Education loans still a far cry for students

Updated on: Tuesday, September 22, 2009

Chennai: Education loan continues to be a fruit on which many students are unable to lay their hands on, despite claims by the Union finance ministry that it is available for the asking.

Parents and students who have applied for an educational loan this admission season are finding to their dismay that banks are whimsically denying loans or trapping them in unending procedural requirements. Students who had joined professional colleges under the management quota are the worst hit with some bank officials doubting their academic credentials and capacity to repay the loan after their study period.

Even the Banking Ombudsman at the Reserve Bank of India, A Madasamy, acknowledged that a sizeable number of complaints that have been brought to his notice over the past year pertain to non-sanction or delayed disbursement of education loans.

The ordeal undergone by parents in obtaining an educational loan for their wards is best illustrated by the experience of Thirunavukkarasu, a resident of Choolaimedu. Thirunavukkarasu had approached a nationalised bank to obtain a study loan of Rs 4 lakh for his daughter T Malathi, who had secured admission in a private dental college on the outskirts of Chennai under the management quota.

"My ordeal started with the filling up of the application form. I honestly declared that I had already obtained an education loan for my son from another bank three years ago. The bank officials bluntly asked me to go back to the same bank for the second loan," said Thirunavukkarasu. When he went back to the bank which had given loan to his son, officials there said that as per their policy, they sanctioned only one education loan per family. He returned to the bank he had first approached, but was told to come with a letter from the bank which had given the loan to his son, stating that a second loan would not be sanctioned. But the other bank refused to give such a letter.

After much pleading, bank officials agreed to process the application but with a new condition. "They wanted a third party guarantor for the loan. When I argued such a guarantee was not required for education loans up to Rs 4 lakh, the officials came up with a weird logic. They said since I had already obtained an education loan for my son, the amount cumulatively exceeded the threshold limit of Rs 4 lakh," Thirunavukkarasu alleged. He managed to get a third party guarantor and the bank sanctioned the loan but again with a rider.

"The officials said that instead of disbursing Rs 1 lakh each for the next four years, they will divide the amount proportionately for the entire five-year duration of the BDS course. But I did not want a loan for the final year since by then I will be using my savings. When the officials refused to listen, I decided to surrender the loan. That's when they agreed to my formula and I got the loan nearly a week after my daughter's admission date," he added.

RBI Ombudsman Madasamy said though banks might have certain limitations in sanctioning loans, "they cannot refuse it to students." According to him, "after collecting all details, banks should lend credit in 15 days. Refusal to accept loan applications or delay in sanction or disbursement will attract our attention." He said the number of complaints from the aggrieved public in 2008-2009 had risen to 10,381 with an average of 1,200 complaints a month. A sizeable number of them related to non-sanctioning of educational loan.

But banks have said that they were unable to disburse loans as some of the educational institutions were not recognised ones. Besides, some applicants wanted loans to pay capitation fees which do not fall under the category of educational loans. "If the loan applied is for college and hostel fees then the applicant has every right to complain that it has been denied by the bank'' said Madasamy.

Education loans still a far cry for students

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