The demand for education loans is likely to be subdued in the year ahead as a weak economy is forcing students to defer their plans for higher studies till the time the job market in India and abroad sees a major improvement.
Outstanding education loans grew by 10.6% to Rs54,300 crore as on November 30, 2012, compared with a growth of 15.7% in the corresponding period last year, according to sectoral deployment data released by the Reserve Bank of India.
“Going by present indicators, I don’t see any improvement in 2013. Looking at the job market situation in the US, Europe, and to some extent India, the education loan market will be somewhat subdued,” says RK Bansal, executive director of IDBI Bank.
Varghese KI, additional general manager of Federal Bank, says they foresee stagnation of growth in the foreign education loan segment.
Bansal adds that a majority of students is looking to work for sometime before going for higher studies and that even education institutes are giving preference to students with some job experience.
Kris Lakshmikanth, CEO of HeadHunters India, agrees, saying companies also want people with work experience who can join immediately, and 2013 is going to be a tough year for freshers.
The aversion to higher studies is not limited to students just out of college. Experienced professionals are also not willing to take on debt and risk quitting a job. “People are always averse to quitting or jumping jobs in a sluggish economy,” says Yogesh Saigal, head, business development, Talisman Advisors. “Why will one quit a stable job and take a loan of Rs12 lakh to go for higher studies? S/he may not even get the same job after completing the degree in a few years.”