About us    Campaigns    Research    Support us    Publications    Media Room    Join Us    Contact us

Chile’s Bachelet sends education reform to Congress following street protests demanding change

Finances & Budgets


Fox News

SANTIAGO, Chile –  Chile’s President Michelle Bachelet announced the first stage of her promised education reforms on Monday, proposing an end to state subsidies of for-profit schools — a step toward eventual free university education.

Bachelet said she is answering the call of millions of students who have staged protests since 2011 demanding deep changes in an educational system that fails them with poor-quality public schools and expensive private universities.

“We’re taking the first step toward Chile’s most significant education reform in 50 years,” Bachelet said in announcing the reform package.

“We’re following through with what our students repeatedly said: education is a right, not a privilege.”

The bill heading to Congress on Tuesday would cut subsidies to for-profit schools and forbid government-backed primary schools and kindergartens from rejecting students on the basis of tests or interviews.

Funds instead would go to lower or eliminate the fees parents pay at other institutions.

Still to come is a proposal that would make university education free, a measure that will be sent to Congress later this year.

Critics say policies launched under the 1973-1990 dictatorship of Augusto Pinochet foster social exclusion and inequality.

Schools in Chile were free before Pinochet pushed privatization and ended central control and funding of primary and secondary schools. Public education in poorer districts suffered even as a voucher system directed billions of dollars in public funds to privately run high schools.

Today, Chileans pay a greater share of their incomes for education than any nation surveyed by the Organization for Economic Co-operation and Development.

The student protests began under the 2006-10 presidency of Bachelet, who appeased some students by naming a commission including several of their leaders, and shuffling her Cabinet. But many others were left disappointed.

Bachelet who took office in March, now plans to partly finance her education reform by increasing corporate taxes gradually by 5 percent to raise some 8.2 billion. The tax bill was approved by the lower house last week and will now be debated by the Senate.

Comments Off on Chile’s Bachelet sends education reform to Congress following street protests demanding change

Education loan gets a big boost

Education Loans, Finances & Budgets, Higher Education


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.

Comments Off on Education loan gets a big boost

The case for robust low-cost Education Systems in India

Budget Private Schools, Finances & Budgets

Subhalakshmi Duraiswamy

Associate Director

Livelihoods & Skills

The numbers are everywhere – journal articles on education, seminar presentations on livelihoods, books on economic development and commentaries on social development. They all talk about the 400 million children in India who will be ready to enter school or college in the next decade, the million Indians who are expected to enter the workforce every month, the huge success in enrolling them and the frustrating failures in educating them and lost cause of making them employable.

They also talk about the booming demand for education services and quality in education; the Indian Human Development Survey (2005) reported that about 50% of urban and 20% of rural children were enrolled in private unaided schools; India Ratings expects the education sector in India to grow to USD 110 billion by 2015 and estimated that we grew by 16% last year – that’s more than twice the GDP growth rate and almost as good or better than the rate at which the Retail, Auto, IT and Telecom sectors grew.

What hasn’t been addressed well and fast enough is the need for leveraging the best strategies, technologies, processes and systems that the corporate world has used, to deliver impact in the education sector which has goals that are far steeper than most corporates have faced – especially in the low cost private school sector which is the most in need of a cost-effective scalable model.

An estimated 25 million students are currently enrolled in low cost private schools which employ over 1 million teachers and charge anything from Rs. 250 to 1500 per month.

There is a small breed of social entrepreneurs who have entered the affordable / budget private schools sector  – by setting up branded-school-chains which try and leverage economies of scale and benefits of centralisation (like the Ravindra Bharati School chain which operates close to a 100 schools in Andhra Pradesh), offer school rating systems (Gray Matters Capital), school management systems on the lines of ERP (Digital Campus) and school improvement programs in general.

There are fewer still who have ventured into the low cost and ultra-low-fee school sector.  This includes MA Ideal Schools in Andhra Pradesh (10 schools with 1880 students) and GyanShalain Gujarat (1200 schools with 28000 students) who are among the more established organisations in this sector.

