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Representation of Youth For Equality to the Prime Minister / Finance Minister regarding Educational Loans

Educational loan is only available to students whose parents are capable of repaying the loans. Youth For Equality feels that the current system of Educational Loans needs a fundamental change on urgent basis, so that no poor student is deprived of higher education because of lack of funds.

Dec 23, 2008

To,
Dr. Manmohan Singh
The Prime Minister of India
Also in charge of the Ministry of Finance
Government of India,
New Delhi

Subject: Difficulties faced by students in procuring Educational Loans

Dear Sir,

We would like to draw your attention towards a news item published in "The Economic Times Hindi)" (http://hindi.economictimes.indiatimes.com/articleshow/3871292.cms). The news highlights the plight of students who seek Educational Loans for higher studies. This news is neither exaggeration of facts, nor describes stray incidents. Rather it truly reflects the current system prevailing in the matter of Educational loans. Though the Government makes tall claims, it is really difficult for a truly deprived student to obtain Educational Loan from public institutions. We would highlight certain problem areas:

Problems with Educational Loans:

  1. Most often the loans are subject to the merit of the student. There is no chance for an average or below average student to get educational loan.
  2. Banks usually entertain the application of students whose parents reside in the catchment area of the bank. It is difficult for a Delhi University student who belongs to Orissa, to get educational loan in Delhi.
  3. Though the banks say that up to a loan of 4 lakhs rupees, no guarantee is required. However, in all such cases, the parents / guardians of the student have to be co-obligators. This means that the loan is practically in name of parents and if financial status of the parents is not good, the bank will not give loan. It is impossible for the son of a laborer to get educational loan.
  4. The banks always considered educational loan as non-performing and high risk. Hence the rate of interest on educational loan has been high. The interest on educational loan has been higher than most of the personal loans, including car loans.

To sum up, educational loan is only available to students whose parents are capable of repaying the loans. Mostly, these loans are availed by people who have enough black money. The educational loan just acts as a cover up for black money. There is no support for truly deprived students.

Youth For Equality feels that the current system of Educational Loans needs a fundamental change on urgent basis, so that no poor student is deprived of higher education because of lack of funds. We appeal you to incorporate following suggestions/changes in the current policies to achieve the aforesaid purpose:

  1. Loans for education should be seen as an investment for economic development and prosperity, and hence, the educational loans should be interest free.
  2. The Government should act as a guarantor for educational loan and should create a fund to sustain the guarantee.
  3. The marks of the student, residence of parents, and financial status of parents should not affect the decision making.
  4. All loan applications should be disposed off in one week. The Government should appeal on behalf of student if the loan is refused.
  5. The Government should create a "Helpline" to assist students for Educational Loans. The details of this helpline should be printed on the form for Educational Loan itself.
  6. A fool proof, humane system of recovery of educational loan should be evolved, so that the banks do not hesitate in providing educational loans.

We will be glad to participate in related discussions and elaborate further on our views and suggestions.

Thanking you

Sincerely yours
Youth For Equality

Contact details:

Youth For Equality
P-91, South Extension Part-II
New Delhi-110049
Phone: 9868340420
Email: info@youthforequality.com

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