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The Foreign Education Regulatory Bill has been a hot topic of discussion

Higher Education

27-05-2014

DNA

To an Indian student, there is nothing more prestigious than an international qualification. While statistics and common belief may show that US and UK as education hubs are drying up, there is popular demand for qualifications from these two countries. For a country with a population of 1.2 billion, who aspire an international degree without leaving their homeland, the University Grants Commission’s (UGC) ordinance on the Foreign Education Regulatory Bill comes as a ray of hope.

According to the ordinance, unlike as proposed in the Bill, foreign universities will be allowed to operate independently, set up campuses and offer degrees as well without partnering with any Indian partner institution. “Pursuing higher education abroad comes with an exhorbitant price, if foreign universities open campuses in India, fees will be paid in rupees and not dollars proving beneficial for Indian students, says Debashish Sanyal, dean, Narsee Monjee Institute of Management Studies. Suresh Advani, chairperson, international operations, SP Jain Institute of Management and Research agrees. “If grade A institutions set up campuses in the country, it will only prove to be beneficial to all—students and faculty members.” He believes that this will give an opportunity to first class faculty members to up their talent and find lucrative options.

However, there is a strong debate on whether foreign educational institutions will finally be allowed to operate. There is a belief that the ordinance will usher in a new competitive era of quality education there are opponents who argue that this will lead to commercialisation and limit the access of quality education to those few who can afford it.

The PRS Lesgislative Research website which discusses the 2010 Bill questions whether there are as many foreign educational institutions willing to collaborate with universities in Indian given the strict guidelines. Advani points out that education sector in India functions very differently from its international counterparts. “Most of our education institutes have politicians as decision makers and so whether this will ever see light is doubtful,” he says. The PRS website also discusses that, these foreign education providers will have to maintain a corpus fund of about Rs 50 crore. And that upto 75 per cent of any income generated has to be utilised in developing the institute’s Indian campus and the rest has to be invested back in the fund.

Though educationists welcome the proposed Foreign Education Regulatory Bill they have reservations. “Why would any institution want to set up campuses, invest in infrastructure and faculty when they are not allowed to pass on any income to their home campus?,” questions Sanyal. According to Advani, even educational institutes though in the noble profession of teaching are looking at profitable business opportunities.

About the few international institutes who run capsule programmes in India he says, “They are here for their non-profitable modules, for faculties which are not necessarily money generating.” He points out that 65 per cent of our graduates are not fit for employment many still cannot afford basic higher education leave alone the quality programmes offered by the world’s best. “It is too early to celebrate and believe that we are such a huge market that everyone will run to our country,” he cautions.

Indian students make up to 13.1 per cent of total foreign students population studying in US. There is no doubt that international exposure is critical and has a better impact. “Just as much as we need good institutes to cater to our young population, international institutions as well need good students,” says Sanyal. However, with so many restrictions there is doubt as to how many will finally offer their programmes in India? Academicians are hopeful as we inch closer to a new government offering new policies. “What was discussed five years ago will hopefully materalise in the future,” hopes Advani.

A study conducted by the Association of Indian Universities (AIU) says there are…
631 Foreign Education Providers were operating in the country
440 were functioning from their respective home campuses
5 had opened their own campus in India
60 had programmatic collaboration with local institutions
49 were operating under twinning arrangements and
77 had arrangements other than twinning or programmatic collaboration

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Reforming higher education with transparency

Higher Education

23-05-2014

University World News

Is the Indian institute of technology a university? What is the difference between a deemed-to-be-university and a state private university? How does the University of Pune ‘affiliate’ more than 600 colleges? How does the authority and control of multiple regulatory bodies differ?

These are some of the confusing and frustrating questions that researchers, policy-makers and foreign institutions who areinterested in India have to confront. They expose the complexity of the current condition of higher education in India.

Indian higher education has expanded at a break-neck speed. Between 2007-08 and 2010-11, post-secondary student enrolments grew by nearly five million students.

In the same five-year period, the number of institutions increased by nearly 10,000. But this much needed expansion came at the expense of quality, primarily due to an inadequate and incoherent policy and legal framework.

One of the most challenging problems facing Indian higher education institutions is funding mechanisms. According to the policy framework, institutions are required to have a non-profit structure, irrespective of how they are funded – by public or private sources.

At the same time, degree-awarding powers rest only with universities as specified by the University Grants Commission, or UGC, under section 22(3) of the University Grants Commission Act, 1956.

A complex system

The act has resulted in a unique and complex system of hundreds of ‘teaching’ colleges – private or public – ‘affiliated’ with public universities. Public universities themselves can be funded by state or central sources.

To achieve the goals of expanding access to higher education within the constraints of public funding, privately-funded universities were allowed. These private universities in turn can be approved by state acts or the central authority, UGC.

This complex framework resulted in four types of universities in India – central universities, state universities, private universities and would-be universities which are mostly private.

The complexity is further compounded because of the large number of regulatory bodies that sometimes have overlapping scope, resulting in power struggles and additional confusion for stakeholders.

