Students worry about loans as jobs dry up

[Kalyan]

Students worry about loans as jobs dry up

The stress induced by the economic slowdown isn't just telling on those who find themselves out of jobs. Students from modest financial backgrounds, who will soon step out into the world of employment, are carrying huge millstones around their necks, worrying how they'll pay off educational loans if jobs continue to shrink.

Education loans are generally granted for higher studies and payback time begins one year after completion of the course or six months after getting placed, whichever is earlier. As the economic slowdown deepens, campus recruitment — and the chances of securing employment — are fast receding.

Amit Sharma, a third-year engineering student in Bangalore, sums up what students are going through. "Payment for the loan is supposed to start as soon as I get a job, and is based on the premise that I will be placed as usual from campus," said Sharma, 20, who has borrowed Rs 4 lakh to fund his studies. "Right now, the scene looks bleak. I come from a middle-class family and there is no way my father can shoulder the burden. It is worrying me so much that I can't just concentrate on my studies," he added.

It's not just students who are worried. Academics are concerned too. Mumbai-based SP Jain Institute of Management and Research's dean ML Shrikant said poorer students, and those in less well-known institutes are among those who are particularly anxious. "There are students who are not well off and are going through a period of uncertainty till the placements actually take place... Ours is a well-known institute, and I would imagine that students from lesser-known institutes would be under that much more pressure if they have taken loans and may not be in a position to pay them," he said.

Meanwhile, Sharma said he got in touch with the bank to explore alternatives, but the bank said it would only take a call at the time of repayment. "That is hardly any consolation."

The banking system, which has an exposure of around Rs 27,000 crore in education loans, is yet to report an upsurge in educational loan defaults due to the current crisis. But, it may not be for long. Banks are anticipating defaults to emerge, although many of them promise to stand by the students when such a situation arises. This might be a case of making a virtue out of necessity: banks, in any case, don't have a strategy in place to tackle a situation where students default on loans.

Bankers say much of the demand for educational loans is from engineering, medical and management students, and are typically for around Rs 4 lakh. As India's economic growth averaged more than 9% in the past three years, and as companies had more jobs on offer than there was talent available, timely repayment of such loans was never an issue for the country's banking system.

source : economic times