S. Sandhiya is the first graduate in her family and weeks before her counselling date, she is a bundle of nerves. What course will she get? Will her loan get sanctioned? With nobody to guide her, how will she go about it? “My neighbour in the village completed engineering. So I asked his family about what I should do. Otherwise, I have nobody to guide me with all the procedures,” she says.

Sandhiya, however, is confident of not only bagging the course of her choice, but also getting a well-paying job through which she would repay her loan. As is the case every year, this admission season, students, especially first generation learners, not only have to wrap their heads around admission procedures, but also worry about financing their studies.

With the rate of defaulters going up, their fears may not be misplaced. Viewed in this light, first generation student S. Balaraman's story lends some perspective. He has completed M.B.A. and says that good research and sound decisions can go a long way in helping students to pay back the loan.

He says that he could pay back his loan amount of Rs. 2,20,000 only because he planned his repayment plan ahead of time and saved accordingly. “My younger brother recently finished his M.B.A and I funded it completely. I never want to be liable to anyone again,” he says.

According to D. Sherin, Founder of Velicham, an NGO that works with first-generation students, among those who go through counselling to get into professional courses such as engineering and medicine, the number of students applying for loans is on an incline. While more students may seek loans for their higher education, banks observe that fewer and fewer actually repay them on time.

“The default rate (non-performing assets) ranges from 5 per cent to 6 per cent of total loan outstanding under educational loan and the default rate is on the increase,” says M. Bhasin, Chairman and Managing Director, Indian Bank.

Over the last five years, the number of loans has gone up from 64 per cent to 72 per cent in rural/semi-urban areas and the quantum of loan has gone up from 59 per cent to 64 per cent in rural/semi-urban areas, he notes.

Says Sherin, “Close to 50 per cent of students who apply for loan are not given the full amount. Many drop out mid way because they are unable to arrange for funds,” she says.

One such student is C. M. Manikandan, who has just finished his third year in Aeronautical Engineering. “Over and above the loan amount, I have to arrange for funds to pay off my tuition and hostel fee among other expenses. Last year an NGO bailed me out by arranging for Rs. 25,000, but this cannot happen every year. I somehow managed to get permission to write the exam this time, but I do not know how I will arrange for the money,” he says.

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Asha SridharJune 28, 2012

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