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Updated: June 6, 2013 18:22 IST

Paying the price for taking a loan

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Arun Raj
Arun Raj

Arun Raj (22) Engineering graduate

It is never easy for a student of a self-financing college to get an education loan. It was only the fifth bank I approached that agreed to offer me the amount — Rs 2.4 lakh. The only family asset I have is a piece of land, and I had to provide the property document as security. The papers remain under the custody of the bank.

From next year, I have to start repaying — Rs 6,500 a month, which includes an interest of 25 per cent for the next four years. It has been a year since I graduated but I am yet to find a job. If the market situation persists, I might not even get a job.

As the only graduate in the family, I handle all the paperwork myself. Bank officials inform me about the updated loan amount only when I go and inquire about it. The pressure to repay is the loan is so high that many of us are willing to take up any job that comes our way — including night shifts in BPOs, marketing jobs and even data entry jobs — even though they pay very less.

(As told to Vasudha Venugopal)

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Vasudha VenugopalJune 28, 2012

I find most comments reveal poor know-how of education loan schemes of public sector banks. The education loan schemes are as per the guidelines of RBI and carry interest at rates ranging between 11 to 13 per cent. No security except guarantee needs to be provided for loans upto 4 lakhs. I wish borrowers do some research before they begin. Attention to financing education is as much a responsibility as studying. And, please repay the loans.

from:  kris
Posted on: Jun 29, 2012 at 16:37 IST

Shame on you Arun Raj!

Why you are looking down BPO, Marketing jobs? Many people are taking up these jobs are earning good & living happly.

Actual problem is in you? U guys dream of highly paid jobs, settling in abroad etc soon after ur engineering and in frustration u blame others including family members.

please note there are no short cuts to acheive targets/success

from:  Phani Chandra Sistla
Posted on: Jun 29, 2012 at 15:44 IST

It is interesting to note how some people just go by what is there in the news...Now a days we cannot believe any news from any paper...We need to ask many questions before believing the news can be true...The loan amount is 2.4 lakhs...The student says he needs to pay Rs 6500 per month for next 4 years to close the loan...Which means he is repaying 6500 x 48 months = 3.12 lakhs...Which means the total interest paid is Rs72000...Going by this the interest rate is less than 6%...Actually the interest rate is much much lesser because the student doesnt pay any interest for 5 years (4 years while studying and 1 year after completing the degree)...So there is nothing to blame the banks or education loans here...Only concern is about the employment...

from:  Selva
Posted on: Jun 29, 2012 at 05:02 IST

One of the reasons why many graduates fail to get a job is, they fail to develop some basic skills while in college. Another major concern here again, many students who have no aptitude for engineering subjects take up engineering courses for the mere attraction (thinking that taking arts courses are below their dignity). I am not blaming Arun, but the fact remains. When a person has no aptitude for a specific field, it is really hard for to develop some basic skills in the field. The major concern today is, take up a right course of study, as per your talents and inborn capacity and sure you will excel in the field and getting a job is easy. You go for engineering just because of the mass-attraction and end up confused and troubled.

from:  dr.janetius
Posted on: Jun 29, 2012 at 04:04 IST

It is atrocious that student education loans in India have the highest interest rate, more than a house or car loans.
It is surprising that in the US, the loan interest rates are very low almost half of that of Indian education loans.

With a job shortage and an excess of talent, it would be wise to reduce the interest rates for the education loans in India. I do not understand as to why are the rates so high in India?

from:  Rai
Posted on: Jun 28, 2012 at 22:39 IST

This is really sad. 25% is atrocious.
However, please don't be weighed down by this. Focus on your immediate priorities for now. Analyze what expenses can be avoided/minimized. Put those towards the payment. Think about your family that offered the land so that you can get educated.
Your hard work will pay you back sooner or later.

from:  Rizwan
Posted on: Jun 28, 2012 at 22:16 IST

@ Mr.Vengu,
With all due respect, I do agree there are pell grants. how many students get that and how much of their tuition it covers? And the difference of tuition between an instate and out of state student. Even after all the support from the government, between very high cost of tuition,and low paying obs after that, and yes of course long ime for graduate studies student get back to job to earn living. Also once they come to college they are on tr o in USA.

