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Education Loan India

Bad Loans and Wilful Defaulters: Need for Change in Financial Management?
Study on Educational Loan and Rural Graduates



Dr Janetius. S.T., Shilpa. S. & Eswaran. S.
2013, June 22

The mushrooming colleges all over India both in metropolitan cities as well as semi-rural towns have changed the outlook of young people and their vocational preference significantly. Unlike a few decades ago when only economically well-off adolescents generally opt for higher education in the metros and institutes of reputation, today’s youth venture in to higher education irrespective of their economical background. Thanks to the government policy that started in the last decade for easy accessibility of educational loans, students started to seek funding for their higher education from external sources, like government and private sector banks. The increased number of students in search of degrees paves way for the rapidly escalating number of educational institutions with poor infrastructures, undeserving and unqualified candidates as faculty members and inflated tuition fees. These in turn contribute to the bigger number of unskilled graduates ultimately ending as loan defaulters. Since loans up to Rs4 lakh do not require collateral pledge, defaulters have been on the rise and it is hard for the Banks to recover educational loans amounting to higher bad loans or non-performing assets (NPA). This descriptive study uses data from 76 rural employed educational loan defaulters in Coimbatore and Tiruppur districts of Tamilnadu, narrates the reasons for not paying loan and the related financial management style.