Sonam Mishra
Ishika has returned to India after three years. He hopes that his father will help him to fill his education loan installment next few months. Till then she is trying to find a good job in the United Kingdom from India itself. He had his Masters degree in International Relations from the University of Leeds, England.
For this, he has taken an education loan of 36 lakhs from a private bank. He told DW, “I pay a loan installment of Rs 60,000 every month.” He received this loan at an interest rate of 14 percent. Several months after the degree was completed, he got a part-time job very hardly. He said, “After cutting all the tax, I used to get only 1,700 pounds (about 1,80,000 rupees) every month.” In these money, he had to bear his home fare, loan installment and other expenses.
His parents want him to do a job in India. But Ishika says that even the best salary in the best company here is just around 50,000. In such a situation, how will she be able to repay her loan and the rest of the expenses, which have no account.
Education loan in India
In response to a question in Rajya Sabha in 2024, Minister of State for Finance, Pankaj Chaudhary said that in 2023-24, public sector banks gave education loans worth about Rs 28,699 crore. At the same time, private banks distributed loans worth about Rs 7,749 crore.
By the year 2023, the total outstanding education loan amount in India was around Rs 90,000 crore. According to the Reserve Bank of India, this amount is only 0.7 percent of the total bank loan of India. That is, in total, the education loan is very small out of all the loans given by the banks – just one to two percent. The share of education loans in public sector banks is about one and a half to two percent of the total loan, while in private banks this share is even less, ie only half to one percent.
Why education loan is expensive
Both education loans and home loans in India are a means to meet big expenses. But there is a big difference in their terms and interest rates. Home loans usually have to pay 8.5 to 11.5 percent interest. The reason for this is that the house becomes mortgage for the bank. If the loan taking the loan is not able to pay the money, then the bank has the option to collect money by selling the house. In addition, a person taking a home loan is usually already earning, whose income is stable. This reduces the risk of the bank.
On the other hand, the interest rate of education loan is much higher – up to 16 percent. There are many reasons for this, such as education loan is mostly without guarantee, that is, the bank has no property that he can withdraw, the student studying is usually not earning at that time, his income is not guaranteed, the loan duration is also very long, sometimes for 7–10 years, which further increases the risk of the bank.
Also, bank interest rates are kept up to meet inflation and operational expenses. That is, while the home loan is relatively safe for the bank, education loan is considered a more risky investment for the bank. And this risk is directly inserted as heavy interest on the student. Today, the total market market in India is about Rs 2.5 lakh crore.
Parents also in the grip of loan
Rishabh works in a research firm in Noida. Two years ago, he completed his MBA from a business school in Coimbatore. For which he took a loan of one million from State Bank of India. Even today, he is paying an installment of Rs 10,000 per month. He said that he wanted to do his studies on the Chinese Loan Appsum violating the law but a guarantor was mandatory for his loan.
Guarantor means a person who promises the bank that if a person taking a loan is not able to fill the loan under any circumstances, then the guarantor takes the responsibility of filling the loan of the bank. Rishabh’s guarantor became his father and one of his joint accounts was opened. After which from the first day, the day Rishabh’s loan passed. From that day onwards, interest started on him. Rishabh told DW, “There are options, through which you will not get interest from day one but he was not informed this time.”
Loan fight with dreams
Rishabh wanted to work in his favorite company in Bangalore. But the cost of living and eating in Bangalore was so high that it was almost impossible for them to live there and to do the installment of loan. Rishabh said, “So I came to Delhi. My parents had a house here and there was no tension to pay the rent.”
After this, it is the turn to fill the loan. Rishabh says that even after two years of getting a job, he is able to fill only the minimum installment. Although the option is that the sooner you fill the loan, the less interest you have to pay. But he told DW, “Four-five years of completion of studies, only the struggle runs at least. In such a situation, it becomes difficult to get a loan quickly and in the meantime the rate of interest goes on increasing and the loan installment starts to become heavy.” He says that for two years of studies, how correct it is to fill the loan installment for 20 years. This is beyond their comprehension.
According to the Insurance Company, digit, the cost of living in the top cities of India in 2025 has increased manifold. Cities like Bangalore, Delhi, Mumbai have spent at least 50 to 60 thousand to live life. At the same time, living abroad has also become very expensive. The fare of a BHK in Dubai every month starts from 4,904 AED i.e. about 1.25 lakh Indian rupees. In Tokyo, it is up to 1,50,000 yen (ie about 90,000 Indian rupees). And it is difficult to find a place worth living in Berlin about 900 to 1,200 euros (about one lakh rupees).
Understanding of finance is necessary for a better future
Rishabh believes that the biggest problem is unintelligent. You do not understand that it also has an interest rate. There are also ways to increase installment and interest. In the absence of financial literacy, they take many decisions which are later overshadowed. Rishabh says, “People get trapped in the rest of the loan. He is wrong. But getting caught in education loan is equally wrong. The government should start an easy and conscious loan facility for students like Mudra Loan.”
Ishika says that many times the loan granted her father harasses by calling. “This loan is proving to be the biggest mistake in my life,” says Ishika.
*Names have been changed to maintain privacy.
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