Consider the recent example of the conflict between the UGC and the All India Council for Technical Education, or AICTE, on the regulatory jurisdiction for management programmes.

The previous minister of human resource development, who is also responsible for higher education, attempted to address these challenges by proposing a dozen legislative bills, including the Foreign Educational Institutions Bill 2010, the Higher Education and Research Bill 2011 and the Prohibition of Unfair Practices in Educational Institutions 2010.

Unfortunately, most of the bills are still far from seeing the light of day and have remained unapproved because of political divisiveness and general elections in 2014.

The Foreign Educational Institutions Bill, which had been talked about in its various forms for nearly a decade, became a topic of discussion again in 2010 but no progress was made as the bills had been languishing in a political stalemate.

Regulatory bodies are seeking ways to work around the politics of Indian higher education. In May last year, the UGC announced that existing and future partnerships would require their approval to offer any joint degrees or twinning arrangements.

The policy vacuum resulted in many twinning partnerships and a few branch campuses starting without any regulatory oversight. Unsurprisingly, quality is at risk and students are often deceived by the high cost and the lack of recognition of the degree they earn.

Transparency of information for students

Overall, the regulatory environment for Indian higher education is complex and fails to improve its quality and address deficiencies. One of the key solutions for addressing the challenges of higher education is to improve accessibility to credible, consistent and current information about institutional performance.

The current policy reform directions are seriously limited by the government’s political approach of using control and bureaucracy as a way of assuring quality rather than using transparency for empowering students and fostering competition.

One specific recommendation for achieving transparency goals is to mandate high standards of institutional performance data disclosures by institutions. These data could be uploaded to a user-friendly and easy-to-use national database. Hence, students would be able to make informed choices based on the data they have obtained.

Consider the case of regulation in the financial system. How is transparency ensured in publicly traded companies? It is through mandatory and easily available audited financial reports coupled with strict oversight by the financial regulator.

In contrast, the parallel information of institutional performance for higher education institutions is unavailable. This results in all sorts of academic, financial, regulatory and marketing malpractices.

Transparency of the US system

As applied in the US, transparency through data reporting and information sharing is an important policy-tool enforced by the US Department of Education where the National Center for Education Statistics collects, collates, analyses and reports on American education.

Data reported by the institutions are uploaded to a free website, namely College Navigator, enabling students to search and compare colleges based on various parameters.

Since the students have easy access to comparable information on each college’s institutional performance, they can decide on the programmes they wish to pursue and in the process create a state of enhanced competition among institutions. In addition, policy-makers and researchers also have access to rich data and this can help improve the education system.

Consequences of rapid growth

Indian higher education has expanded at a fast rate and the policy framework has failed to adapt and change its complex system. The system has remained embroiled in the politics of policy-making and suffered in terms of quality.

Given the pace of growth and unmet demand, the success of higher education lies in finding adaptable and innovative solutions.

A focus on enforcing higher standards of transparency should be the first step in enabling a stronger institutional accountability and addressing the complexities and challenges of Indian higher education.

Dr Rahul Choudaha is chief knowledge office and senior director of strategic development at World Education Services in New York. He is an international higher education strategist with a focus on student mobility, enrolment management and transnational education. This is an edited version of an articlepublished in the fall 2014 issue of the Comparative and International Education Society’s Higher Education Special Interest Group.

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The Indian liberal arts renaissance

Higher Education

19-05-2014

The Times of India

In the decade to come, the Liberal Arts will undergo a renaissance in India. Why? “Liberal Arts” has meant different things at different times and in different places. In classical Rome, it was a set of elite skills (or “artes”) considered indispensable for all elite free male citizens (or “liberales” ) who — in contrast to women and slaves — were expected to engage in debates on matters of public importance. Over time, the core skills of grammar, rhetoric and logic were supplemented by geometry , arithmetic, music, astronomy, history, poetry, ethics and classical Greek. Until the middle of the 20th century, t h i s remained the d o m i n a n t model of Liberal Arts in the West: social elites were expected to have a broad-based training in many subjects.

In post-Independence India, however, the elitist model of the Liberal Arts has been largely superseded by another vision of education. This vision has its roots in the supposedly more inclusive school system introduced in Britain at the end of World War II, which offered free education to all. A version of this British model was imported to India, where training in a single prestigious vocation — engineering, law, business — became the raison d’etre of most top universities.

In the US, the Liberal Arts model has had a longer life. After World War II the G. I. Bill made education much more widely available to the public at large. A Liberal Arts education was no longer a privilege of the social elite but a universal right.

But how quickly things change! In the US, the sharply escalating cost of education has coincided with demands to make undergraduate programmes more vocationally-oriented. The traditional Liberal Arts curriculum is under pressure as students, often having to pay more than $250,000 for an undergraduate degree, opt early for professional courses of study that, promising to lead to well-paying careers, supposedly justifies such exorbitant fees. By contrast, several new Indian universities, and one or two old ones, have started to offer multi-disciplinary curricula at a fraction of the price charged by their US counterparts. And we can expect many more to follow suit in the years to come.

