Education loan disbursed in Gujarat falls as foreign degrees lose appeal

Education loan disbursement in Gujarat witnessed a sharp fall, of around 42%, in the financial year 2009-10 as compared to the previous year. On the other hand, the number of bank accounts for the same has increased by around 12%, indicating that more students are taking education loans for higher studies. The fall in the number of loans disbursed, however, is being attributed to fewer students going abroad for studies.

Banks in Gujarat lent Rs581.62 crore to students as education loans in 2008-09; in 2009-10, this came down to only Rs332.37 crore, a decline of Rs249.25 crore in absolute terms.

However, the number of students obtaining loans from banks in the state grew in the last financial year (FY), as compared to the previous fiscal. In FY 2009-10, a total of 12,663 students obtained education loans from banks while in the previous year the number of such students was 11,296. In FY 2009-10, there was a growth of 12%.

Overseas education consultants and banking experts say the latest trend points to fewer students going abroad for higher education, as also to increased demand for education loans from students joining the not-so-big institutes.

"It seems the demand for education loans is coming more from students joining the not so-premium institutions," said P Nandakumaran, chief general manager, State Bank of India (SBI).
Nandakumaran added that, earlier, the greatest demand for education loans was from students joining premium educational institutions. This is not the case now, he said.

It is worth noting here that the most striking decline has been noticed in SBI's education loan disbursal statistics. In the quarter ending March 2009, SBI disbursed Rs305.10 crore as education loans among 569 students in the state. This came down to just Rs15.32 disbursed among 959 students in the March 2010 quarter.

MK Jain, SLBC convener and general manager, Dena Bank, said that the decline in the amount disbursed as education loan could be because of fewer students going abroad for higher studies. "The maximum amount given by banks as education loan is Rs20 lakh. The number of students applying for this maximum amount has gone down," said Jain.

Tanu Seth, office manager, 'Study Overseas', endorses Jain's views. She said that the number of students going abroad had declined by around 40% in the last financial year. She cited recession as being a major factor behind the fall. "Only two out of 10 students coming to us are interested in obtaining an education loan, as they usually do not have liquid assets to show as collateral," said Seth.