How Fintech has played an important role in shaping the dreams of middle-class Indian aspirants to study abroad.
Studying abroad has always been an attractive option for Indian students, as they are interested in higher academic exposure with cultural and educational diversity. However, the influx of low debt has made it extremely difficult for middle-class families to secure funding for their children’s education.
In recent years, a wave of fintech platforms has opened up new avenues for students to pursue their dream of studying abroad. But before we take a look at it, let’s take a look at the educational loan situation during COVID and the common challenges for obtaining such funds.
Demand for education loans in the Covid crisis
Although demand for education loans declined slightly in the first quarter due to the 2020 epidemic lockdown, travel bans and job uncertainty, demand for education loans began to pick up speed towards the end of the year, although most schools and colleges are in the vicinity. The world is going completely online or switching to hybrid models.
According to the CRIF High Mark of the Credit Bureau of India, educational lending institutions, including banks and non-bank lenders, disbursed loans of Rs 11,000 crore in 12 months till September 2020. A large portion of these distributions occurred during the epidemic period, with more than 3 million new borrowers signing up for loans between March and October 2020.
There are various reasons for the increase in demand for study abroad. Industry experts believe the epidemic has served as a motivation for people to upgrade. This was probably supported by the fear of losing jobs, the prospect of stagnant growth in the domestic market, the accelerated pace of digitization of the workplace and the impending need to prepare for the future.
In addition to the increase in enrollment for short-term upskilling courses and executive courses, the number of individuals applying to foreign universities has increased by 35%. Some of the main reasons for the Indian student community to look abroad for college admissions in 2021 are the fact that most aspiring students could not attend college abroad last year. Strong immunization drives and improved healthcare infrastructure are also important factors in the current interest in several developed countries.
Challenges in obtaining education loans
Concerned about the complex admission process and the lack of reliable information on these processes, students and their families have to go through the hassle of getting an education loan. Especially for a middle-class family in India who are already struggling to make ends meet, a long and complicated process of getting an education loan makes studying abroad a distant dream.
In a traditional banking setup, loan applicants are usually expected to rush to a bank and arrange for a casiner and / or collateral for the loan. Once a student decides to take out an education loan (s), he or she must evaluate the loans provided by banks and NBFCs with collateral against the non-guaranteed loans provided by Fintechs. Banks typically require margin money, requiring multiple inspections at the branch to complete the application process and taking longer to process the loan than NBFC and Fintech lenders. They offer much less flexibility when evaluating a loan and sometimes ask customers to show proof of a savings account.
But things are very different with the new age fintech platform. In addition to disbursing money directly to universities, these national platforms provide loans without collateral or causer, providing a smooth enrollment process for students. They value the share of student employment more than their financial status.
The role of fintech studying abroad
With the rise of fintech companies targeting the digitization and education sectors, they are offering better access to education for students from low-income families, where most colleges demand a single fee. This reduces the burden of payment on these aspirants and their families, so that people can pay the fee in small, cheap and convenient installments. EdTech companies, on the other hand, are financing short-term loans for upskilling courses and programs, usually overlooked by banks and NBFCs.
By adopting unconventional ways to facilitate education loans, Fintechs is revolutionizing the future of education loans. First, these lenders have no strict credit requirements and evaluate loan applications based on the student’s future earning potential. Fintechs, such as Prodigy Finance, typically lend more than banks normally would. Second, they offer no collateral and no-consignor for higher education to international students, omitting one of the biggest pain points in securing student loans in India. In addition, they do not penalize applicants for early repayment or complete debt settlement and work entirely online in a hassle-free manner.
Fintechs collaborates with banks and NBFCs to create innovative lending provisions that efficiently cater to students and lenders. They are focusing on giving middle class students the opportunity to pursue their education without having to bear the burden of paying huge sums at once. They even offer multiple credit options to students with low credit scores or non-existent credit histories and offer tailor-made education loan products for vocational courses. Students can finance the purchase of items like laptops, books, mobile phones, etc. at reasonable rates by registering on the platform with their loan requirements.
In conclusion, the flexibility of repayment plans by providing fintech is currently unmatched by most traditional lenders. With the advent of fintech in the field of education, an uninterrupted education financing process is now within the reach of middle class Indians, who are waiting for their dream of studying abroad.