GyanShala has developed a model which relies on para-skilling the teacher’s role (divide it into 3 parts – 1 teacher who interacts with the child on a day-to-day basis, 1 senior teacher who works with a child once per week in more complex processes of problem solving and comprehension and 1 designer who develops the curriculum), investment in teacher training (@ 25% of their salary cost), site selection by identifying spots where children are naturally congregating, review and renewal of the curriculum annually and maximizing time usage to allow for children with chores at home to be able to attend to those without dropping out.

Newer entrants like SEED (Standard of Excellence in Education and Development) Education Corporation (setup in June 2013 and currently operating 2 schools with 1500 students) aim to providean integrated offering of curriculum and technology support, building large neighborhood schools and reducing dependency on teachers overall.

Looking at international examples, Omega Schools in Ghana (38 schools and 20000 students) which use a pay-as-you-learn model where students pay on a daily basis using vouchers which are available in the market and the Bridge International Academies (100 schools and 30000 students) in Kenya using a vertically-integrated academy-in-a-Box model which has re-engineered the lifecycle of education leveraging data, technology and scale, are examples for Indian edupreneurs to draw from.

In summary, there is a lot to be done in the Indian Education sector in general and the Low Cost Private schooling space in particular; the task is as challenging as any other on offer currently – and the potential to contribute to India’s economic and social development in a meaningful way, is bigger than most other options. What remains to be seen is the nature of responses that rise and the scale of impact that they are successful in delivering.

Comments Off on The case for robust low-cost Education Systems in India

Punjab releases Rs 280.81 cr for scholarships

Finances & Budgets


Business Line

The Punjab government has released Rs 280.81 crore for scholarships for scheduled castes students studying in degree courses, medical education, engineering courses and diploma and certificate courses. Punjab Scheduled Castes and Backward Classes Minister Gulzar Singh Ranike said students whose parents have annual income of Rs 2.50 lakh would be eligible to get these scholarships. He said 2.64 lakh students in 2,000 institutions were given scholarship for the year 2012-13 from out of the sanctioned amount of non-refundable fees. Rs 31.75 crore has also been released during the current year for this purpose, he said. The minister said Rs 230 to Rs 1,200 per month was being given to the students as scholarship amount. Besides, Rs 1,600 for educational tours, Rs 1,600 for thesis writing and Rs 1,200 for books was also being given by the Punjab government. Fees amount was sent though online system to the institutions concerned and maintenance amount of the students transferred to their bank accounts, he said.

Comments Off on Punjab releases Rs 280.81 cr for scholarships

Education is free from class 1 to 10 in all government schools

Finances & Budgets, Primary Education, Secondary Education

The News (International)



Education is free from class one to 10th in all government schools within the federal territory, said Director General Federal Directorate of Education Islamabad Dr Shahnaz Riaz.

She stated this while addressing the 4th annual convention titled ‘Education-Road to Sustainable Development and Peace’ organised by the Pakistan Coalition for Education (PCE) here on Monday.

She said, “By implementing the article 25-A of the constitution the ministry of CAD had directed all the public sector schools not to collect the monthly fee from the children from the next month.” While addressing the convention PCE National Coordinator Zehra Arshad demanded of the authorities concerned that they should immediately implement free and compulsory education for all.

She further said, “The PCE is taking important steps for implementation of Article 25-A and have set up a network in more than 65 districts of the country for that purpose.” “Islamabad Capital Territory (ICT) introduced in 2012 as Right to Free and Compulsory Education and the Sindh government in February 2013 introduced ‘Sindh Right of Children to free and Compulsory Education Bill’ but still rules of business have not been drafted for either,” she added.

“The representatives of the civil society, PCE have filed three Public Interest Litigation suits in the High Courts of Islamabad, Lahore and Peshawar to demand the respective provincial governments to provide free and compulsory education to all children as promised in the Constitution — but the courts aren’t giving the cases the attention they deserve,” she resented.