How Indians and Chinese survive? if you take The graduate school going Indians (i dont know about chinese) Most of our bachelors, if it was BS and MS in India was very cheap and we come to PhD with stipend, and even if its BE, right after MS people land jobs. FYI a report in NPR two days back said Asians take over Hispancis in USA and that reports more than 70% of indians in USA have college degree and higher Median Income- no wonder they can support their wards.

Sadly that is not the case for Indians in India

from:  sriram
Posted on: Jun 28, 2012 at 17:12 IST

i think government should provide subsidy on rate of interest on education loan instead to provide package relief for corporate sectors.As the ROI for financing a car is 10.5 % where as on education loan it is approx 12 % , so government have to decide whether luxuary is important or the future of India.

from:  rahul aggarwal
Posted on: Jun 28, 2012 at 16:56 IST

It is all because of the very high cost of education. And indiscriminate approval for colleges by AICTE, STATE GOVTS etc. Lot of these colleges are owned by politicians only. They just flout all the rules and put colleges to grab money from the willing, and do not offer quality education. Recently I heard a story of a BE EEE joining a small company for a salary of 6000. There will be many such incidents in the near future as the job market goes bust and growth topples. It is reality that banks are squeezing the blood out by means of educational loans. I found personal loan to be cheaper than education loan.

from:  Karthikeyan
Posted on: Jun 28, 2012 at 15:26 IST

Hi Arun,

I am also in the same situation. I got 2.5 lakh loan from bank. My land property is under the bank custody. The government told dont ask any security. but most of the bank manager asking provide any land property or government employee sign. I am a first graduate from my family and my my ralative also. Then how is possible to get the sign from government employee..

Thanks
Lakshmikandan

from:  Lakshmikandan
Posted on: Jun 28, 2012 at 05:54 IST

When you come out as a full fledged Mechanicl Engineer, opt for Membership with the Institute of Engineers that will help you update with the latest trend in the world, and simultaneousely load your properly worded profile in the net. Never loose your hope. It will not be difficult for you to get a break provided you are willing to relocate yourself anywhere even if it for a short time besides your hometown. There are bright opening in sectors like Marine/Ship Building and Servicing, Large Enginering Projecs. In a short while, if you are able to apply your knowledge and skill into your day to day assignments and projecs, not only your loan EMI will not be a burden on you but also you might be left with soemthing extra for which you can plan. Perseverance, hard work and dilligence always pays. All the best.

from:  sridhar iyer
Posted on: Jun 27, 2012 at 23:13 IST

Mr Arun, I sympathize with you in this regard. I recently repaid my
education loan which I had taken for my MS education in United States.
I can understand the pressure that you are going through now. All I
can suggest you is persistence and hard work is the only key to get a
job and succeed in life. Wish you all the best.

Mr Gopalakrishnan: Nowadays, PSB are granting education loans only if
the applicant/gurantor can pledge a security whose worth is equivalent
or higher than the loan amount requested.

from:  Pavan
Posted on: Jun 27, 2012 at 21:15 IST

Re: Sriram's comment - this is not the reason the US education system has failed; there are Pell grants, etc. as well as student loan programs authorized by congress. The interest rate is about 4%. In the US, and in the west in general, many students do not go into STEM programs (Science Technology Engineering and Math) because of a number of reasons, including the fact that one has to be in school for another 5-7 years beyond the bachelor's degree, then a post-doc, etc. Many bright students go to medicine or health professions which pay a lot more. Please get your facts right. If the writer's letter is correct, how do Indian and Chinese students survive?
As some one who has taught/worked in US schools for close to three decades, I find this response to be uninformed.

from:  vengu
Posted on: Jun 27, 2012 at 20:54 IST

This is the story of most of the Indian professional graduates. when i was trying to get educational loan, i knocked almost all the bank door in my town but nothing is fruitful. U could get an Engg seat even but getting Loan is pathetic.
When govt waived the whole loan amount for farmers why shouldnt the interest for educational loan be waived off.
India is heading its way to dark with the economical turmoil, rupee value getting diminished, what else... hail politicians

from:  vijayabharathi senthilnathan
Posted on: Jun 27, 2012 at 19:06 IST

Educational loans should be given for a low interest. That is the only way..or parents should have a saving strategy for their kids education. Taking a loan is always stressful. I know some of my American friends in USA who repaid after 10 years of work. You can imagine how much interest goes into the payment. When there is stress how can they concentrate on their studies.

from:  sambhav
Posted on: Jun 27, 2012 at 18:50 IST

Arun,
We can comment on the broader picture about why this is happening and why capitalism is bad.. etc. etc.