No matter how high the scores of graduates from supposedly top-notch IITs and IIMs, they often lack the requisite skills of communication and intellectual versatility — the ability to approach a problem from several angles — that employers value. And when job security is no longer a lifetime right and people often have to change fields and adapt their skills many times in their careers, a course of study that offers training for a single vocation seems myopic at best and dangerous at worst.

The old Liberal Arts model of education, with its multi-disciplinary emphasis, suddenly looks relevant again — especially if it is no longer just a privilege of the elites but rather an option for all Indians. Whether this new embrace of Liberal Arts will lead to a democratic flowering of Indian education or yield to the dominant model of single vocational training, only time will tell.

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India’s ‘Other MIT’ Scores Again, Brings Country’s Private Engineering Schools Into Focus

Higher Education

04-30-2014

Forbes

When two India-born (both in 1967), India-educated executives were recently named CEOs of two large multinational corporations, it caused quite an eruption in a country where such global appointments are not exactly commonplace. Even more unusual is the fact that both men were educated at a small university town near Bangalore called Manipal on India’s south-western coast.

This week, Nokia named Rajeev Suri, 46, as its new CEO, an elevation from his earlier position as the head of its revenue-spinning networks division. Suri graduated in electronics and telecommunications engineering from Manipal Institute of Technology. In early February, the $78-billion-in-sales Microsoft named Manipal alum Satya Nadella as its CEO. The appointments are remarkable as very few Indians have risen to the top of global firms, and Indra Nooyi of PepsiCo and Anshu Jain of Deutsche Bank are among the exceptions.

Both executives have attributed their success to their education at the thus-far inconspicuous Manipal Institute of Technology (MIT), which is increasingly being referred to as the ‘other MIT’ after the renowned Massachusetts Institute of Technology. Several ingredients set the Indian MIT apart from the best of India’s top notch technology and management schools, the IITs and IIMs.

Manipal is India’s lone university town (pop. 35,000) as well as the country’s sole education destination to offer diversity in student mix, nationalities and disciplines. While its student population is predominantly Indian, Manipal has students from 60 countries. Its Indian students come from wide economic strata, from middle class to elite. Manipal awards a wide range of degrees from nursing to printing besides medical and engineering education.

India’s brightest teenagers are drawn to its state-funded engineering schools called Indian Institute of Technology as well as the second-rung National Institute of Technology. Manipal charges twice as much in fees as the IITs but attracts the next-cut of brainy Indians. Over 50,000 students apply for 1,800 MIT seats. Its holistic, well-rounded education – ranging from debating to sports – is of a kind that is rarely found in India’s academically-rigorous engineering schools. MIT boasts of the best sporting facilities in any school in this part of Asia.

India’s elite public engineering and management schools can only cater to a tiny slice of the country’s 1.3 billion people. Its private schools have been largely responsible for the country’s transformation and have fueled its country’s IT and telecom revolution. The topmost of these private schools are stepping up and their graduates are beginning to make a mark as global entrepreneurs and corporate leaders.

 

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English Universities Losing International Students

Higher Education

13-04-2014

The New York Times

LONDON — The number of international students enrolling in English universities has dropped for the first time in nearly three decades, interrupting a long-term trend of double-digit growth.

A new report by the Higher Education Funding Council for England examines recent shifts in enrollment patterns and discusses their possible causes. The nations that make up the United Kingdom have individual responsibility for higher education, and the report addresses only the situation in England.

Britain attracts more international students than any country except the United States and puts a figure for the overall value to its economy of foreign currency earnings from higher education at about £10 billion, or nearly $17 billion.

The report says that the number of students enrolling in full-time “taught graduate programs,” which include many master’s programs, declined 1 percent from the 2010-11 to the 2012-13 academic years. That decline is especially worrying for institutions because those programs tend to be dominated by foreign students. According to the report, in 2012-13, 74 percent of entrants to full-time master’s programs were from outside Britain.

Master’s programs, which are usually a year long, are often a significant source of income for universities, as well as a potential future source of teaching staff members. Their short duration, relative to similar programs elsewhere, puts British universities under more pressure to maintain international recruitment levels.

According to Janet Ilieva, the author of the funding council report, a recent analysis by the council indicates that there is a high progression rate from full-time taught graduate programs to doctoral programs, so the drop could be a worrisome sign for future teaching and research capacity. “The implication is that this is putting the long-term viability of certain subjects under threat,” she said.

Another development the report highlights is a sharp drop in the number of full-time undergraduate entrants from other European Union countries. Those students pay the same tuition as domestic British students, for whom the government caps the amount of tuition that universities can charge. Their number fell by a quarter in 2012-13, when the tuition cap at most universities in England rose to £9,000, or around $15,000. The report identifies the tuition increase as the likely cause of the decline.

The last time international student numbers decreased in Britain was in the early 1980s, when universities began charging international students tuition.

