Education loans: Private players troop in where banks fear to tread

11 May, 2016

Need money to study sports management or image consulting, photography or music technology? Private education loan financers are ready, even eager, to finance you.

Even as banks grapple with high defaults in student loans, private players such as HDFC Credila Financial Services and Avanse Education Loans are increasing their exposure in this space, funding non-traditional courses.

While majority options like MS and MBA continue to dominate the loan market, these new age courses on music and photography have been seeing a steady increase in finance portfolios in just two years.

Credila, an arm of mortgage major HDFC, that finances student loans, said it is witnessing a surge in unconventional and unique courses like Bachelor of Arts in Sports Management, Bachelor Of Media Arts - Commercial Music, Bachelor and Masters Of Physiotherapy.

"There is an increasing inclination of parents and students to pursue non-traditional and new age courses, with the luxury to choose from a large pool of job applicants," said Ajay Bohora, co-founder, MD and CEO of Credila. "Students and parents therefore are aspiring to not stop at the bachelor's level, but to go beyond and continue to acquire additional qualifications, more skills and competencies.

BSc music, Sports Events Management, Associate of Art-Music, MA sport business, MSC advanced cardio-respiratory physiotherapy, MS advanced sports therapy and rehabilitation science…the list of the new popular courses is long.

Neeraj Saxena, CEO of Avanse Education Loans, an associate of Dewan Housing Finance Corporation Ltd, said, "The trend of students opting for such courses is increasing… We can say about 2-3% of the students go for such courses, compared to none two years back."

The lenders rely on thorough credit analysis of co-borrowers and guarantors and on the employability of the courses. "We check good placement track record of such courses in case of established premium institutes. Where previous data is not available, a strong co-borrower and co-guarantor are important," said Avanse's Saxena.

Calling education loan a complex sector, Bohora said that credit variables are different for domestic courses, and when reviewing for a loan for studies overseas too.