Education Loan Write-Off A Popular Poll Plank, But Experts Urge Caution
The promise of a waiver of education loans, made by both the DMK and the AIADMK in their poll manifestos, is a dangling carrot for those struggling to repay the banks.Take the case of 27-year-old M. Satish (name changed on request), who had availed himself of an education loan of ₹2.58 lakh for his B.E. course, which he completed in 2012. But he has been struggling to repay the loan as he hasn’t found a job, and is now staring at an outstanding debt of ₹3.53 lakh.
“For two years after my graduation, I did not find any suitable employment. My mother is a sweeper, and the loan was taken in her name. I have explored all options for a one-time settlement, for paying the principal amount and getting a wavier on interest. But I have been told to pay the outstanding amount in full, and so far, I have managed to pay ₹1 lakh by selling my wife’s jewellery. I am not sure how I would be able to manage [repaying] the remaining money,” Mr. Satish told The Hindu.
Lack of employment opportunities is causing hardship to many graduates in repaying education loans. Tamil Nadu is a key market for education loans, accounting for 25%, or ₹20,650 crore, of the ₹82,600 crore-worth loans disbursed across the country. At least 10 graduates The Hindu spoke to cited underpaid jobs as the major issue causing loan defaults. There have also been delays in granting the interest subsidy under the Central government’s scheme.
The Central Sector Interest Subsidy (CSIS) scheme was implemented by the Union Ministry of Human Resource Development. Under the scheme, full interest subsidy is provided for the moratorium period (course period plus one year) on education loans of up to ₹7.5 lakh taken from scheduled banks. The benefits are applicable to students from economically weaker sections (EWS) with parental income of up to ₹4.5 lakh per annum.
Satish said while he understood the importance of repaying the education loan, what he expected was some form of relief, such as an interest waiver based on the individual’s situation.
“Whether I get a job or not, I need to repay the loan. But I can make the principal payment. Creation of jobs is also the responsibility of the government. So, they should come forward to offer relief in the form of interest waivers for many struggling graduates like me,” he said. However, K. Srinivasan, convener, Education Loan Task Force (ELTF), argued that education loan write-off is a bad promise.
“Even during the 2014 general election and the 2016 Assembly election, all parties in Tamil Nadu promised to write off education loans. Such promises have prompted the students not to repay the loans, resulting in their accounts becoming NPAs and affecting their CIBIL score,” he said.
Mr. Srinivasan said the political parties should instead promise interest-free loans, flexible repayment, conversion of NPA accounts into regular accounts with a fresh repayment schedule, bring down the cost of education and give more scholarships. Parijat Garg, vice-president, CRIF High Mark, pointed out that the cost of education has become a major issue in recent times.