The report also calls attention to the growing numbers of Chinese students at British universities. They now represent nearly a quarter of all students enrolled in full-time master’s programs and make up the second-largest cohort after British students, at 26 percent.

That increase has taken place as the numbers of students from India, Pakistan, and Iran, which historically sent large cohorts of graduate students to Britain, have declined. The numbers of students coming from Pakistan and India have halved since 2010, even as entries from other countries have increased, according to the report.

Those developments paint a worrying picture for British universities, which seem to have borne the brunt of a confluence of events. “We can’t point to causality,” Ms. Ilieva said, but the timing of the shifts suggest some factors that might be at play.

Immigration, for one, has become a contentious political issue in Britain in recent years, and the government’s efforts to limit immigration figures have at times conflicted with the aims of universities. Universities UK, the lobbying organization for vice chancellors, has opposed the government’s approach to immigration, warning that including students in migration figures would be detrimental to universities.

Policy revisions, such as the elimination of work entitlement for foreign students at private institutions, a move designed to curb abuses by bogus institutions, also had an effect on international enrollments.

Those shifts, all of which may have suggested to international students that Britain was becoming less hospitable to foreigners, coincided with efforts among Britain’s main competitors for foreign students to ease the path for them.

Commenting on the funding council report, Nicola Dandridge, the chief executive of Universities UK, noted that at a time of growing international demand for higher education, “we should be seeing a significant rise in international recruitment figures, given the global standing of our universities. At the same time, competitor countries, who are actively promoting policies to encourage international students, have seen rises in international-student numbers.”

The report, “Global Demand for English Higher Education: An Analysis of International-Student Entry to English Higher-Education Courses,” is available on the funding council’s website.

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Foreign universities open India centres

Higher Education

07-04-2014

Live Mint and the Wall Street Journal

New Delhi: Although foreign universities are yet to open independent campuses in India because of regulatory hurdles, some global higher education brands are opening research centres to capture a portion of the growing market of executive education and other research partnership opportunities.

The University of Chicago had opened a centre in Delhi on 29 March. Virginia Polytechnic Institute and State University, popularly known Virginia Tech, is opening its centre in May. Harvard Business School has an Indian research centre in Mumbai, and Deakin University, a well-known name from Australia, has a centre in New Delhi.

A couple of foreign institutions are likely to open centres this year as well, an official from the human resource development ministry said on condition of anonymity.

While experts say India is a huge market to be ignored by anybody, including the education sector, universities said brain drain is no more the key focus and to capture the education potential of the market, they cannot operate by just flying in and flying out.

“Virginia Tech believes that India’s growing population and expanding industrial sector is well positioned for high-quality research and graduate education in the areas of science and technology through a model of collaborative research, education and engagement,” Guru Ghosh, associate vice-president of international affairs at Virginia Tech, said in an email.

The centre that opens in May will largely be an engineering research centre, Ghosh said. It will bring the best minds from Virginia Tech and from around India to work in a modern, cutting-edge research environment outside Chennai, he said.

Gary Tubb, faculty director at Chicago University’s Delhi centre, said that a centre in India will enhance their engagement in the country. “We expect this to happen over a wide range of activities,” Tubb said. “Our faculty members will do projects in collaboration with Indian colleges, research institutes, business entities and government offices.” The university will provide some short duration certificate programmes as well.

“India is becoming increasingly important for education and economy,” Tubb said. “There is a two-way opportunity here, to learn and to teach.”

The higher education landscape in India has changed, according toRavneet Pahwa, country director India, Deakin University. “Brain drain is no more the way forward. It’s about value addition, research and teaching collaborations,” she said. “Any top global institutions looking for serious partnership cannot operate by flying in and flying out. You need a centre and constant engagement.”

Sam Pitroda, former head of the Knowledge Commission and adviser to Prime Minister Manmohan Singh on public information infrastructure and innovations, said: “They have a need to go global and India is a huge market. It is no more just about staying in America and knowing about America. It is also knowing about India, China, etc.”

The trend signifies two points, the potential of the education market and the need to understand the Indian economy which is increasingly becoming global, said Debashis Chatterjee, director at Indian Institute of Management at Kozhikode.

The Indian education market is likely to be worth Rs.5.9 trillion in 2014-15 as against Rs.3.33 trillion in the 2011-12 financial year, according to rating agency India Ratings.

For now, executive education is the way forward for overseas institutions.

Harvard Business School offers customized executive education.

For example, from the end of April, the school is offering an executive education programme called Building a Global Enterprise in India.

Ghosh said Virginia Tech will “offer customized executive courses for Indian companies as well as open admission, short-courses in Chennai, Bangalore and Mumbai in the areas of energy, data analytics, information technology and other areas of science, technology, health, management, engineering and mathematics”.

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9 Striking Similarities Between the Housing Bubble and The Higher Education Bubble

Higher Education

31-03-2014

The Huffington Post

With the collapse of the housing bubble and corresponding financial crisis of 2008 occurring just six years ago as of this writing (2014), concerns over a bubble in higher education are beginning to emerge. It’s amazing how many similarities there are between what happened in housing and what’s happening in higher education. Considering the causes and outcomes of the housing bubble may help inform what might happen in higher education.

