Easy Loans Today,Debt-Traps Tomorrow!
Posted on: 27 Apr 2011
Cissy Jacob
The people of Kerala have not forgotten the suicide of Rajani S Anand, the poor engineering student who jumped to death from a building after a bank refused her an educational loan. In her footsteps another parent attempted suicide - again for an educational loan. Both events exploded a dam of public resentment against banks. And political parties and their feeder student organizations cashed the sentiments to the hilt.
Bank officials were cowed down by the aggressive protests and they became lenient.
The results are there to see… According to State Lead Bank Council (SLBC), One fifth of the 1.6 million-plus educational
loans disbursed all over India has gone to Kerala students.
The banks have provided loan of - 56 billion to them during the
period between 2004 and '09 in Kerala. When the last installments of the sanctioned loans are disbursed, that would cross -100 billion. Each year the banks provide at least another - 15 billions fresh loans.
Is the education loan provided by banks, which is considered to be a boon by the aspiring students in Kerala turning out be a bane in future? The statistics suggests so.
The loan scheme was started to help bright but financially backward students. The students need to repay the loan only after a moratorium period of one year of completing their studies. The moratorium period is going to end for many of the early beneficiaries, but majority have not began to repay.
Majority of the loans are being provided to nursing students studying in private nursing colleges in other states. The nurses working in private hospitals won't get more than - 6000 per month. Engineering students fare no better – few years ago when Reliance Communications laid optical fiber across the state the job was done for by electronics and communication engineering for less than -. 8000/- per month. A student who took loan of - 4 lakh has to repay - 8000 to 10, 000 per month. That means a person's salary won't cover his loan repayment EMI.
Most of the indebted students have no got good jobs - how could they repay the loans? The government and political parties have not even paid attention to the matter. As the beneficiaries are becoming defaulters, banks have began proceedings to confiscate the assets. We have seen what happens when the banks got tough with farmers for defaulting agricultural loans. It let loose a wave of copycat suicides. Will there be a replay when banks get tough with students? In the coming years, Kerala is going to feel the heat of the issue.
The Real Beneficiaries
The scheme dreamed up to help financially weak but brilliant students is only helping the private sector education businessmen and their middle men. With easy loans available, higher education became a piece of cake for most students. Only problem was the availability of enough educational institutions to the meet the demand of hundreds of thousands of aspiring students.
In a welfare state, education is one of the primary responsibilities of the government. But in India the state is shirking off this responsibility, not in a sudden, dramatic manner –but in meticulously planned slow and steady manner. Different governments systematically reduced their investment in education and turned open the field for private players. This unleashed a professional education mania. Individuals or organizations with little or dubious experience in education jumped into the field of education business.
With a provisional affiliation from some university they manage to establish a college with ramshackle infrastructure and incompetent faculty. They are the number one beneficiary of the loan scheme- they and their commission agents. They fleece the students and their parents first by demanding exorbitant capitation fees (you don't get any receipt for thisa fee and it is in fact black money): at the current rates the illegal capitation fees range from: -. 1-10 lakh for the engineering courses; -. 20-40 lakh for MBBS courses; -. 5-12 lakh for dental courses; and about -. 30,000-50,000 for courses in arts and science colleges, depending on the demand. As for the tuition fees, the university regulations are vague here and the fly-by-night tutorial business man fix it as per whims and fancies.
It is these people and not the targeted social group who benefit from the existing educational loan regime. The quality of the education and training they provide to provincial Malayalee students is mediocre at best and abysmal at worst. You can imagine their employability and worth in the labour market. They are supposed to pay back - 8,000 to 20,000 per month as loan EMIs, how would they accomplish this? That is a big question mark Kerala is facing now.
