While there was a demonstrable shift from traditional classroom teaching to online education, the push towards online degree programs didn’t translate into a decrease in education costs.
The pandemic has affected and changed the lives around us drastically. Most importantly, it has affected and altered how education is pursued, along with changes in student loan borrowing trends. Despite the COVID-19 crisis, the Indian education sector continued to witness a rise in the number of students pursuing higher education.
Rise in education loan during the covid wave: As per the All India Survey on Higher Education, student enrollment in higher education increased by Rs 11 lakhs, a ~3 per cent jump between 2019-2020. This surge combined with spiralling education inflation has led to steady growth in education loan demand in the country.
At a time when most schools and colleges in the country and the world were forced to close physical classes, demand for education loans rose to a record level, especially during the first wave of the pandemic. The bulk of the disbursals happened through the pandemic period with more than 3 lakh new borrowers signing up for loans between March and October 2020, showing the data from CRIF High Mark, an RBI approved credit bureau in India. Moreover, there was a disbursement of Rs 11,000 crore loans by the education companies during the year ending in September 2020, revealed the credit bureau.
Here are some of the trends that led to the rise of education loans although the pandemic;
The rising cost of education: Rising costs of education have made it difficult for parents to invest in their children’s education, especially at a time when many parents have faced pay cuts in their jobs. The pandemic has added further pressure on parents’ purses, creating further demand for finance options to manage education-related expenses. It is estimated that 1 in 5 of the students found it difficult to cover their fees, even after being in college for a year.
An MBA from a leading private business school today will cost approximately Rs 20+ lakhs, while this would have been around Rs 10-12 lakhs five years back. Similarly, the cost of education is a top Ivy League college that was around USD 60,000 five years ago, now has risen to around USD 75,000 and more.
While there was a demonstrable shift from traditional classroom teaching to online education, the push towards online degree programs didn’t translate into a decrease in education costs. Since universities had to make infrastructure investments to enable this delivery, the cost for which was diverted to students leading to a spike in education loan requirements.
Cost of overseas education continues to be high: Despite the pandemic, it is observed that there is a growth in the number of students wanting to shape their careers by studying abroad. The overseas spending for such high courses is also expected to increase in the years to come. The spending on overseas courses is expected to reach USD 80 billion by 2024 from the current USD 28 billion, according to statistics from RedSeer. Besides, education loan institutions are already noticing a rise in outbound student enquiries.
Increase in the demand for up-skilling or executive courses: In the past two years, there has been a steady rise in the number of people enrolling on executive education programmes. The pandemic has created a dire need for the upskilled and hi-tech workforce. With new jobs coming in and new ways of driving business growth being chalked out, the only way to be relevant to the emerging job profiles is through education.
Aspirants now want to upgrade themselves – either by signing up for an executive education programme or by enrolling for short-term upskilling courses. Around 30-40 per cent of the upskilling courses uptake is being driven on the back of buy-now-pay-later finance models.
The surge in aspirants pursuing multiple courses: With most students pursuing their education virtually from home during the pandemic, they have the flexibility to pursue multiple courses. The proliferation of EdTech companies across the country has allowed aspirants to take up multiple educational avenues to upgrade and up-skill.
Continued demand: With the sought-after higher education courses being far from affordable, and education remaining a key concern for most Indian households, education-related borrowing will continue to rise in the country.
by Avinash Kumar, Founder, Credenc