1. Same Players

The same “players” that were in the housing “game” are also in the higher education game: lenders, student loan borrowers, producers, and, perhaps the biggest, government.

a. Borrowers

In housing, the borrowers were home buyers. In higher education, the borrowers are students. In both cases, borrowers take on loans they can’t afford to pay back. They become swamped with debt on assets that won’t generate a return large enough to be able to pay off. “Owning” a house worth less than the mortgage is similar not earning enough to be able to pay off student loan debt.

Poor decisions were made by borrowers, in part because of being unable to value assets properly and/or forecast returns.

b. Producers

In housing, the producers were homebuilders. In higher education, the producers are schools.

Because of the abundant debt capital and corresponding demand, supplying a house or education seems attractive as prices continue to rise. However supplying the house or school means decreased supply of other goods or services. The reduced supply of other goods and services leads to an increase in price of other goods and services.

Schools, with poor cost management, are investing in fixed assets, not anticipating a declining price and revenue. If the prices decrease significantly they may be unable to continue to supply education, a service which our country needs. The reduced supply could prevent prices from dropping too low.

c. Government

The government’s role in the housing bubble of shouldering risk from lenders and encouraging or restricting lenders is similar in the housing bubble.

In the 1990s, the government encouraged banks to expand access to housing by reducing down payments and other risk reducing measures. Lenders’ concerns were eased because two quasi-governmental agencies, Fannie Mae and Freddie Mac, were formed to guarantee the loans, reducing lenders’ risk. Lenders could make loans, profit, and sell the loans to someone else where the government would pick up the proverbial “tab.”

In 1996, the Department of Housing and Urban Development encouraged Fannie Mae and Freddie Mac to make more than 40 percent of their loans to low-income borrowers. Simultaneously, the Federal Reserve pushed interest rates to historically low levels, making mortgages cheaper, encouraging people to borrow money to buy houses.

In the case of education, the government is actually the biggest lender of student loans. In addition, the government is essentially subsidizing schools, by giving them tax breaks. The subsidization discourages competition which would help students. What seems like a noble objective, encouraging people to go to college, may actually be causing more harm than good as students take on debt to buy an asset that won’t help them enough to be able to pay it back.

d. Lenders

In both housing and higher education, lenders are “guilty” of lending irresponsibly, putting themselves at risk despite their services being necessary for the economy to function, and putting the government, the economy, and taxpayers on the hook. In the case of housing, because banks took on too much risk, when people began defaulting on their mortgages, there was a risk that they could lose their customer’s reserves. In part to prevent a run on the banks and/or banks losing people’s savings, the government announced the bailout, giving massive amounts of taxpayer dollars to banks.

Lenders, such as banks, are profit seeking entities. Having profit potential with loss potential encourages lending. In some cases they were actually forced by the government to make bad loans (such as laws requiring lending to low income families or with reduced down payments). In the case of higher education, the biggest lender is actually the government.

2. Excess Capital

In both housing and higher education, easy access to debt capital at low rates and with lax borrowing requirements, encourages borrowing to purchase assets, which increases prices. In both cases, banks are essentially ensured by the government and it’s taxpayers, incentivized to make risk loans, and/or prevented from refusing to make risky loans. In additon, interest rates set by the Federal Reserve are at record lows.

3. Universal Belief

Per the definition of an economic bubble, bubbles are often created as a result of a universally held belief about an asset’s value.

In housing the belief was something along the lines of “I have to buy even if I can’t afford it because owning house is the american dream and it’s a great investment because prices will always keep going up.” The fact that amateur investors (“average people”) were “flipping” houses was a sign that there was a near universal belief about housing prices.

In higher education, the belief is something along the lines of “I have to get a college degree, regardless of the cost, because a college degree is the only path to prosperity, and I won’t be able to succeed without it.” The fact that if you tell the average person not go to college they look at you like a crazy person is a sign that there is near universal belief about higher education.

4. Overvalued Assets

The combination of readily available debt at low interest rates with a universally held belief about the value of the underlying asset leads to significant increases in price. In the cases of education, the degree can become overvalued if the abundant capital and universal belief lead to more people graduating from college and entering the workforce. The additional supply of graduates, leads to a decrease in price (wage) if there is not a correlating increase in demand for labor.

In the case of a degree, it can’t be re-sold the way a home can. In addition, a degree only has value (in the form of increased wages) because employers (the parties paying those wages) believe it does.

5. Weak Lending Standards

Just as mortgage lenders lead borrowers to think they could afford a house way outside their price range, student lenders and schools tout the promise of more job opportunities and higher wages. Lending standards for student loans may even be lower than mortgages.

In housing, borrowers often had to pay a certain percentage the price of the house as a downpayment. Borrowers also often had to show a history of employment at compensation sufficient to pay back the mortgage. Students do not have to pay any down payment, and do not have much history of employment. The lack of down payment leaves lenders with even more risk on the table.

