Tamil Nadu's disbursal of education loans in murky waters

CHENNAI: Now, parents can heave a sigh of relief as the State government has decided to take measures to ensure that education loans to the tune of Rs 2,500 crore are disbursed to students aspiring to pursue higher education in government universities and State-run colleges, and also for the polytechnic students in 2025-2026.

The loan will be disbursed to Class 12 students, who had studied in government and government aided schools in all the districts. It will also be available for graduate students in State-run universities, who want to join postgraduate courses in India or abroad.

The State government’s move to facilitate students for getting education loans comes against the backdrop of increasing complaints about private banks and some national banks denying loan applications of students from economically poor family backgrounds for no valid reasons. Accordingly, the concerned department will tie-up with all nationalised banks to provide education loans at nominal interest.

Additionally, the recent announcement by Co-operation Minister KR Periyakaruppan that co-operative societies would now provide education loans up to Rs 5 lakh for students in TN has also enthused parents. Loans from cooperative societies will be granted for students admitted in recognised diploma courses, UG and PG courses from recognised universities. The loan is repayable within five years after six months from the date of completion of their studies.

A senior official from the Higher Education Department said, “Each year, the number of eligible students seeking education loans has been increasing. Due to the best gross enrolment ratio (GER) in primary and secondary education, thousands of students from financially poor backgrounds depend on education loans for higher education. These loans are vital since college fees increase every year.”

Explaining the initiatives planned, he said that an online platform would be created for students to get enrolled. “Selected students will be given guidance such as how to approach the right bank’s authorities with required documents in their respective areas. Selected banks will also be instructed to provide loans to students, who fulfil all the criteria,” he added. “Expenses covered under education loan include tuition fees, exam fees, library fees, books, periodical expenses and hostel fees among others. A detailed guideline on availing education loans will be released shortly.”

CH Venkatachalam, general secretary, All India Bank Employees Association (AIBEA), said that the state bank should tie-up only with nationalised banks which provide nominal and uniform interest rates especially for all education loans. “Private banks are motivated by profits while making a decision. So it’s a good move by the State government,” he opined. “If the government nominated students, banks cannot deny education loans. Besides, getting an education loan is easy these days. If students have all the required documents, which is mandatory for availing education loans, the application will move fast.”

However, Srinivasan, a student consultant in the city, raised a pertinent point: “If Rs 2,500 crore is going to be disbursed by the banks based on the State government’s recommendations, then what is the role of the government in accepting the term recommendation? Anybody can recommend without any account ability. If officials are interested in recommending educational loans to the banks without any account ability, it could lead to corruption.”

He also urged the State government that Rs 2,500 crore could be given by way of subsidy to the borrowers by framing rules and eligibility criteria for such loans and the subsidy. “Unless they come out with details of the scheme, it’s difficult to comment based on assumption. We don’t know if they’re going to recommend 1 lakh students or share their burdens,” Srinivasan explained.

Not many banks advertise about providing education loans as the number of defaulters in education loan has crossed over 8%, pointed out M Sukumar, a senior accountant in a city-based bank, “They will be cautious in processing the loan applications, as many students could not pay the loan dues during pandemic from 2020-2022 since most candidates had huge salary cuts,” he added.

Concurring with him was K Hari, an agent between banks and borrowers, who averred that almost all banks, including the nationalised ones, would be more careful about processing loan applications especially while checking the financial background of the applicant’s family. “Salary and available assets of the parents are important for the banks. Similarly, most parents will not get guarantors and in many cases, they will not have property to place as collateral,” he said.

IN A NUTSHELL

· Loan for Class 12 students in government and government aided schools in all districts

· Also available for students in State-run varsities interested in pursuing PG courses in India or abroad

· The concerned department to tie-up with all nationalised banks to provide education loans at nominal interest

· Loans from cooperative societies for students admitted in recognised diploma courses, UG and PG courses from recognised universities

· Students to be offered guidance on how to approach the right bank’s authorities with required documents in their respective areas

· A detailed guideline on availing education loans will be released shortly