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Tuesday, June 15, 2010

education loans .. a few suggestions

when banks were told to popularise education loans they were sceptic. now they are proved right, well, almost. education loan accounts for a major portion of bad loans in banks.
there are a few problem areas in the education loan segment. repayment obligation is too heavy in many cases. for example for a five year course the loan amount goes up by about 50% by the time the student starts repaying (hopefully from the sixth year). this amount is to be repaid in the next five years with compound interest . many jobs simply do not provide such salaries.

the other problem is that the student forgets to keep in touch with the bank once the course ( and the loan disbursement) is over. it becomes very difficult for the banker to trace the student and his employer.

but education loan is a great step forward. there is no meaning in denying an aspiring student a venue just because he doesnt have enough money. here are a few suggestions to improve education loan segment.

from the student's side

-- estimate the repayment obligation before availing the loan

-- start repayment at the earliest , even during the course period if one can afford it.

-- inform the bank details of employment or otherwise



from govt side



-- consider further reduction in rate of interest. even at zero rate of interest , education loan may provide positive returns to the society at large.

-- consider substantial increase in repayment period. even a ten year period is ok. after all the student will be in gainful employment for a much longer period.

-- make it mandatory for the colleges to send information to the financing banks on the progress and completion of of study and employment details if any

-- make the student decalre education loan liability if any in his bio data for job application. make it compulsory starting with govt and public sector jobs.