New thinking on funding education

Updated on: Tuesday, January 24, 2012

Even as it remains the principal source of funding for the higher education sector, the Union government should provide for the disbursal of scholarships for every student who wishes to pursue higher education, the subcommittee on Student Financial Aid constituted by the Planning Commission has recommended.

The cost of such scholarships should be financed by the government by reallocating funds from other sectors or by raising taxes, the panel's report recommends.

All three stakeholders of higher education — the students, the government, and the corporations or employers — must participate in the financing of education at varying levels. For its part, the government should give block grants to institutions to meet capital and operational costs. There should be tax exemption on the income of the institution and subsidy for “inputs.”

The existing scholarships for students belonging to the Scheduled Castes and the Scheduled Tribes and the minorities, particularly Muslims, should continue. However, the allocation for these scholarships should be at least Rs.8,000 crore in the first year of the 12 Plan. This should be annually increased by 15 per cent. The amount of scholarships given should be indexed since their last revision to arrive at the money to be paid during the first year and during the subsequent years. This is to meet increases in tuition fee and living expenses.

The top 10 per cent on the rank list of all examination boards should be given scholarships equivalent to the tuition fee for any undergraduate programme in the country. Institutions should be encouraged to provide a tuition fee waiver for needy students.

“Institutions should be encouraged to establish a work study programme under which students are hired to work in laboratories and campus services like administrative offices, library, computer centres, research projects, etc., as assistants. However, the students should not be allowed to work for more than 20 hours per week and the payment for work should pay for a significant cost of education. This will provide students with the much-needed resources to fund their education and provide rich work experience. For this purpose, government should allocate a sum of Rs.500 crore,” the report reads.

Students completing graduate professional courses should be encouraged to work for few years before signing up for a postgraduate programme. This will enable them to pay off loans and save some money for higher studies.

Education loans

On education loans, the report recommends that these be made available to all students who qualify for higher education programmes “irrespective of their caste, creed, religion, means and merit.” Loans shall be made available for every discipline available in the country and should not be restricted to professional courses. Significantly, the committee has recommended that loans shall not the linked to the income of the applicant's parents. No collateral should be sought.

The loan component relating to boarding and lodging should be transferred directly to the student's bank account. The rest shall be paid directly to the institution concerned. The Centre shall provide full guarantee to the loan taken by each student. The government should make allocations for making good any loan defaults. A “credit guarantee trust” should be established to manage this guarantee corpus, the report recommends.

The rate of interest on loans should be only slightly more than the yield on comparable 10-year government securities. In other words, the interest on education loans should be 9.5 per cent in the present regime and will drop to 7.5 per cent in a “benign inflationary regime.” The prevailing interest rates on education loans are, however, over 13 per cent plus annual service charges, the report notes. There should be a moratorium on repayment for the duration of study plus one year.

The Reserve Bank of India should amend its regulations to allow banks to lend at ‘sub-base rates' for educational purposes. The period of repayment of loans shall be 15 years after the moratorium for candidates belonging to the Scheduled communities, Other Backward Castes, and the minority communities. For the rest, the term shall be 12 years. While all student loans shall be securitised, any default on education loans should be treated as an income tax default. Recovery procedures should mirror the procedures laid down in the Income Tax Act for this purpose.

The entire process of scholarships and loans shall be administered by a student financial aid delivery system, an IT-driven system which would minimise personal interaction between students and loan disbursing agencies and ensure transparency in processing loan requests. The subcommittee has recommended the adoption of the Andhra Pradesh model, with suitable modifications, for this.

Linking libraries

The report calls for the creation of a national mission programme to link libraries of all national institutions through a single Web portal. There should also be a national server which hosts all published working papers in every discipline.

Institutions should be allowed to leverage land resources for resource mobilisation. The funds raised by an institution should not be used to offset the grants from the government. The government should institute a financial programme to attract and sponsor top students to do doctoral research in the country and abroad, with an inbuilt obligation to work in academic institutions in the country for a fixed number of years.

The starting compensation for an Assistant Professor should be better than what the industry may pay to freshers with graduate degrees. The services of a new lecturer in a college should be regularised only after six years. Each permanent professor should be evaluated once every decade for contributions to “thought leadership.” An annual performance review system needs to be put in place in institutions of higher learning, the report recommends.

The report, recently submitted to the Planning Commission, would now be considered by the Ministry for policy decisions for the 12 Plan.

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