But all I can say for you is you have age on your side. Make a long term plan and fight for it day and night. You will come through well by 26 for sure.

I was in a similar situation without any job after my bachelors. Next 2 years were the toughest of my life. But thankfully, for my hard work and interest in my B.E. subjects, I could clear GATE for M.Tech in a top college and at the same time get a job for my technical skill (that I honed during those tough days). Luck is important too. But luck, no one can predict. All you can do is do your best at this point in time.

I suggest you aim very high. That way, I assure you, you will at-least earn a living and finish your loan. When you aim to be first, you will at-least end up in top ten... so don't forget to aim high in whatever you do and toil day and night... The satisfaction you will get when you are through is unmatchable.

from:  Karthik
Posted on: Jun 27, 2012 at 18:24 IST

@ Sriram, I was fed-up by giving inputs to students, parents, co-lecturers, etc. Still, you inspired me to share my thoughts!

@ Rajan, I worked as lecturer and came across many students who faces the problem like Arun. Any inputs like how to get bank loan without pledging documents?

@ Arun, This a difficult but short phase of life with your committment and decisions to become engineer. Personally I'll say, engineering alone doesn't brings success, so never advice your junior to opt for engineering if they can't afford for it. To strive in Chennai and payback your monthly loan to the bank you need to earn Rs15k a month. Take any job temporary, but plan your career now as you've missed all the placement oppurtunity (may be) given by college / university. I may be alternative help for you, if need my advice, get me. May the Almighty bless you and the students who're going through the same problem

from:  Imdad
Posted on: Jun 27, 2012 at 18:01 IST

No Bank can charge 25% for education loan. Mr. Arun should take up the matter with the Banking Ombudsman to rein the bank to charge not more than 12% for education loan. It is high time that such suffering students should form a group and come together to fight it out. Good samaritans come to the rescue of Arun.

from:  K.S.Balasubramanian
Posted on: Jun 27, 2012 at 18:00 IST

that is the way it is Arun. We have to face it. No other go. But you
should not have pledged the land documents. Education loan is unsecured
loan. That is how I availed it for my daughter. Each bank follow their
own set of rules. I cannot suggest you to sell the land and settle the
loan. Better find a good job. God will be with you. We lower middle
class people always suffer .. But we will come out of it with
perseverence .. God Bless you.

from:  Rajan Gopalkrishnan
Posted on: Jun 27, 2012 at 17:23 IST

This is exactly the reason why US education system failed for its own citizens and that much of their R&D work force is Indians or Chinese. As someone who had interacted with many many students here in USA th have exactly similar words as to Mr. Arun ...."The pressure to repay is the loan is so high that many of us are willing to take up any job....." over to pursuing Masters and PhD. Its predatory lending in terms of banks, capitalism at its worst. When you finance housing loan at 11 and 13%, 25% for education is absurd. What is the government doing - I believe they are hand in hand with several foreign forces that aim to keep Indians modern day coolies at their off shore offices. This is a long term danger for our country, Our might is the youth and foreign governments ensure that those brains do not innovate by throwing them jobs right after BE/BS, so they becomes desk clerk after BE in instrumentation and Be in mechanical. Students, Parents , Teachers should wake up.

from:  sriram
Posted on: Jun 27, 2012 at 16:52 IST

This is really sad to read this situation. 25% interest on Education
loan is exorbitant. Some of the points comes to my mind:

1. Students do not check on the Scholarships or financial aids
available. Some of my friends studied in bigger institutes, with
higher scholarship aids.
2. College has to take responsibility in providing financial aids to
Students.

from:  Sathish
Posted on: Jun 27, 2012 at 16:07 IST

What else can the Bank do? The Banks' rate of interest is much less than the market rate.

from:  narayana
Posted on: Jun 27, 2012 at 12:49 IST

One of the difference between developed world and India is implementing engineering. This
risk could act as an opportunity for you to try entrepreneurship. You always do not need
capital to start on your own.

from:  M Paul
Posted on: Jun 27, 2012 at 04:35 IST
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