Edu loan application status: Delayed

CHENNAI: Vinoth, an aspiring engineer is unsure if he can pursue his academic dream. He wants to study an engineering course at a deemed university in Chennai but he’s already fed-up with a banking system that refuses to give him a break.

Being made to run from pillar to post when he approached a few banks for an education loan, he said that several students cannot afford to pay huge fees in private colleges. And that it leaves them with no choice but to avail a loan from the bank.

However, default over the education loan has crossed over 8%, which has prompted several banks to tighten their budget and adopt a cautious approach while sanctioning the amount. Adding to the woes of students are recession and unemployment that leaves them dejected even before they could begin their academic life.

Where difficulty begins

K Lakshmi Mohan, a city-based homemaker, lamented over the innumerable formalities for availing an education loan especially from private banks.

“Bank officials never deny education loans. But they do delay the process especially if the application is from a middle-class family that runs on a single person’s salary,” she averred.

Bank authorities also consider the family background of the applicant before they decide to disburse loans. “They also look at the student’s pass percentage in Class 12. Most officials in the bank loan section have an impression that students with less marks in Class 12 will not perform well in higher education and after completing the course, would not get a job,” explained Kumerasan, an accountant with a private bank.

Hari, a facilitator between various banks and borrowers, said that though it was not mandatory, bank officials will analyse family background and the salary of the breadwinner. “Most parents who want to take an educational loan will not get guarantors. In some cases, they’d not have any property to give as collateral security for a education loan above Rs 5 lakh,” he added.

Bankers deny charges

Dismissing such charges is CH Venkatachalam, general secretary, All India Bank Employees Association (AIBEA), who insists that availing educational loans is far more easier today.

“Borrowers must submit the required documents correctly and do so, on time. Then, no bank will deny or delay sanctioning the loan,” he stated.

Venkatachalam added that all educational loan processes were made online, and that there was no room or reason for delay or error while sanctioning the amount.

“Many parents approach the bank at the last minute, which would be difficult for the loan department to sanction the money within a few days,” he added.

Quoting a recent RBI report, a senior bank staff in the city, said that non-performing assets (NPAs) in the education loan category (including public sector banks) was about 8% in 2022. “Therefore, there might be chances that few banks are cautious while granting an educational loan,” he said.

They also pointed out that many engineering students, who had completed their courses in 2020, could not get jobs due to the pandemic and lockdown situation. “They could not pay their loan in time,” he said.

Govt on loan

A senior government official, who looks after students’ welfare measures including granting scholarships, said that the authorities clear on their instructions to all banks that they should not deny loans to students if all the required documents were correct.

“There is also a separate department such as Tamilnadu Minorities Economic Development Corporation (TAMCO), which provides education loans to students,” he added. “Loans are given to students from minority communities, who pursue short-term high skill development courses, professional courses and job-oriented degree courses in government and private institutions (recognised by the government). From Rs 3 lakh per academic year to Rs 15 lakh, they can avail loans at 3% interest per annum.”

He reiterated that annual parental income of the beneficiaries should not exceed Rs 98,000 in rural areas and Rs 1.20 lakh in urban areas. Those who study abroad are eligible for a loan from Rs 4 lakh/year to Rs 20 lakh/year for 5 years (maximum period) at 3% interest per annum.

On the loan-share pattern, the official said that the share of the National Minorities Economic Development Corporation (NMDFC) will be 90% and TAMCO’s share will be 10%.