Zehra cited that according to Unesco, the number of children out of school is 12.9 million (the second highest number in the world, after Nigeria) adding that only64% schools have drinking water, three percent of schools have electricity, 61 percent schools have latrines, 13,635 schools in Pakistan (11%) have no building.

According to the Unesco Global Monitoring Report 2012, Pakistani women with a high level of literacy earned 95 per cent more than women with no literacy skills, whereas the differential was only 33 percent among men.

The others speakers said that the survival rate till grade 5th (number of students who complete school till the fifth grade) is 56 (out of a 100). Only 35% of all primary school teachers in rural areas of Pakistan are female, which will continue to limit access to females, as many families don’t feel comfortable sending their daughters to school unless they have female teachers due to cultural norms prevalent in Pakistani society.

Comments Off on Education is free from class 1 to 10 in all government schools

‘Govt to increase education budget upto 4pc of GDP gradually’

Finances & Budgets, Global news, Higher Education


Business Recorder


Minister of State for Interior, Education, Training and Standards in Higher Education, Baligh ur Rahman said the government would gradually increase the budget for education and will take it to four per cent of the GDP.

He was speaking as chief guest at the Vice Chancellors’ Committee Meeting which was attended by Vice Chancellors and Rectors from all public sector universities of the country. The meeting was organized by Higher Education Commission (HEC).

He emphasized that less developed areas and institutions will be given preference for disbursement of funds.

The minister appreciated the performance of HEC and universities across the country and ensured that the government will do every possible effort for further development of higher education sector.

Appreciating the university heads for their role in strengthening the higher education sector, he said that their suggestions for improvement in the education sector, including primary and secondary education, will be taken seriously.

He also mentioned Ministry’s request to HEC for developing minimum entry standards for universities of Pakistan.

The minister agreed with the Vice Chancellors that education should be a federal subject, especially curriculum development. “If each province develops its own curriculum, it will create disconnect among different units of the country,” he said.

In his welcome address, Chairman HEC, Engr. Imtiaz Hussain Gilani said that proposed changes in the higher education setup in some provinces are dangerous for future of university education.

He requested the government to ensure the autonomy of the higher learning institutions otherwise “it will compromise the quality of education.”

Dr. Mukhtar Ahmed reiterated HEC’ stance that access to higher education will be increased, adding that the universities should be very careful while opening new campuses and offering affiliation to colleges.

He stressed the importance of improving quality and not compromising it at any cost.

Mentioning HEC’s concern regarding mushrooming growth of sub campuses, he said “Universities are allowed to open sub-campuses but only after fulfilling HEC’s requisite NOC.”

During the meeting, the Vice Chancellors showed concern on the institution specific amendments being incorporated in the Acts of different universities/degree awarding institutions.

They observed that such interventions could derail the operations, management and standards of higher education and research, and impede the progress currently being achieved in the higher education sector.

A committee would be constituted to review these amendments and propose a Model United Universities Act for adoption all across the country, after briefing the concerned ministries and the Prime Minister of Pakistan.

Funding constraints faced by public sector universities were also discussed in detail by the academics along with placement of fresh PhDs in universities.

Comments Off on ‘Govt to increase education budget upto 4pc of GDP gradually’

China Education Resources Inc. Reports Q3 2013 Financial Results

Finances & Budgets, Global news

Nov. 29, 2013

Market Watch

VANCOUVER,  /PRNewswire via COMTEX/ — China Education Resources, Inc. (“CER”) /quotes/zigman/354052/realtime CA:CHN +5.26% (otcqx:CHNUF), a leading technology and content provider of online learning, training courses and social media for teachers, students and education professionals, announced its financial results for the third quarter of 2013. All figures are expressed in U.S. dollars.