6. Securitization

Just as mortgages were being securitized into mortgage backed securities, student loans are being securitized into student loan asset backed securities (SLABS). Securitizing loans can be a good way for lenders to reduce their risk.

However, if too many of the securities are not owned by the lender, the lender can be less careful about their lending practices because their returns are less correlated to the borrower’s ability to pay back the loan. In addition, if an investor, such as a bank, allocates too much of their capital to the securities and the underlying loans default at higher than expected rate, it could cause harm to the investor, and therefore impair the investor’s ability to make other investments that spur economic growth.

7. Poor Ratings and Risk Assessment

During the housing bubble, many investors and ratings agencies did not properly assess the risk of default in mortgage backed securities. There may be similar problems with student loan asset backed securities.

Student loans are often based on credit score rather than a borrower’s ability to repay. Evaluating the credit score of someone who hasn’t entered the workforce, won’t for at least four more years, and with unemployment as high as it, may not make for the best assessment.

Many student loans have co-signors. These co-signors, such as parents, often have higher credit scores than their children. Therefore the credit score may not properly reflect the ability of the actual borrower to repay the debt.

8. Large Market Value

According to Fiscal Times, the mortgage backed security market reached about $7 trillion, while the student loan asset security market has topped about $2.6 trillion.

While the student loan market may not be as large as the mortgage market, it’s still very large, especially in an already fragile economy that’s still recovering from the housing bubble.

9. Speculating

Housing had and higher education has a long history of providing a strong return on investment. College graduates have historically earned more than high school graduates. Housing provided great investment returns for years, as housing prices actually did continue to rise for many years.

However, investors in both degrees and houses may fail to consider that the past is not always an accurate predictor of the future. At some point the rising price of education offsets the increased earnings potential, especially if earnings potential declines because of an increased supply in the number of graduates. Similarly, in housing, once a significant number of investors have their money in housing, there’s not much more money left on the sidelines to continue to raise the price.

Conclusion

The housing bubble had significant and prolonged effects on many aspects of the economy. There are many similarities between the housing bubble and the higher education bubble. Analyzing the housing bubble may help us inform best actions for the higher education bubble. Higher education could actually be worse than housing.

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Education loan gets a big boost

Education Loans, Finances & Budgets, Higher Education

17-03-2014

The Indian Express

Nearly nine lakh borrowers stand to benefit from the Interim Budget 2014-15 when finance minister P Chidambaram announced a moratorium period for all education loans taken up to March 31, 2009, and outstanding as of March 31, 2013.

As the new academic session kicks off over the next few months, for students pursuing higher education, not only the institute and the course will matter, but also the method of funding.

Higher education courses, especially those for professional training or in foreign colleges tend to come with a heavy expenditure on fees and travel. In such cases, taking an education loan may be a good option.

All banks, public sector as well as private, offer both education as well as vocational loans to students for regular degree as well as post graduate courses by recognised universities in India and abroad.

Such loans are an attractive option not only for students from economically weaker sections of the society but even for those from middle or higher middle class due to the easy repayment options and availability of funds.

Education loan portfolio of banks have been rising steadily given that it is one of the priority sectors under which banks are mandated to lend by the Reserve Bank of India. The finance ministry also keeps a tight watch on lending by public sector banks under the scheme.

Reflecting their popularity, official data reveals that public sector banks have disbursed Rs 57,700 crore as education loans and 25,70, 254 such accounts were opened by December 31 last year.

Of these, the largest number of accounts were opened by State Bank of India (6,14,957), followed by Canara Bank (2,45,155) and Indian Overseas Bank (2,17,045).

Finance minister P Chidambaram has also stressed time and again that education loan is the right of every student and banks should not reject applications of deserving students.

Apart from regular post graduation courses such as a Master’s degree, the education loan scheme also covers courses such as medicine, engineering and diploma courses like nursing, business management, pilot training and chartered accountancy.

The Model Education Loan Scheme was prepared in 2001, which was then circulated to banks for implementation by the Reserve Bank of India (RBI) in April 2001. The scheme, since then has seen some changes and a massive overhaul was done in September 2001 based on needs of students and suggestions of stakeholders.

The size of the Indian education industry is pegged at Rs 3,833.1 billion in 2012-13 by CARE Ratings, of which higher education is estimated to contribute nearly 60 per cent.

Meanwhile, according to India Ratings, timely availability of education loans have not only given a boost to the sector but has also helped affordability given the periodic revision in fees by both the government and private colleges.

Under priority sector guidelines of the RBI, banks can give up to Rs 10 lakh to students for studies in India and Rs 20 lakh for courses abroad.

But the Indian Banks’ Association — the umbrella body for all lenders, has said that banks can consider a higher quantum of loans on a course-to-course basis. This means that students studying in institutes that have fees over Rs 10 lakh such as the Indian Institutes of Management or the Indian School of Business may get higher loans sanctioned.

“But this is largely on the discretion of the bank and is based on the course being studied and the institute,” said an official with a state-owned lender.

