Such loans usually range between Rs1 lakh and Rs4 lakh, with an interest of about 12.5%.
Vijaymurthy Parthasarathy chose a school near his house for his two children. However, the high fees demanded by the school forced him to take a personal loan to pay off Rs1.25 lakh towards school expenses. And then he learnt that some banks are offering exclusive loans for paying school fees, which are increasingly becoming popular among middle-class parents of school-going children.
In Bangalore, paying your child’s school fees can leave you poorer by anywhere between Rs50,000 and Rs3 lakh a year. To resolve this issue, a few banks have started offering education loans for school fees, which are directly paid by the banks to the schools, as in higher education loans.
Though it is yet to meet the popularity expected by the banks, there is an increasing trend wherein parents are seeking school fees loans.
“There is definitely a growing demand for such loans. Though the portfolio is not as big as it is in the case of higher education, the ever-increasing school fees is forcing people to come to us,” said Ram Sangapure, general manager, Central Bank of India, which started offering school fees loans in 2008-2009 when they received 105 applications, which then grew to 1,100 in 2011-12.
Though several banks offer loans for higher education, there are only a few who offer educational loans specifically for school students — Bank of Baroda, Central Bank of India, State Bank of Hyderabad and J&K Bank. Such loans usually range between Rs1 lakh and Rs4 lakh, with an interest of about 12.5%. Normally, parents sought personal loans to pay high fees at an interest of up to 15%.
And to gauge the present level of popularity of the not-much-heard-of school fees loan, that State Bank of Hyderabad disbursed at least Rs300 crore in school fees loans of a total of Rs1,200 crore in education loans.
“Last year, we saw a decent jump in loan amount taken for school fees. We are trying to popularise it by advertising frequently through mails sent to schools and boarding school,” said a bank official.
There are certain criteria that the school fees loan applicant must meet. One of them is that the parents need to have a regular source of income,” said Adhil Shetty, CEO, BankBazaar.com, a financial services company.
Arun Kamath who had taken a personal loan to get his daughter through middle school, is now contemplating taking a school fees loan.
“I want my child to get the best education and high school fees should not be a hindrance,” he said, adding that taking such a loan for school is a good option as one gets tax exemption as well.
Delhi Public School, for instance, charges anything between Rs70,000 and Rs80,000 per annum from its students, including school transportation charges.
(Parents’ names changed on request)
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