Role Of Fintech In Realising Study Abroad Dreams
How Fintech has played an important role in shaping the study abroad dreams of middle-class Indian aspirants.
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Studying abroad has always been an attractive alternative for students in India, as they yearn for superior academic exposure along with cultural and educational diversity. However, the low credit penetration made it extremely difficult for middle-class families to secure their child’s education funds.
In recent years, a surge in Fintech platforms has opened new avenues for students to pursue their dream to study overseas. But before taking a look at it, let’s understand the scenario of educational loans during COVID and the common challenges faced to acquire such funds.
Demand for education loans amid Covid crisis
Although 2020 witnessed a slight dip in demand for education loans in the first quarter given the pandemic induced lockdowns, travel restrictions and job uncertainties, the demand for education loans began to pick up the pace later in the year, despite most schools and colleges around the world going entirely online or switching to the hybrid model.
According to data from CRIF High Mark, an Indian credit bureau, education loan companies which include bank and non-bank lenders, disbursed Rs.11,000 crore loans in the 12 months through September 2020. A bulk of these disbursals happened through the pandemic period, with more than 3 lakh new borrowers signing up for loans between March and October 2020.
There are several reasons for the rise in demand for study abroad programmes. Industry experts believe that the pandemic served as an impetus for people to upgrade. This was possibly backed by the fear of job losses, the stagnant growth opportunities in the domestic market, the accelerated pace of workplace digitisation, and the impending need to be future-ready.
Besides the uptick in enrollments for short-term upskilling courses and executive courses, there was a 35% increase in the number of individuals applying to universities abroad. Some key factors driving the Indian student community to look overseas for college admissions in 2021 could be the pent-up demand since most aspiring students could not join colleges abroad last year. Robust vaccination drives in several developed countries and better healthcare infrastructure are also important reasons driving current interest.
Challenges in attaining an education loan
Amidst worrying about cumbersome admission processes and a lack of credible information on these processes, students and their families have to go through the rigamarole of attaining an education loan. Especially for a middle-class family in India who are already struggling to make ends meet, a protracted and complicated process of getting an education loan makes studying abroad a distant dream.
In a traditional banking setup, the loan applicants are usually expected to run back and forth to a bank and arrange for a cosigner and/or collateral for the loan. Once the student decides to go for an education loan(s), he must evaluate the loan offered by banks and NBFCs with collateral against non-collateral loans offered by Fintechs. Banks usually ask for margin money, require multiple visits to the branch to complete the application process, and take longer to process the loan than NBFCs and Fintech lenders usually would. They also offer much less flexibility while evaluating a loan and sometimes ask customers to show proof of a savings account.
But things are quite different when it comes to new-age Fintech platforms. Besides directly disbursing the money to the universities, such platforms grant loans without asking for collateral or cosigners, providing students with a smooth enrollment process. They place importance on the employability quotient of the student rather than their financial conditions.
Role of Fintech in studying abroad
With digitalisation and the surge in Fintech companies targeting the education sector, they’re offering better access to education for students from low-income families, where most colleges demand fees in lump-sum amounts. It reduces the payment burden on these aspirants and their families, allowing people to pay fees in smaller, cheaper, and convenient instalments. On the other hand, EdTech companies 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 are revolutionising the future of education loans. Firstly, these lenders have no strict credit requirements and evaluate loan applications based on the student's future earning potential. Fintechs such as Prodigy Finance generally provide a higher loan amount than banks can usually provide. Secondly, they offer no collateral and no-cosigner for higher education to international students, weeding out one of the biggest pain points of securing a student loan in India. Additionally, they don’t penalise applicants for early repayment or full loan settlement and operate completely online in a hassle-free manner.
Fintechs collaborate with banks and NBFCs to form innovative loan provisions that efficiently cater to the students and lenders. They’re focused on providing an opportunity to students belonging to middle-class families to pursue their education without having to undertake the burden of paying vast amounts of money in one go. They even provide multiple credit options to students with a low credit score or non-existent credit history and facilitate tailor-made education loan products for vocational courses. Students can also fund purchasing items such as laptops, books, mobile phones, etc., at a reasonable rate by registering on the platform with their loan requirements.
To conclude, the flexibility in repayment plans that Fintechs provide are currently unmatched by most traditional lenders. With the arrival of Fintech in education, a seamless education finance process is now within reach of middle-class India, who are waiting to fuel their study abroad dreams.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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