Students now seeking loans for ‘new age' courses like golfing, music; bypass bank

24 March 2015

Source: The Economic Times

Posted On: 24 Mar, 2015, 06.27AM IST

MUMBAI: Taking a loan for an MBA or PhD degree is quite the norm, but students are now looking for assistance for new-age courses such as acoustics, music technology, golf coaching, motor sports engineering and leisure management.

Finance institutions say, loans for new age education are gathering momentum in India, as students increasingly pursue courses that further their passion and open up job opportunities.

"With 30-40% engineering seats lying vacant every year and the shrinking number of students taking MBA entrance exams, it appears students are increasingly opting for and will continue to choose newer courses and occupations," says Ajay Bohora, co-founder and CEO, HDFC Credila Financial Services, a subsidiary of HDFC.

The company has disbursed loans worthRs 2,000 crore for studies in the past six years and seen the demand for different courses go up by 25% every year. "This will go up further because generic courses are not creating sufficient job opportunities," says Narayanan Ramaswamy, lead partner in education for KPMG India.

Occupation-specific courses like social media analyst or nano engineering and social interest courses like geo-political transformation will both gain ground, he says. However, he adds, there is no data on the increase in these new age courses yet in India.

Since many banks are hesitant to roll out loans for 'unusual' courses, many students queue up at lending firms. "Non-performing assets (bad loans) in the education loan industry are at around 5-8%, the highest in India. Thin margins, coupled with very high NPAs, make lenders conservative while experimenting with courses which do not have a track record of earning potential," adds Bohora.

Nisha Nayyar, whose son Varun is in Berkley College of Music for a four-year course, approached banks only to be disappointed.

"They do not look at a child's potential, despite the fact that he was trained from Trinity School of Music and others of equal repute in India," says Nayyar.

The course fee, including living expenses, is around $70,000 per year and despite Varun securing a scholarship, the family took a loan ofRs 50 lakh from Avanse Education.

New-age courses form nearly 6-7% of our total loan book size. We have been in operation for over a year and our observation is that the Indian market is still at a nascent stage for such courses. But we see a rise in awareness levels among students and their families," says Neeraj Saxena, CEO, Avanse Education Loans. The company expects a 9-10% year-on-year growth in enrollment for new-age courses.

The firm has seen a rise in the number of students seeking loans in big data, forensics, sustainability and environmental studies, and fine arts. With an interest rate ranging from 11.5%-13.5%, Avanse has provided loans for new age courses to 60-80 students in a yearand-a-half. As compared to this, state-owned finance companies roll out education loans at an interest rate of 11-15%. However, these rates may change depending on the collateral provided by parents, income, and the standing or ranking of the university.

"Besides covering the entire course fee and living costs, these lenders are also popular because they roll out visa disbursements and have longer tenures up to 10 years for eligible candidates to pay back the loan," says Bohora.

hese unconventional courses are usually structured differently by each university, and career prospects and the cost of education vary substantially too.

Akhila Phadnis took a loan of Rs 15-20 lakh from HDFC Credila for a year's course in translation studies from the University of Durham. It has been a month since she returned from her internship in Belgium and now leads the translation team of language institute of Alliance Francoise, Chennai. "Not all banks were keen on funding me but now, I see more students taking up such courses and getting funded by lenders like Credila," says Phadnis.