"The default will affect the person's credit report and credit score. If a student defaults, the records of all the four credit bureaus will reflect it. Income levels for entry-level jobs are also stagnating," says Gaurav Aggarwal, associate director, unsecured loans, .Ĭonsequences of not repaying can be harsh: Not repaying the education loan is no longer an option with the advent of credit bureaus. Many graduates also have only low to moderate employability. At the same time, there is excess supply of fresh graduates in certain career streams. Loan repayment is much better in the segment above ~750,000, where banks demand a collateral.Įxcess supply, stagnating salaries: The demand-supply scenario in the job market is also leading to higher NPAs. Sometimes, students become untraceable because they move abroad. Students who have taken such low-value loans take up jobs in another city, do not inform the bank, and hence become hard to trace. This is the segment where the NPAs are highest. If elections are round the corner, they stop paying and instead wait for a waiver."īanks don't take a security or collateral up to ~400,000. This has spoiled the attitude of borrowers. He further adds: "Prior to elections, either the interest or the entire loan is often waived. "Prior to 2014, education loan melas were held and immense pressure was put on public sector banks (PSBs) to disburse loans on a mass scale.Such loans were often disbursed without adequate due diligence, resulting in a high level of defaults," says a highly placed PSB source, who spoke on condition of anonymity. ![]() Clearly, repaying an education loan is proving to be more difficult than many students and parents imagine.Ĭulture of loan melas and waivers to blame: In states like Tamil Nadu, which tops the chart in terms of education loan NPAs, the political cultural has contributed to a high percentage of loans going bad. According to data from the Indian Banks Association (IBA), NPAs in this segment rose from 7.3 per cent in March 2016 to 7.67 per cent in March 2017, and further to 8.97 per cent in March 2018. Non-performing assets (NPAs) within the education loan segment have been rising. Many who have taken this path before you have defaulted. If you are a student planning to fund your higher education through an education loan, be warned. A default will get reflected in your credit report and score, and you will not be able to get even a credit card, let alone high-value credit like a home loan
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