Financing Higher Education through Education Loan in India: Current Status, Challenges and Future Prospects

Abstract

The increasing demand for higher education and the fiscal constraints faced by the government has resulted in the evolution of ‘Education Loan’ as an alternative source of funding higher education in India. Since the announcement of the Model Education Loan Scheme in 2001, the commercial banks have come forward to finance higher education on a wider scale. Though there has been a spectacular increase in education loan over a period of time, the scheme has met with several challenges. In this background, we make an attempt to examine the growth of higher education in the country, the growth of education loan and its regional distribution. The study found that there has been continuous increase in higher education enrolment through diversified institutions. Consequently, the education loan has also witnessed remarkable rise during the study period. However, a look at the dispersal of education loan shows its skewed distribution among various states and regions. The study concludes that the uneven distribution of education loan vitiates the very purpose of this scheme.