Kshirod Chandra Mohanty is a partially blind 24-year-old dual degree (BTech-MTech) student of IIT Kharagpur, set to graduate next year, with an outstanding education loan of ₹4.20 lakh from the State Bank of India.
While his family has no means to fund his education, his health issues and hospitalisations have only made it harder to repay. “I am supposed to start repaying the loan next year as I was supposed to graduate this year. However, owing to my health challenges, I had to skip a semester, and I will graduate only in 2023 now. I am most likely to default on paying my education loan because I have no means and I also have other pending loans to pay,” he says.
Many students like Mohanty struggle mightily with education loans. According to the latest data available with the Ministry of Finance, 22,56,851 people have outstanding education loans in the country across banks, as of December 31, 2021.
It also says that banks are owed ₹89,477.01 crore in terms of education loans. This is a jump of ₹1.63 lakh crore from the previous year and a 17 per cent year-on-year increase, which is the highest in the last seven financial years. This was revealed by Dr Bhagwat Karad, Minister of State for Finance, in the Rajya Sabha on March 14.
Dire consequences
Tamil Nadu has the maximum number of people with outstanding loan accounts — 6,25,735. They owe a total of ₹16,301.93 crore to banks. Trailing behind it are South Indian states Kerala and Karnataka with 3,07,670 and 2,10,437 people with outstanding education loans respectively.
Close to 60 per cent of the people (57.8 per cent) with outstanding education loans are from South Indian states.
The SBI guidelines say that loans up to ₹7.5 lakh do not require additional documents or collateral. For IIT students, they charge an interest of 7 per cent. It varies up to 8.65 per cent, depending on the course and money. Even though collateral is not involved in a lot of cases, defaulting these loans negatively affects their credit report and CIBIL scores.
“Defaulting loans will have great repercussions in their later lives too. Often lenders reach out to employers and kin of defaulters, causing them a lot of embarrassment,” says Aditya Damani, Founder of Credit Fair, a Mumbai-based finance services platform. “Their CIBIL scores will also be affected and repairing this will take a long time, affecting their future loans and even EMIs,” he adds.
Fearing this, student loan borrowers in default, including Mohanty, have turned to crowdfunding platforms like Milaap to repay the loan. “I haven’t been sleeping fearing the repercussions. I am contemplating dropping out and getting a job now. Covid almost halved my family’s income and I see my father struggling to provide three square meals to us,” he says.