China Education Resources generated gross revenues of $3,475,166 in the third quarter of 2013. This is compared to gross revenue of $2,716,353 for the same period in 2012. It recorded a net profit attributable to shareholders of $741,010 as compared to a net profit attributable to shareholders of $1,008,994 for the same period in 2012. The decrease in net profit attributable to shareholders for the current period was mainly due to an increase in selling expenses of $1,243,317 as compared with that for the same period of prior year for marketing and promotion of the products of the Company.

Q3 of 2013 financial highlights include:

Online products revenue of $1,757,026 generated during the third quarter of 2013 as compared to $1,979,384 during the same period in 2012; $5,465,405 for the nine months of 2013 as compared to $3,756,376 during the same period in 2012.

Text book sales revenue of $1,718,140 generated during the third quarter of 2013 as compared to $736,969 during the same period in 2012; $4,465,744 for the nine months of 2013 as compared to $3,322,757 during the same period in 2012.

During the nine months ended September 30, 2013, the Company generated revenue of $9,931,149 as compared with $7,079,133 for the same period in 2012. The net profit attributable to the owners of the Company for the period was $618,069 as compared to $1,442,512 net profit for the same period in 2012.

“We are very pleased with our continually increasing revenue in the Q3 2013, and the strong operating performance of the company.” said Chengfeng Zhou, CEO, China Education Resources.

“We expect our unique and comprehensive blend of education resources and services to generate more on-line related revenue, and we are encouraged by the increasing utilization of our internet platform and educational social network, which work together with our existing online/offline products.”

In collaboration with China’s education administrators and experts, China Education Resources has been helping to transform the curriculum of the world’s largest educational system. Recognizing the need to address education reform changes, China Education Resources has created educational tools and curriculum for China’s entire kindergarten through twelfth grade system. The Company is playing an integral part in transforming China’s educational system through helping to convert the existing educational system from a memory-based learning system to a creative thinking and interactive approach. Presently, China Education Resources has over 1 million kindergarten through twelfth grade teachers registered through its Web portal. For more information, please visit www.chinaeducationresources.com or call (604) 331-2388.

Safe Harbor Statement

Certain statements made herein, and other statements relating to matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable securities legislation. Forward-looking information and statements are typically identified by words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “plan”, “estimate”, “will”, “believe” and similar expressions suggesting future outcomes or statements regarding an outlook. All such forward-looking information and statements are based on certain assumptions and analysis made by China Education Resources, Inc.’s management in light of their experience and perception of historical trends, current conditions and expected future developments, as well as other factors management believes are appropriate in the circumstances. These statements, however, are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information or statements. Important factors that could cause actual results to differ from these forward-looking statements include those described under the heading “Risks and Uncertainties” elsewhere in the Company’s MD&A filed at www.SEDAR.com. The reader is cautioned not to place undue reliance on forward-looking information or statements. Except as required by law the Company does not assume the obligation to revise or update these forward looking statements after the date of this document or to revise them to reflect the occurrence of future, unanticipated events.

The TSX Venture Exchange has not reviewed, and does not accept, responsibility for the adequacy or accuracy of the contents of this press release.

Comments Off on China Education Resources Inc. Reports Q3 2013 Financial Results

‘Affordable medical education will bring down healthcare costs’

