Education Loans Dip as Incomes, Opportunities Impacted by COVID

With people suffering pay cuts and many being furloughed and unemployed, the coronavirus pandemic has hit the education loan industry as well. Representative image only.

(Photo: Kamran Akhtar/The Quint)

The economic fallout of the coronavirus pandemic continues to get worse with people suffering pay cuts, getting furloughed and even unemployed. The latest sector to have been hit is education loans, as more number of people shy away from opting for it.

According to the country’s second-largest education loan company Avanse, business has dipped but lenders are not fearing defaults in their high-value loans for overseas education, reported The Times of India.

The first quarter saw only 20% of the last year’s disbursements and they are expecting the numbers to rise to 45% in the second quarter, stated the media report. This is mainly because lesser number of people are eyeing courses abroad with the lockdown and restrictions imposed.

Some other experts have noted that during the initial phase of the lockdown, the number of students who wanted to study overseas dipped because many did not want to do international courses online. However, now with many universities assuring that the subsequent semesters will be on campus, they are hoping more students will begin to opt for these courses.

Restructuring of Education Loans Allowed by RBI

With job losses rising, the latest trends have observed more number of people opting for traditional courses such as engineering, medicine, science, reports suggested.

The total educational loan market in India is Rs 93,000 crore, stated the media report. For banks, education loans which were about Rs 68,229 crore by the end of September 2019 has gone down to Rs 65,100 crore by the end of July 2020, it further said.

Avanse funded the education of 69,000 students last year but this year has slumped to only 75% of last year.

In August 2020, the Reserve Bank of India (RBI) allowed a one-time restructuring of existing education loans to help companies and individuals manage the financial stress caused by the pandemic. This includes rescheduling of payments and granting of the moratorium for maximum two years after assessing the individual’s income.