The History Of Education Loan

Education loan has been a savior to students for a long time and it still is serving the same purpose. You too like each one of us may have heard your dad’s struggle story. Stories like studying under street lights because they did not have funds and worked during the daytime. Pity that we or the generation of the 2000s won't be able to tell a similar story to their kids, as we never were and never will be deprived of education because of lack of funds, as we have the option of taking education loans to complete our education. In the below article, we will study the History of education loans and education loan interest rates over the years.

Education was, education is and it will always be the way for a country to progress. Education has always been given importance since the independence of India. Even before we got Independence many of our freedom fighters took the support of education to fight against the British. Given the importance that education carries, the government started, kind of the first step in education loans in 1963. Below we see a series of important events in the history of education loans.

1963 - The National loan scholarship scheme, which was a kind of loan scheme was started by the government to help students in attaining higher education.

1991 - The scheme was stopped in 1991 because of the low recovery rate.

1995 - A more structured education loan was started by the SBI.

2001 - In 2001 a model education loan scheme was introduced and has been in use since then with some modifications over the years.

2004-5 - Changes in the security norms for education loans that are between 400000 and 7,50,000. 

2009 - In 2009, importance was given to girl education by providing a concession of 0.50% on interest rates of education loans for girls.

2009-10 - New central loan scheme to provide subsidy on the interest in the moratorium period to economically weaker section( parental income less than 4,50,000 annually). These loans were provided to students to study in professional or technical fields in India. 

2013-14 - The scheme was introduced to provide subsidies toward education loan interest rates to study in India and abroad.

2015 - Vidya Laxmi portal to apply for unsecured education loans of up to 7.5 lacs was started.

Education loans were started to help financially deprived students gain higher education. The poor did not have money to manage expenses for their child’s education. They also could not arrange collateral to pledge against their loan. That is when the government came up with the initiative of providing unsecured education loans. But the recovery rate in lower amount unsecured loans has been very low. The low recovery rate stats forced banks to rethink their strategy. Since 2015 banks have been very careful about providing unsecured education loans.

From March 2015 to March 2019, the number of students who secured education loans fell from 3.34 lakh to 2.5 lakh. Though the amount increased significantly. The amount increased by 34% from 16,800 crores to 22,550 crores. This shows that the banks are the least interested to fund low amounts of loans, particularly unsecured as the recovery rate is very low. The lower amount of loans is mostly requested by people who are planning on going to average colleges. Averages don’t always guarantee quality education and placement after that. So the students have very low chances of getting jobs. Hence the chances of loan repayment are very low in such cases. Keeping this in view, the banks have curbed providing lower amounts of loans, particularly unsecured lower amounts of loans.

The trend of education loans has been of providing education loans to students going to good universities if they don’t have collateral to pledge. Good Universities charge high fees for which the student needs to arrange from banks. That is the reason we see a spike in the education loan amount while there is a decrease in students getting loans.

There is a great range of schemes provided by the government for students to help with their education loans. But these are implemented through public banks and we all have heard about the effectiveness of public banks. There are problems with private banks too, like disbursement issues and wrong information on interest rates. These issues seemed minor but were impacting the education loan market heavily. Then WeMakeScholars, an organization that is funded by the Ministry of IT, the Government of India stepped in to resolve these issues. WeMakeScholars provide students with the best lenders to process their education loans. They guide students through the process of education loans and also provide negotiation support on behalf of the students. They have expertise in this domain as they are in it since 2015 and so can process even the most difficult cases.

Choose a good University to pursue your higher education as that will help you land a good job and also will be the deciding factor for banks if you are planning to go for an education loan. Avoid going directly to banks for education loans, as that might result in delay or rejection. Go through us i.e. WeMakeScholars to process a hassle-free loan from suitable lenders. Do not delay in thinking too much and get worried. Request a callback today to start your process of an education loan.