Around 3 lakh Indian students go abroad annually, 33% take property-backed loans

NEW DELHI: Anita Kapoor (name changed), a resident of South Delhi, sent her son to pursue an undergraduate media course at a top university in New York last year after taking a loan.

While taking a loan for overseas education isn’t unusual, in this case, the family had to pledge its second house as collateral.

The four-year course covering media, culture and communication costs over $500,000 (Rs 3.2 crore). Kapoor’s son insisted on going abroad because of the limited availability of such undergraduate courses at home.

"He was very sure he wanted to study at a top college, even if there wasn’t a scholarship," said Kapoor. "We know he can work after his course for nine months and perhaps get a job as well there."

With more students than ever heading to foreign universities at undergraduate and post-graduate levels, many parents are pledging their homes as collateral for loans taken to meet the cost of their children’s education overseas, including tuition and living expenses. "It’s a cultural thing. In India, most parents live for their children," said Ajay Bohora, cofounder and CEO of Credila, a unit of Housing Development Finance Corporation.

Many students go abroad because they are unable to find their choice of courses locally or cannot get admission in the country’s universities. This year, the University of Delhi received 2.85 lakh applications for the 54,000 seats offered for undergraduate courses.

The number of Indians studying overseas was 189,472, according to Unesco figures for 2012, the latest figures available. Industry guesstimates suggest that 2.5 lakh-3 lakh students from India travel abroad every year to study and at least one in three takes a property-backed loan.

The US is the preferred destination for Indians students. There were about 103,000 Indian students in the US in the academic year 2013-14, more than double the number of students 15 years ago.

Engineering is the most popular major, followed by computer science, according to the US embassy in New Delhi.

Education consultants said that up until two years ago, only 15% of their business came from undergraduates and this number has now risen to 40%.

Piyush Agarwal of Abroad Education Consultants gets almost half his business from students seeking admission in undergraduate schools abroad. He said most of the undergraduate aspirants are from North India and find it tough to get into the top local colleges.

"The aspiring middle class wants to send their children abroad for undergraduate studies, especially in the north of the country, which wasn’t the case until three years ago. Though, in the south of India, 80% still want to pursue post-graduate studies abroad," said Agarwal.

Most undergraduate programmes in sought-after universities abroad entail spending of about Rs 1 crore over four years. Princeton University, ranked No. 1 by US News & World Report, charged USD41,820 (Rs 26.3 lakh) for tuition and fees in 2014-15.

For agencies providing such loans, real estate is better collateral. Banks and finance companies are always comfortable lending against property, especially when the amount involved is very high, because they have the collateral in case of a default, said Sreenivasan Ramakrishnan, cofounder of Career Launcher.

Consultants say over 80% of education loans have been taken with personal homes as collateral. In Mumbai, ReachIvy’s Vibha Kagzi says 70% of its clients offer their homes to back loans.

Neeraj Saxena, chief executive officer at Avanse Financial Services, said earlier, education loan sizes remained between Rs 25 lakh and Rs 60 lakh. "Today, if a student is going abroad for further studies, it could cost anything between Rs 50 lakh and Rs 1.5 crore, depending on the course. For this, most banks will not give unsecured loans," he explained.

Rajdeep Chimni of New Delhi-based Admissions Gateway said for the schools he consults with, 30-40% of the children apply for courses in the US primarily because it is easier to get admission there than in India.

Yudhajeet Dasgupta, a class of 2014 student at one of India’s premier technology institutes, faced uncertainty after finishing his course. His father, who has a government job, said they couldn’t manage the cost of Rs 32 lakh to send him abroad. So they took a loan against their home in Hyderabad for Rs 32.6 lakh from State Bank of India.

Today, Dasgupta is ready to take off for a master’s in electrical engineering and he said he couldn’t have made it without the loan. Consultants expect undergraduates will increasingly drive the education loan market.

"As the disposable incomes of the upper middle-class and middleclass rise, there will be more and more first-generation undergraduate admission seekers emerging from India," said Ramakrishnan of Career Launcher.

Source : Economic Times