Towns A study in aspirational borrowing as overseas education calls

A growing desire for international education is sweeping small towns across the country, spurring demand for study loans and underscoring the burgeoning ambitions of young Indians. Guntur, Rangareddy, Krishna, Surat, Prakasam, Warangal, Visakhapatnam, Ludhiana, Nellore, Patiala, Amravati, Bijnor, Medak, Ajmer, Bhilwara, Churu, Darjeeling, Mahbubnagar and Nalanda are among towns that have seen the most applications for education loans in 2023, according to lenders whom ET spoke to.

As much as 70-72% of the students funded by Avanse Financial Services in 2023 belonged to tier II-III and beyond, said the education-focused nonbanking financial company’s managing director and chief executive, Amit Gainda. He attributes the growing demand to aspiration among youngsters from the hinterlands to access foreign education and have a better standard of living.

Study abroad consultant Leverage Edu’s financial services platform recorded more than 50% jump in applications from tier II-III towns in 2023. This included applications from 147 new cities for the first time.


“In calendar 2023, we received 1.9 applications from small towns for every application from tier I city,” said Akshay Chaturvedi, founder and chief executive, Leverage Edu.

A variety of factors are influencing the trend. These include emergence of new-age education-focused NBFCs, growing awareness of diverse financing options and perceived better career opportunities from holding a foreign degree. Rohan Ganeriwala, cofounder of study abroad consultant Collegify, said, “It reflects the growing ambitions of the Indian youth from the smaller towns and districts.”

“There is more awareness about the plethora of options — both in terms of universities and financing due to rising social media exposure and internet,” said Ganeriwala of Collegify.

According to CRIF High Mark, a leading credit bureau, India’s total education lending market share stood at Rs 1.57 lakh crore as of September, a year-on-year growth of 28%. NBFCs cater to almost 23% of this market. The overseas education loan market stood at Rs 1 lakh crore as of September, marking a 48% growth on-year. NBFCs had a 35% market share in this segment.

“Small towns are actively shaping the trajectory of education financing,” said Amit Singh, founder of UniCreds, a provider of foreign education loans. He feels that the current surge is not a momentary up tick, but a clear response to the growing demand. “It also reflects the increasingly competitive terms and conditions offered by banks and NBFCs to students,” he said.

Experts cite increased accessibility to tailored education loans as another factor for the strong interest. “In the last three years, there has been a notable influx of new participants, particularly banks such as IDFC, Union Bank, and Yes Bank,” said Chaturvedi of Leverage Edu. “These banks, leveraging their extensive networks, have expanded accessibility to a broader audience, particularly individuals from tier IIIII cities.”

Education loan companies, however, note the high risks of default if the borrowers are unable to secure proper jobs to repay their debts.

The delinquency rates in education loan buckets are at 7.5% levels, with private sector and PSU banks booking non-performing assets in the range of 5-8%, while NBFCs and other new age lenders are at 0.7-1.25%, according to industry sources. Adarsh Khandelwal, chief executive, Collegify, said, “Students who are putting up collateral face the biggest risk if they do not get a job.

This is more of a risk in the current times when several Western countries are facing macroeconomic headwinds and shrinking job opportunities.” “Financing companies must clearly define the parameters of the loan, in terms of what kind of students get the loan and his/her aptitude to get a job abroad in terms of GMAT score, ranking of the college they are going to… (This way,) there is more clarity at the outset about the person’s employability and a student can make a more informed decision,” he added.


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