Better career opportunities were one of the key reasons for 21-year-old Utkarsh Nigam from Dehradun to go to Canada. Having scored more than 90 per cent in class 12th, he decided to get enrolled in a Canadian university. Higher per capita income and a better standard of living, he says, are the motivation. However, he found it initially difficult to secure a no-collateral and low-interest rate education loan from banks. His worry was, however, resolved by MPOWER Financing, which provides scholarships and no-collateral loans to deserving students.
There are many like Nigam from tier 2 and tier 3 cities who have benefitted from the availability of funding options besides bank loans, thanks to fintechs and NBFCs that have entered the overseas education sector in the recent past.
Student visa issuances to Indian students by the top four study abroad destinations, the US, Canada, the UK and Australia, have surged by nearly 75 per cent at 4,14,822 visas in financial year FY22, as against 2,37,532 in FY20. In the first half of 2022-23, this number stood at 3,48,111.
According to industry experts, while some of it is pent-up demand from students who had postponed their plans to pursue higher education overseas in the wake of the pandemic, a significant chunk is coming in as fresh demand, particularly from students in tier 2, tier 3 and even tier 4 destinations.
Renewed interest
“There is a good demand for overseas education coming in from tier 2 and tier 3 towns, unlike earlier when it was majorly restricted to metros. This is because many fintech and edtech companies have come in and are creating awareness. On the affordability side, earlier it was primarily the banks extending education loans but now there are a host of NBFCs. So, it has become very competitive and students have options available,” Rajesh Kachave, Chief Business Officer - Education Loans, Avanse Financial Services, told bloncampus.
Inflow from tier 1 and top metro cities would earlier account for close to 60-70 per cent of total demand for overseas education courses while the remaining 25-30 per cent came from tier 2 and tier 3 cities.
Avanse, which had fresh disbursements of close ₹3,300 crore this year, is expecting 35-40 per cent growth in the next fiscal. Nearly 35-40 per cent of its total demand comes from tier 2 and tier 3 towns at present and is expected to go up to 50 per cent in the next year, he said.
Some of the top tier 2 and tier 3 cities for study abroad applicants include Aurangabad, Bhopal, Bhubaneshwar, Chandigarh, Dehradun, Gorakhpur, Guntur, Indore, Jaipur, Jamshedpur, Kanpur, Lucknow, Nashik, Nellore, Patna, Ranchi, Surat, Vijayawada and Warangal.
According to Sasha Ramani, Director of Corporate Strategy, MPOWER Financing, it has never been easier for Indian students to apply for overseas education. The pandemic has encouraged universities to expand their recruitment efforts digitally. This means that they’re more easily able to engage with students outside of the big cities and access students in tier 2 and tier 3 cities.
Close to 83 per cent of MPOWER students report that cost is the most significant barrier to studying in the US and Canada, says Ramani. Ninety-one per cent of students indicate that the availability of an education loan has been instrumental to their ability to study abroad, he added..
“Due to a steady increase in the cost of education, more and more students are funding a rising share of their education through loans. This is especially true for students from tier 2 and tier 3 cities,” he said.
Growing share of NBFCs
The overall Assets under Management (AUM) of the education loan segment stood at ₹1.10-lakh crore as on September 30, 2022, against ₹0.88-lakh crore as on September 30, 2020. The education loan segment in India, which has been primarily dominated by public sector banks, has over the past five years, seen a steady increase in the share of specialised NBFCs focussing on the overseas education loans. Especially during the period between 2020 and 2022, NBFCs have almost doubled their market share, said a recent report by CareEdge.
“With the severity of Covid-19 subsiding and easing of travel restrictions post the second wave of Covid-19, the NBFCs have witnessed a sharp increase in disbursements from Q2FY22 aided by robust demand for the overseas education segment,” the report said.
NBFCs have carved out a niche in the overseas education loan segment supported by specialised credit underwriting skills; whereas banks had primarily concentrated on catering to the domestic education segment with 66 per cent of loans outstanding of banks being qualified as priority sector (loans to individuals for educational purposes, including vocational courses, not exceeding ₹20 lakh).
“The education loan market is expanding with more NBFCs, fintechs entering the fray realising that it is a profitable business. There was always an aspiration among students to go abroad for higher education and now there are means as well,” says Saurabh Arora, Founder and CEO, University Living, a global student housing marketplace.