Finances & Budgets


The New Indian Express

One way to make healthcare affordable is by ensuring that medical education becomes inexpensive, Sri Jayadeva Institute of Cardiovascular Sciences and Research (SJICSR) Director Dr C N Manjunath said. Delivering the  keynote address at the inaugural of a two-day workshop titled ?Affordable Healthcare and Access to Clean Water’ at the Indian Institute of Management, he said,?Because of expensive medical education, doctors are constantly thinking about how much they’ve spent on their training, and patients are made to bear the costs. To make clinical service affordable, medical education has to become affordable.?  Dr Manjunath said affordable medical education would also make 25-30 per cent doctors follow an evidence-based medical approach. ?We need to strengthen the basics of medicine. Doctors seem to be taking pride in conducting investigations (tests), most of which may be unnecessary. It is wrong to make patients undergo so many tests. In more than 50 per cent of the cases, lending a good ear to patients will give us the diagnosis,? he said. ?The basic cost of treatment will be decided by the managements in private hospitals, which are mostly looking only at a revenue model. They need to adopt a volume-cum-revenue model instead,? Dr Manjunath suggested. He referred to how SJICSR did close to 80 angiogram procedures every day. ?With such volume, I can easily perform at least 7-8 free of cost,? he added. Dr Manjunath said hospitals in the public sector were unable to win the trust of patients due to lack of uniformity in high standard healthcare. ?There is a need to cut red tape. Also, a corporate culture should come in the public sector. Otherwise, patients will be forced to go to the private hospitals.? With 70 per cent of clinical services today being provided by the private sector, ?there is a need for better synchronisation between public and private institutions,? he said.  Dr Manjunath urged the government to reduce duties on costly medical equipment.

Comments Off on ‘Affordable medical education will bring down healthcare costs’

Impact of ‘revolutionary’ edu scheme in another 10 yrs: FM

Finances & Budgets

Financial Express


The impact of the ‘revolutionary’ education loan scheme of the UPA government would be felt in another 10 years, Finance Minister P Chidambaram said Saturday.

Participating in a loan mela organised by Canara Bank at nearby Tirumangalam city, he said Tamil Nadu is an advanced state in many ways due to the vision of late Chief Minister K Kamaraj, who had developed schools and introduced noon-meal schemes, encouraging children to go to school.

“Similarly the education loan scheme introduced by the UPA government is a great revolution and will have its impact in another 10 years and make India an advanced nation in the coming years,” Chidambaram said.

The Finance Minister pointed out that backwardness in education was the reason for many states not being developed, despite having natural wealth and industries.

The minister said one out of four education loans given in the country had been received by students from Tamil Nadu. Its impact would also be felt after 10 years when one out four persons employed in big companies and government services would be from the state.

He said the recent meeting of Bank Chairmen at Delhi had been informed that Rs 58,000 crore worth education had been sanctioned and the balance of Rs 12,000 crore would be given in another five months.

Chidambaram also praised the ‘farsighted’ vision of former Prime Minister Indira Gandhi for nationalising banks. “But for that act, it would not have been possible for the poor to avail of loans,” he said.

Without mentioning the name, he said some people appear like magicians and claim to have a magic wand to develop the nation. “I don’t respect such people. There is no way to develop the nation using magic. The only way is to introduce schemes that will help the next generation.”

“Congress does not think about next elections, we think about the next generation,” he said.


Does our socialist economy really care about education?

Finances & Budgets




Why do education loans attract the highest interest rates when the government stresses on the impetus of education?


I distinctly remember the union budget speeches of our Finance Minister and now the President of India Pranab Mukherjee and the current finance minister P Chidambaram. They both outlined the government’s focus of elementary education through the Sarva Shikha Abhiyan and the Right to Education Act. Speech after speech they stressed on the government’s commitment towards the education sector.

In P Chidambaram’s last budget speech, the word ‘education’ was used 15 times whereas ‘economy’ was uttered 13 times. However, in the 2010 budget speech of Pranab Mukherjee, he said the word ‘economy’ 19 times and ‘education’ 8 times. Inclusive growth? As part of Mukherjee’s inclusive development agenda, he proposed to increase the plan allocation for school education from Rs.26,800 crore in 2009-10  to Rs.31,036 crore in 2010-11.

