Education loan demand hits new high despite pandemic

Demand for education loans rose to a record level in 2020, a year when most schools and colleges in India and across the world were forced to conduct classes online due to the pandemic.

Education loan companies – which include banks and non-bank lenders – have disbursed Rs 11,000 crore loans in the 12 months through September 2020, according to data from CRIF High Mark, a credit bureau. A bulk of the disbursals happened through the pandemic period with more than 3 lakh new borrowers signing up for loans between March and October 2020.

As of October 2020, the outstanding education loans totalled Rs 1 lakh crore, the highest on record.

Lenders and industry experts said the pandemic has given a big impetus for people to upgrade – be it signing up for an executive education programme or enrolling for short-term upskilling courses.

Fear of job losses, rapid disruption in the workplace and stagnant scenario in terms of increments and promotions are prompting several professionals to learn the ropes of the post-Covid world. Top management institutes imparting executive education have also seen a spurt in interest from professionals wanting to sign up as the disruption pushed people to upgrade themselves to increase their opportunities for career growth.

“We have seen an increase in people enrolling for our executive education programmes. With new jobs coming into the horizon and new ways of driving business growth, the only way to be relevant to the emerging job profiles is through education,” Indian Institute of Management-Kozhikode director Debashis Chatterjee said.

“The number of people (individual applicants) who have expressed interest in our executive education programmes has gone up this year,” said Preeta George, associate dean, executive education and modular programmes at Bhavan’s SPJIMR. “People see that doing an MBA may better their career prospects, not just growth within the organisation but also widen the opportunities outside,” George said.

That apart, the current work-from-home milieu and the accelerated pace of workplace digitisation prompted many to sign up for upskilling courses.

Said Amit Gainda, chief executive, Avanse Financial Services: “Apart from an increase in domestic upskilling, we have also seen a 35% increase year to date in the applications for overseas courses as an increased number of people wanted to enrol for foreign institutions which ran most part of the year in the hybrid mode.”

Though some of the big-ticket loans (Rs 50 lakh to over a crore) for study abroad programmes have taken a hit last year, loans for domestic courses as well as upskilling programmes went up, thus leading to an increase in the overall loan demand, said Varun Chopra, CEO of Eduvanz Financing. Typically, loans for domestic programmes range from Rs 5-6 lakh to Rs 15-20 lakh.

“Going ahead, the reason for borrowing will start changing as it will become more of a necessity. I see smaller ticket size loans becoming a part of the norm,” said Chopra.

“Lenders also will become more cautious linking the credit disbursed to the future prospect of the borrower rather than the traditional method of keeping a collateral,” he added.

Loan Amount Disbursed Between Oct 2019 & Sept 2020 (Rs crore) 11,087.41
Number of Active Loans as on October 2020 27.73 lakhs
Education Loan Outstanding as on October 2020 (Rs crore) 1,02,742

Source: CRIF High Mark

Loan Ticket Size

  • Overseas courses – Rs 50 lakh to over a crore
  • Domestic executive education programmes – Rs 5-6 lakh to Rs 15-20 lakh
  • Short-term upskilling courses – Rs 2-3 lakh

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