The education loan scheme covers basic education fees as well as travel expenses, purchase of books and computer, examination and library charges and any other expenses such as study tours and even lodging and boarding expenses.

Banks are free to charge interest rate linked to the base rate. A simple interest is charged during the study period and up to commencement of repayment. The repayment period usually starts one year after completing the course or six months after getting a job.

Depending upon the amount, banks typically expect the loan to be repaid within 10 to 12 years of the start of the repayment.

Borrowers can also claim income tax deduction on the interest repaid by them in the previous year on an education loan.

An added bonus for students is that education loans are collateral free up to Rs 4 lakh. For loans between Rs 4 lakh and Rs 7.5 lakh, parents have to be a joint borrower and collateral is just in the form of a third party guarantee. For loans above the amount, a physical collateral has to be provided.

The education loan scheme got a further fillip in the Interim Budget 2014-15 when finance minister P Chidambaram announced a moratorium period for all education loans taken up to March 31, 2009, and outstanding as of March 31, 2013. Nearly 9,00,000 student-borrowers would benefit to the tune of around Rs 2,600 crore.

“This proposal was based on public demand. The finance minister received a large number of letters where people who had taken student loans prior to April 1, 2009 felt they were discriminated against as they could not avail the interest subsidy scheme. Basically, what was happening was that many of these doctors and engineers were being considered as NPAs on passing out and could not get a new loan to set up something new,” said a senior finance ministry official.

According to finance ministry calculations, there were 8.94 lakh such pending accounts of which the total interest was Rs 6,000 crore.

Though the move has helped students who graduated earlier, bankers caution that such a moratorium should not be the main reason for students to opt for an education loan.

“Before taking out an education loan, students should also evaluate the job prospects post completion of the course or alternative means of repayment of the loan. Else, in times of a slowdown such as post-2009, when hiring is low, students can face pressure in payments,” said a banker on conditions of anonymity.

Industry sources said that there has been a rise in defaults in education loans post the global financial crisis as many students found it difficult to get a job.

While banks do prefer timely repayment of education loans, under IBA guidelines, if a student chooses to leave the course mid-way or has to extend the course up to a maximum period of two years, the bank can work out a new repayment schedule.

Meanwhile, the government is also working on a credit guarantee fund for education loans that would provide guarantee for such loans up to Rs 7.5 lakh.

The objective is to spur banks to lend more to students without concerns over repayment or defaults.

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Education Programs Try to Close Gaps in Myanmar

Education, Higher Education, Vocational Training

09-03-2014

The New York Times

NYAUNG SHWE, MYANMAR — Across the marshes and open waters of Inle Lake, in Myanmar’s Shan State, motorboats and traditional canoes carry monks to temples and villagers to market, while fishermen with spherical wooden nets pull fish from the murky waters. Lately, another sight has also appeared — boatloads of tourists, cameras readied for the perfect shot of a rapidly disappearing traditional way of life.

Tourism in Myanmar, formerly Burma, is readying for takeoff, with new hotels, airports and restaurants under construction all over the country. Yet development in places like Inle Lake risks being held back by a major constraint: Decades of isolation and repression under the former military junta have left a shortfall in higher education and vocational training in essential skills, not least a working knowledge of foreign languages.

As a step toward filling the gap, a pilot program last summer sponsored by Partnership for Change, a Norwegian social business organization, arranged a six-week English language immersion course for Inle people working in tourism and hospitality. Supported by Teachers Across Borders, 77 students were taught a range of material including English grammar and giving spoken directions. The program proved so popular that 120 students are expected to join a version of the course this summer.

“We talked to the locals here and they were very specific. They wanted to improve their English skills,” said Barbara Bauer, a retired American telecommunications executive who coordinates the program. “We used a rather crude assessment at the beginning and then again at the end, and it was literally a measurable improvement in written and grammar skills. It improved their confidence dramatically.”

The Inle Lake program is one among dozens of vocational education programs that are being implemented to get Myanmar — a place where major multinationals are eager to invest — up to speed in skills as varied as hospitality, information technology and nursing.

For example, Telenor, which won a mobile phone license tender last year and planned to hire 1,000 employees by the end of this year, started the Telenor Myanmar Academy in December, focusing on skill training and professional development.

There are also huge changes afoot in university education. In October 2012 a “Comprehensive Education Sector Review” was begun to bring the quality of education at all levels, from primary school through to university and adult learning, up to international standards.

Led by the Myanmar government, working with partners including the Asian Development Bank, the British Council and Unesco, the review is expected to produce a final draft of recommendations in June as a framework for sweeping improvements in curriculums, matriculation exams and school environments.

“The education system, especially in higher education, will be key to the economic development of the country,” said Daniel Obst, deputy vice president for international partnerships with the Institute of International Education. The I.I.E., a nonprofit group based in New York has been helping the government create links with global educational institutions.

“You have all these companies swooping in and investing,” Mr. Obst said: “But if you do not have the courses that can teach the right things — and professors who do not have the knowledge to teach them — it is very challenging.”

