How merit-based loan financing is fuelling global aspirations of India’s Tier 2 and Tier 3 students
Year after year, India witnessed an increase in the number of students choosing to study abroad. According to the most recent ‘Higher Education Abroad’ report from consulting firm RedSeer, the number of Indian students seeking higher education abroad climbed from 440,000 in 2016 to 770,000 in 2019 and is anticipated to rise to about 1.8 million by 2024.
There has been a noticeable shift in student demographics in recent years. Recently, a growing section of students from tier 2 and 3 cities and towns have expressed a desire to stand shoulder to shoulder with their metropolitan counterparts.
Higher Education Is Not A Pipedream Anymore For Tier 2 And Tier 3 Youngsters
India has become a hub for fast-growing middle-class people. According to a report by Ernst & Young, there were 50 million Indians in the middle-income category in 2010. This population is expected to increase to 475 million by 2030.
The rising urbanisation and evolving consumer patterns of India’s Tier 2 and Tier 3 cities are clear indicators of these fast-expanding middle-class people. And with the government’s Digital India initiative and competitive telecom plans, smaller cities are going through a digital makeover that opened up a world for middle-class youngsters and made them savvier than ever.
These cities have quickly emerged as viable alternatives to India’s conventional metropolises’ oversaturated marketplaces. As a result of technological advances, young Indians in these cities are becoming more globally-minded. Furthermore, internet accessibility has resulted in students from tier 2 and tier 3 towns migrating to international universities to achieve their goals.
As a result of rising edtech trends, this is an ideal time to develop the skills of ‘Real Bharat’ youngsters to help them integrate into the global workforce and prepare them for the challenges of Industry 4.0.
Determined to achieve their objective, many students defy typical credit-averse mindsets by opting for education loans. To realise these growing goals, high-quality education is required. An international qualification not only increases their employment opportunities but also raises the living standards and prestige of their family.
However, the country’s growing demand for a good education remains unsatisfied due to the rigorous education loan system, which isn’t viable for the middle class.
Traditional Educational Loan System is a Major Roadblock
Although a bank educational loan seems like the obvious choice, the application process is intimidating. Education loans are primarily intended to provide financial support to students wishing to pursue higher education. As college tuition fees is rising, it is becoming increasingly challenging for students from Tier 2 and 3 cities and towns to pursue higher education after 12th.
Most conventional education loan programmes are recognised for their stringent credit assessments, making it extremely difficult for students with low family income or low credit ratings to get an education loan. Most financial firms evaluate loan applications based on creditworthiness, making it difficult for students to get approved because they typically do not have a good credit history.
Even if students do get the loan, the tedious process of numerous bank branch visits and burdensome collateral makes the dream a debt-ridden choice that must be borne by the family, making it a major obstacle for youngsters from middle-class backgrounds.
Modern Lenders has Streamlined the Loan Process
The market for education loans is about Rs.80,000 crore, comprising mainly of scheduled commercial banks (Rs.73,000 crore), co-operative Banks (Rs.2,000 crore) and NBFCs (Rs.5,000 crore) and the demand for education loans rose to a record level in 2020, a year when most schools and colleges in India and across the world were forced to conduct classes online due to the pandemic.
There has been a multiplier effect since NBFC banks began investing in aspirational Indian students in tier 2 and 3 cities.
With the help of online lenders such as Leap Finance, education loans have become simpler and easier to obtain.
A number of critical changes have also occurred in the sector, making it easier for students to get loans without having to go through complex paperwork. Leap Finance has designed their education loans in such a way that the process doesn’t burden students and their parents with a rigorous credit system and is friendly, merit-based and super quick.
Credit loan platforms such as Leap Finance use scientific models rather than traditional methods of credit appraisal. By giving more weight to the profile of the student, they make education loans more accessible for aspirants in Tier 2 and Tier 3 geographies.
Furthermore, loans are being made available without collateral, allowing students to follow their aspirations across borders without burdening their parents or themselves. By removing superfluous complications and outmoded procedures, Leap Finance allows students to focus on what is most important.
Having students evaluated based on past achievements and potential boosts their confidence and makes them feel valued as individuals seeking to improve their future rather than merely another file number.
(NOTE: This article was written as an assignment for Leap Scholar)
