The parliamentary panel’s observation that the number of active education loans has declined while the total value of loans has surged exposes a troubling paradox at the heart of India’s higher education financing. Active student loans fell from 23.36 lakh to 20.63 lakh, even as the total outstanding credit nearly tripled. This divergence reflects structural shifts in education costs, lending norms, and access barriers. At the core lies the exponential rise in higher education fees. Over the last decade, professional and technical courses-engineering, medicine, management, and even mainstream undergraduate programmes-have witnessed extraordinary fee escalation. While students from reserved categories benefit from subsidies, scholarships, and nominal fees in many institutions, general category students bear the full brunt of this inflation. Education loans, once measured in thousands, are now sought in lakhs, fundamentally altering the risk profile for both borrowers and lenders.
This shift has made education loans harder to access. Large loan amounts trigger stricter banking scrutiny-collateral requirements, co-borrower income proof, credit history, and repayment capacity assessments. For students from middle- and lower-middle-income families, meeting these conditions is increasingly difficult. As a result, many eligible students either abandon higher education plans or opt for less expensive, and often lower-quality, alternatives. The decline in the number of loans granted thus signals not reduced demand, but constrained access. Another contributory factor is the tightening of visa regimes abroad. Stricter immigration policies, uncertainty in post-study work opportunities, and geopolitical shifts have reduced the number of Indian students pursuing education overseas. Since foreign education traditionally accounts for a significant share of high-value education loans, fewer outbound students directly translates into fewer loan applications.
The underutilisation of the PM Vidyalaxmi scheme starkly illustrates policy failure. Of the Rs 4,427 crore sanctioned, only about 15 per cent has been disbursed. This gap underscores procedural bottlenecks, lack of awareness among rural and disadvantaged students, and institutional reluctance to lend despite government backing. When 85 per cent of allocated funds remain idle, the very purpose of education loans-democratising access to higher education-stands defeated. The government must address root causes rather than symptoms. The policy options are limited but clear: either rein in runaway fee structures or make education loans genuinely affordable. Without decisive reform, rising loan values will continue to coexist with shrinking access, deepening inequality in India’s education system, rather than bridging it.
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