The country’s higher education sector was devastated by five decades of military rule, which formally ended in 2011. After a nationwide spate of student protests in 1988, brutally suppressed with thousands of deaths and arrests, the university system was essentially dismantled, with undergraduate courses dispersed to satellite campuses far away from the city centers like Yangon and Mandalay.

“Students had to literally wade through paddy fields to go to university,” said Tharaphi Than, a Burmese languages professor at Northern Illinois University in DeKalb. “The idea was to not just physically disperse the student population but to also send a strong message that you cannot use higher education institutions for political activities.”

Universities were nationalized, with 13 different ministries in charge of various higher education institutions, and academics were cut off from their international counterparts.

Since the country opened up three years ago, however, changes in higher education have been happening quickly: “It is hard to keep up with, really,” said Kevin Mackenzie, the director of the British Council in Myanmar.

Among the changes, undergraduates have been allowed back to the main campuses of schools like Yangon University; in December a first cohort of 1,000 students moved back into Yangon’s dorms and started classes.

There are also plans to give universities more autonomy and to decentralize some powers, moving some authority away from the ministries.

In parallel with the comprehensive review, two parliamentary committees are examining how to redraft higher education laws and how to modernize Yangon University. There also is a strong understanding that the current vocational and higher education curriculums may not be relevant to the needs of the job market.

“We need to look towards courses with greater job orientation in practical areas,” U Zaw Htay, director general for the Department for Higher Education, wrote in an email. “This is an area of imbalance in our current system and it is important that we redress this.”

That is where catch-up vocational courses such as the Inle Lake English classes have served as a stopgap.

“People are leaving university without the kind of skills that are needed for employability,” Mr. Mackenzie said. “Companies that are coming in now are finding it difficult to recruit skilled workers. If you want to recruit someone with critical thinking skills or business management and with good English, that is very, very challenging.”

There is also an understanding that international educational links are essential for universities to improve their courses and prepare students for a global job market. The I.I.E. began a 20-week course in November aimed at helping universities in Myanmar set up links with schools around the globe.

“Our thought was, you cannot wait until education reform is enacted, you have to do something now,” Mr. Obst said. “All this stuff is happening, but how can you redesign your curricula if you do not have contact with a foreign university? How can you bring in foreign faculty to co-teach courses? So it is International Education 101.”

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Crossing borders for a little freedom & quality education

Higher Education

10-03-2014

The Times of India

PANAJI: It took a while for them to find their bearings, but a couple of monsoons down the line, these students from Afghanistan, who have created a new home in Goa, feel one with the people here.

They are now looking forward to celebrating Holi.

“We have celebrated all the festivals; Diwali, Christmas, Eid specially Holi, and have had a wonderful time with friends. In Afghanistan there is no freedom to play Holi,” says Abdul Ghayoor Karzad, a student.

Each year, thousands of students make their way from Afghanistan to India to pursue their higher education. Most of them are enrolled in Bachelor’s, Master’s and diploma programmes in Delhi, Goa, Bangalore and Pune.

Goa is one of the most sought-after education destinations for these students who comprise over 60% of the foreign national students. Data provided by the education department reveals that of 86 foreign-origin students enrolled in various colleges for the academic year 2013-2014, nearly 63 are from Afghanistan.

The education department confirmed that at present there are 11 higher educational institutions including the Goa University and 19 schools and higher secondary schools where foreign students are studying. Afghan students come to India in large numbers especially with Indian Council for Cultural Relations (ICCR) scholarships.

Prof Bernard Rodrigues, foreign student advisor, tells TOI that compared to other states the education in Goa is very cheap and professional.

It is the Indian Embassy in Afghanistan that gives the students, both boys and girls, scoring 90% and above special scholarships.

Students mostly prefer to go for quality education.

“In Afghanistan the syllabus of even top colleges is in Persian and not very advanced. Many students are attracted to India because the medium of instruction is English,” says Mujeeb Rahman, a law student.

But it was not an easy road for these students. “We had some problems initially as accommodation was not easily available. But with time our neighbours got to know us better and got very friendly with us,” Rahman Nazar Bilim, a law student says.

The students are full-throated in their praise for the locals’ command over English. “India has a good standard of English. We heard that Goans are really friendly and he environment is good to study,” he added.

While the world raves about Goan cuisine, these visitors from Afghanistan had a tough time wrapping their palate around the spicy food. “In the beginning it was very difficult for me since the food is very spicy here, especially the canteen food,” Noorullah Sorkhi, another law student says. Instructions to waiters to go easy on the spice is quite common.

“Back home our food is very bland,” a student says.

Many students study in a city college of arts and science. “This is one of the finer colleges in Goa. The teachers are trained and skilled – most of them have a doctorate and are very helpful. I joined Dhempe college because of its Grade A rating,” says Najeebullah Yalghoz, a student.

Many students want to continue their education in other parts of India.

But not surprisingly, a section of them hope to go back to their country and work for human rights.

 

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