Delhi government can also avail of the educational loan.
To meet the costs of the scheme the state government has set up a Higher Education and Skill Development Credit Guarantee Fund (HESDCGF) for providing guarantees to the banks against any default on these educational loans. It will have an initial corpus of Rs 30 crore and will also collect an annual guarantee fee of 0.5% of the outstanding amount of the loan from the banks each year.
In case of default by the students the HESDCGF will initially settle 75% of the claims of the bank after the initiation of the recovery proceedings and the remaining 25% will be settled after ascertaining the final loss of the bank at the end of the recovery process. The threat of defaults are to be minimized by making the parents or the legal guardian’s joint borrowers of the educational loan along with the student. A default will also negatively impact the credit rating of the student and parents.
The educational loan would be available not only to students of government owned institutions but also to the private or self-financing institutions which have been a minimum grade of A+, A or B from either the National Assessment and Accreditation Council (NAAC), National Board of Accreditation (NBA) or the State Fee Regulatory Committee (SFRC).
The competition among educational institutions to attract more students and the government stipulations for securing accreditation by educational institutions providing admission to students availing educational loans will ensure improvements in quality of education. The educational intuitions would also be forced to improve the course content in tune with market needs to ensure employability of the students.
By liberally expanding the educational loan scheme the Delhi government has wisely chosen to follow the approach most popular with the governments in advanced economies. This would help expand educational loans as an important market to the banks like in the US where the outstanding educational loans of more than $ 1.3 trillion makes it the largest form of household debt next only to mortgages.
The liberal educational loan of the Delhi government, the risks of which are borne by the government, is in line with the practices in advanced countries like Australia, Canada, Denmark, England, France, Germany, Japan, Sweden and United States where the funds are provided by the government to improve student access to higher education. The shifting the burden of losses from the banks to the government is a landmark move which will give a big boost to higher Education loan in India and help roll out important national programs like the Make in India initiative and also build a new knowledge economy in tune with the needs of changing times.