“The Right to Education (RTE) Act is being implemented with effect from April 1, 2010 through the Sarva Shiksha Abhiyan (SSA). For 2012-13, I have provided Rs 25,555 crore for RTE-SSA. This is an increase of 21.7 per cent over 2011-12,” Mukherjee in 2012-13 budget speech said.  Chidambaram, in 2013-14, said, “Education is the other high priority. I propose to allocate Rs 65,867 crore to the Ministry of Human Resource Development, which is an increase of 17 percent over the RE of the previous year. The Sarva Shiksha Abhiyan (SSA) and the Right to Education Act are firmly in place. I propose to provide Rs 27,258 crore for SSA in 2013-14.”

One might argue that with the above mentioned allocations the government is dispensing its social duties. Education for all.

But is this education for all? Is this inclusive? What happens to higher education? What happens to students who dream to study more?

Of course I am not suggesting that the government should subsidise education at every level. But is it too much to expect realism in terms of affording higher education?

Now let’s look at the latest data available with the Reserve Bank of India. It says that during March 2012 to June 2013 period, the lending rates for education loans saw the sharpest decline of 63 basis points. Kudos! Now the bad part: the median lending rates of scheduled commercial banks for the education sector was 13.12 per cent in June 2013. In simpler terms, if you approached any private bank for an education loan, the interest rate it will charge you is 13.12 per cent. Even after the sharpest decline amongst all sectors, the lending rates for education were only second to credit card interest rates. Necessity versus luxury?

A home loan in June 2013 was available for 10.93 per cent, vehicle loan for 12.85 per cent and agriculture loan for 11.67 per cent versus an education loan, at 13.12 per cent. Credit card interest rates were at 26.67 per cent.

Turns out, socialist, democratic republic of India cares more about capitalism. What else could be the reason that a home loan and vehicle loan is cheaper than education loan?

The banks will tell you that the problem is with the students. They do not repay the loans and the bad debts that banks have to write off in the education loan segment are high. Therefore, as the risk is greater, the interest rates are higher. Instead of finding a solution as to why students are not able to repay their student loans, this is the solution the banks have found.

Now imagine such a situation with a big corporation? Banks would have bent over backwards to offer them a corporate debt restructuring (CDR) plan. No questions asked, interest rates lower, time period increased, more money pumped in, moratorium, etc. Kingfisher Airlines?

This story shows how CDR has increased from Rs 86,535 crore in March 2009 to a whopping Rs 2, 50,279 crore in June 2013.

Now let’s look at the RBI data on the deployment of gross bank credit by major sectors. In July 2012 and 2013, outstanding education loans grew to Rs 49,800 crore and Rs 54,500 crore, respectively The education loans, which are mentioned under the priority sector, as on July 2011 were at Rs 45,300 crore. Lowest after micro-credit at Rs 16,200 crore and export credit at Rs 33,100 crore out of the list of 10.

What does this show? The government’s impetus on education is not necessarily finding space with commercial banks?

The priority sectors or the areas important for the economic and social growth of India are identified to be agriculture, micro and small enterprises, education and housing. Interest rates for all of which are in double digits with education being the highest. Education loan, although described as the harbinger of India’s future and economic stability and growth, classified as a priority sector by the government and the RBI, is still mentioned under the ‘personal loan’ sections.

If education is supposed to uplift the people and with them their families and the economy on the whole, is it still a personal loan?

If the government’s allocation for education goes up year on year, if a student wishes to study more it becomes his personal ambition rather than an ambition for the nation?

A student who wishes to pursue his higher education abroad cannot do so because he doesn’t belong to a rich family and the interest rates that the bank charges on such loans is back breaking. Most banks offer education loan for higher studies abroad of upto Rs 20 lakh with a few public sector banks even offering Rs 25 lakh. But these loans are not without a collateral and understandably so.

But what happens to a student whose family doesn’t have a house to mortgage to the bank to secure the loan? Isn’t it the duty of the government to underwrite the loan for the underprivileged?  Is the flight of one’s dream based on the money his parents or their forefathers earned?  If education is such a top priority for the government then the interest rates, the method of lending and government’s role should reflect that.

« Older Posts

  Disclaimer: The copyright of the contents of this blog remains with the original author / publisher.