How fintechs are helping parents fund their children’s education

With schools demanding several months’ fees in advance, parents are turning to fintech startups for loans

Updated - April 25, 2022 01:35 am IST

Published - April 24, 2022 09:59 pm IST

Parents taking their children to school in New Delhi 

Parents taking their children to school in New Delhi  | Photo Credit: File Photo

Venkat Narayan, a software professional based out of Bangalore, found it hard to pay the school fees of his two children, given the school’s insistence on collecting six months’ or even a year’s fees in advance. 

“The school asks me to pay 60% of my children’s yearly fees, which comes to be around Rs 1.2 lakh. I don’t have that kind of surplus cash,” said Mr. Narayan. He couldn’t get this amount as an interest-free loan from banks or friends either. 

That’s when, in the course of exploring his options, he came across a fintech which provided him with the option of paying his children’s fees through no-cost Easy Monthly Installments (EMIs). 

“The flexible payments system, which allows me to decide the date on which I can pay the installment, as well as the option to pay the loan back through no-cost EMIs, came as a godsend for me,” he told The Hindu.

Mr. Narayan is among a growing number of people who are turning towards startup fintechs focused on the education sector, to pay the school and coaching fees of their children.

Gurgaon resident Prabhat Aggarwal had a similar challenge - paying his child’s quarterly advance school fee. 

“Earlier, I had to pay about Rs. 22,000 rupees as advance for my son’s school fee. Now, a no-cost EMI option, provided by a fintech, allows me to pay back this amount as per my convenience,” said Mr. Aggarwal. For him, as for many other salaried employees, who spend around 10% of their income on their children’s education, it makes a lot of sense to break their expenses into smaller chunks, especially given the rising costs of living.

The numbers

As per a survey on ‘Household Social Consumption: Education’ conducted in the National Sample Survey 75th round (July 2017-June 2018), average expenditure per student incurred by a household for basic course was nearly Rs 8,331 for general courses, and Rs 50,307 for technical/professional courses.

The survey further pointed out that 24.3 per cent males and 17.7 per cent females for not attending education was due to ‘financial contraints’. Among those who were enrolled, drop-out rate was as high as 10.6 per cent at primary level, 18.2 per cent at upper primary/middle, 20.8 per cent at secondary level and 6 per cent at graduation.

“In the absence of suitable financial support system and high burden of course fee especially in higher education pushes them out of the education system,” the Economic Survey 2019-20 had said. Students pursuing education in private aided institutions are spending significantly higher as compared to government institutions across rural-urban India, it had said.

Booming business

In recent years, there has been an ever-increasing number of startup-fintechs offering various services to parents to make payment of student’s fees as convenient as possible. Jodo, a fintech start-up, offers flexible fee payment schemes for parents, without charging any interest or convenience fees.

Many other fintechs in this sector, such as ‘Propelld’, ‘Financepeer’, ‘Eduvanz’ etc., offer a similar experience through their personalised financial models.

Making tech work

Explaining why schools have begun to ask for fees in larger, advance installments, Atulya Bhat, one of the founders of ‘Jodo’ a fintech startup, said schools with small admin and finance teams find it difficult to handle numerous transactions if they give the multiple installments option to the parents of every student. 

He gave the analogy of a school with 2000 kids collecting monthly fees. “Per year, there could be over 20,000 transactions; the school will have to communicate about these transactions to parents; collect the fees, send reminders for payment and painstakingly follow up for each delayed payment,” he said. 

Varun Chopra, CEO of ‘Eduvanz’, which provides education loans for skill-based training, said with the outbreak of COVID, there was a lot of financial uncertainty as a result of which, “a lot of students and parents started holding back the pre-payment for their courses.” His company has financed 100,000 plus applications since its inception in 2016. 

Several other companies have become popular in this segment within a short span of time. Rohit Gajbhiye, CEO and founder of ‘Financepeer’, claims his company has provided financing solutions to close to 35 lakh students and parents since it was founded in 2017. 

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