Abstract
The paper attempts to investigate the trends in financing higher education which convey that student loans is the dominating source of financing higher education in India. This leads us to explore various factors that influence, viz., enrolment growth, growing private sector, bulging youth population with growing middle class with a wider acceptability of loan culture and increasing earning premium of higher education and the willingness to pay. Using various secondary data sources besides using the unique data set made available on Interest Subsidy Scheme on Student Loans, we examine various troubles, namely who gets access to student loans and interest subsidy, what are the risks associated in terms of default or recovery and how the employability is linked with better repayments. We conclude that fees, grants/scholarships and student loans need to be examined in the context of increasing cost and role of markets in higher education along with affordability within the domain of family characteristics.
Highlights
Student loans is one of the alternative sources of financing higher education for the credit constrained students
In the Indian context, despite the arguments such as imperfections of market and discrimination practised by banks and education loans cannot be a solution for students willing to pursue higher education (Chattopadhyay, 2007), education loans both in number and finances are contributing to the growth and financing of higher education in a big way
State policies on universal public financing of higher education have a pervasive effect on both allocation of resources in higher education and its inherent unequal distribution of benefits to the better off in the society
Summary
Student loans is one of the alternative sources of financing higher education for the credit constrained students. In the Indian context, despite the arguments such as imperfections of market and discrimination practised by banks and education loans cannot be a solution for students willing to pursue higher education (Chattopadhyay, 2007), education loans both in number and finances are contributing to the growth and financing of higher education in a big way This indicate a clear shift of burden from taxpayers and parents to students. The paper uses possibly a unique data set made available by the nodal bank which operates the Central Sector Interest Subsidy Scheme (CSIS) on education loans (Eligibility criterion for students to get this interest subsidy is parental income with less than Rs. 450 thousands) It covers all students who received interest subsidy under the Ministry of Human Resource Development (MHRD) scheme (www.mhrd.nic.in) during the period 2009-10 to 2012-13 (Table 2). It captures few select household, social and economic characteristics of student loan borrowers
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