NEW DELHI: The recent fee hike at IIMs has not only created a stir in the academia, but also raised concerns among IIM aspirants and their parents. Although the hike has generated mixed reactions from students, thousands of MBA aspirants at the threshold of joining IIMs are worried about arranging finances.
Abhimanyu Singhi, a graduate from St Stephen’s College, Delhi, is one such example. He has offers from two IIMs, but is worried about the fee hike, “I feel that the hike is inexplicable because most of the B-schools get huge funds from the government. But now an MBA degree can easily cost more than Rs 5-6 lakh a year, which is more than what a lot of people even earn in a year.”
Agrees Ankit Agrawal, who has two years of experience, working with an MNC and looks forward to fund his education from his savings. “Many of us fund our education from our savings. Such increase in fee is very difficult to absorb. Only a few students are covered under scholarships, where 50-60% of the fee is absorbed, but the rest are left in despair.”
The solution may be around the corner. “I think availing of loans is the only option for most students now. The expected interest rate hikes will further hurt our prospects,” adds Mr Agrawal.
Since more IIM aspirants are expected to avail of loans this year, many banks have agreed to raise the bar of their educational loan offerings, to correspond with the higher fees. “SBI offers two educational loan options; general and scholar. Scholar loan is meant for institutes like IIM, MICA and NID, which are usually up to Rs 10 lakh for an entire course. We shall be ready to offer more loans this year since the fee has been hiked and at competitive rates. Our PLR is 12.25%, but we offer educational loans at 10.75%, which can be further negotiated,” says SBI (Gujarat) chief general manager HC Pattnaik.
SBI is planning to raise the loan amount to Rs 20 lakh approximately. The equation works like this; Rs 11 lakh (as per IIMA), plus Rs 1 lakh for a laptop/computer and Rs 3 lakh for additional expenses. Under the bank’s scheme, 95% of the fee amount can be availed as a loan.
Dena Bank, too, has similar schemes for students. “We offer educational loans up to Rs 10 lakh for higher studies within the country, and loan up to Rs 4 lakh does not require any collateral. The interest rate can be relaxed by 1% further, if the loan is being repaid during education,” says Dena Bank DGM TR Chawla.
The educational loan market has been steadily growing in India, since their introduction. For instance, in Gujarat alone, 31,000 educational loans have been given totalling Rs 711 crore. SBI alone contributes Rs 210.28 crore to this segment in the state, with Rs 28.20 crore accruing to scholar loans. Most of the educational loans can be repaid within 5-7 years.
Private banks do not want to be left behind either. “We not only offer educational loans for popular courses like MBA, but also offer loans for the preparation of CAT and SAP tests as well. The interest rate is around 13.5% and the loan amount can be up to Rs 20 lakh. Various factors are kept in mind while giving loans, but our focus is to lend money to the best students, opting for the best career opportunities,” says HDFC Bank business head of personal loan, and loans against securities and gold loan, Biju Pillai.
According to students, banks may be happy to provide loans to IIM aspirants. “The rate of interest is very high and most students can repay their fees in a year or two, looking at the kind of hefty packages they get. Compared to international B-schools, a $1,50,000 education at Harvard or Stanford is much more difficult to pay off,” says Aastha Sahdev, another IIM aspirant.
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