Sustainable Education Loan Ecosystem – To Benefit Students & Educational Institutes
By Micah Moen
I think if we look at the world, the matured world and wherever people claim that they have best quality education happening, arguably the best, now there we see that funding, the sources of funding have been resolved. There are various avenues in which they can get funding. For Example, to sight the US case study, overall total student loans outstanding there are equivalent to 1.3 Trillion dollars, Trillion I repeat. That is the second largest asset class after mortgages that means personal loans or vehicle loans or any other loans are lower in terms of quantum compared to the education loans. Now if we contrast that with India, our population being four times more and we being the, despite us being the youngest nations of the world, to all banks put together total student loans outstanding are equivalent to about, as Gaurav has said 68000 Crores about 10 billion dollars. So we are 130 times lower, less than that. Now, if we try to analyse, first of all what’s the role of education loan. Now, no matter what happens there are various theories and everybody would agree on one single point that the funding is extremely critical for the quality of education, now it could be quality of infrastructure, better salaries for the faculty, better research, facilities, better labs, it could be anything but for all of that money is required. Now in the absence of a vibrant and sustainable education loan ecosystem it would be highly impossible. Now we can get into the why, what is the road ahead and what should us as the country be doing to create a vibrant sustainable education loan system, that’s one part and I’ll end with another part. In addition to the education loan the institutes also need to raise funds. Now if we see some other industries like power industry there is something called Power Finance Corporation, which is a centralized agency. So, any power company which needs to mobilize funds goes to that specialised entity whose only job is to mobilize funds. Now, we could explore the similar structure for the education industry. Now let’s say there is college either private or public based in any part of India, they could approach that agency who can then mobilise funds by various ways. For example, a few trillion dollars I repeat a few trillion dollars in countries like Japan and other parts of the world are earning negative interest, that means people are paying the bank money every year to just keep the money there. Now if there could be return on investments and if India can create a story or a model where our education industry which is start for funding can acquire those funds and have the right mechanisms, right financial instruments in place, right enablers in place, I think the world money can come in here. The last part is insurance companies and various mutual funds, they have investment pattern. Now there are again billions of dollars with the insurance companies, but education is not allowed, funding in education, it could be for vehicles or faculty infrastructure or housing, if that gets opened up then the insurance money which is long term can also come in into this industry. Thank You!