New Delhi: It’s an emerging social media trend that has evoked scorn from some, but support from many others. Several students with dreams of a foreign education have been turning to social media with crowdfunding appeals for help with the (often prohibitive) fees of premier institutions.
Many of these applicants describe themselves as first-generation learners with hopes of using their exposure and lessons abroad to effect change in the grassroots. They usually parade stellar educational credentials and resort to crowdfunding after securing admissions in some of the world’s most prestigious institutions.
Some applicants say they turn to crowdfunding because they are unable to afford the loans — they say they are from modest backgrounds and don’t have anything to offer as collateral, the absence of which translates to higher interest rates.
While others note that the scope of applying to banks and financial institutions for assistance has shrunk amid the Covid pandemic, a few applicants only seek partial assistance, saying they’ll take a smaller loan or pick up a part-time job to meet the remaining expenses.
The idea of soliciting contributions for education has been criticised by many online, who question why the applicants don’t take loans instead. However, hundreds of people are pitching in with not just contributions but also words of encouragement.
Ketto, a crowdfunding platform, says it has seen a 300 per cent increase in the number of education fundraisers over the last one year. Of the education fundraisers on their platform, Ketto co-founder Zaheer Adenwala said, 46 per cent have been able to raise about 50 per cent of their goal amount, while about 25 per cent have achieved 25 per cent of their target.
Milaap, another crowdfunding platform, said it has hosted 2,374 fundraisers so far this year, and education is the second-most common goal, after medical treatment.
Said Adenwala of Ketto: “Crowdfunding has emerged as a popular means for students looking to pursue education overseas. One of the reasons for this is that students can raise funds not just for their fees, which a conventional loan would provide them, but also for their living expenses.
“They usually come to our platform to raise funds as a first option since not all students can afford to take loans. Those who can, later take loans for the amount not raised on our platform. This reduces the burden for underprivileged students,” he added.
Cost of a foreign education
Foreign education comes at a premium.
A foreigner pursuing Master’s at an Ivy League university in the US would have to pay around Rs 85 lakh/year as tuition fees and an average of Rs 14 lakh as living expenses.
At the Oxford University in the UK, course fees alone can set one back by thousands of pounds (£1 is approx. Rs 103.65).
Students can also apply for loans from private financiers.
“The rate of interest on education loans in public sector banks is between 7 and 10 per cent, while private institutions and banks start only at 12-13 per cent onwards,” said a Delhi-based media professional looking to study in Canada. “Fees for most management courses start at Rs 35 lakh per annum. On top of it, students take an additional (loan of) Rs 15 lakh-20 lakh for overall living expenses.”
When it comes to repayment, he added, “private financiers have fluctuating interest rates, which are subject to the market’s current state”.
“This becomes tricky for those who get fixed salaries in their jobs later. Public sector banks have low interest rates and fixed rates for repayment and allow a student as long as 15 years to repay the loan,” he said.
Parima Mehta, an engineer working in Bengaluru, added that “loans without collateral have a very high interest rate, which not everyone can afford”.
While affordability is the issue with some crowdfunding applicants, others point to a reluctance among banks to give out education loans, especially amid the pandemic.
To be sure, the seeming hesitation of banks to give out education loans predates Covid amid concerns about growing non-performing assets (NPAs). In 2019, banks had reported a rise in bad debt from the education sector.
Speaking to ThePrint on the condition of anonymity, bank officials admitted they have become more conservative in giving out loans during the pandemic because “they have witnessed a steep rise in NPAs or loan defaults. This, they said, has been largely because of job losses, hefty expenditure on Covid treatments, and massive pay cuts.
“The gross NPA for education loans across the country in the last financial year was a total of 7.5 per cent. This year, it is predicted to be 9 per cent. The major cause for this are the pandemic-driven job losses and income reduction,” said an SBI official. “At a time like this, even banks will become conservative when it comes to giving out loans. So, even if a banker feels like a certain person is deserving of the loan amount, they won’t get it in the absence of strong financials. Logically/practically, the loan will be given to an applicant with better financial backing.”
Education loans, the bank official said, constitute an additional risk compared to a home or a car loan. “There are unsecured education loans given upto the amount of Rs 7.5 lakh, no collateral is required. In a situation of economic downturn, a loan-bearer will first try to pay interest on the loans where they have a stake, say for example a housing loan or a car loan.This is because they stand to lose a house or a car if the loan becomes an NPA. This is why education loans become a secondary priority for them, leading to NPA.”
Not an assured route
Even as students increasingly opt for crowdfunding, it is not an assured route to assistance.
A 27-year-old anti-caste activist and rapper, Sumeet Samos Turuk, made news this month when he raised Rs 38 lakh in 3 hours for studies at Oxford, but few have it this easy.
Said a journalist who is yet to reach his goal amount, “Being a minority comes with additional baggage. On social media, not only does one get trolled but one also has to face insensitive questions. Not all applicants have the privilege of applying for big loans, not all students can afford to provide the collateral or pay the monthly interest.”
Being a first-generation learner, he said, the loan may come as a disguised setback for him and his family. “My family has no collateral to give in lieu of the loan and loans with no collateral have very high interest rates. I come from a humble family and we cannot afford it,” he added. “Does that mean I have no right to study in a world-class university?”
(Edited by Sunanda Ranjan)