ECONOMIC IMPACT OF EDUCATION LOAN IN KERALA

* Dr. T. Rajesh
Assistant Professor, Dept of Commerce, Govt. College , Ampalapuzha, Published by 3 research
books and edited by2 research books and published 25 research papers in National as well as
International peer reviewed journal, Participate and presented papers in 10 international and 20
National seminars.
Address for communication
T.Rajesh, Vaishnavam, Pazhakutty.P.O, Nedumangad Triavandrum(Dist) Kerala, Mob:
9447001608, email-rajeshvjd@rediffmail.com
** Dr. Dileep. A.S
Assistant Professor, Dept of Commerce, NSS College , Nilamel ,Published by 3 research books
and edited by 2 research books and published 15 research papers in National as well as
International peer reviewed journal, Participate and presented papers in 7 international and 15
National seminars.
Address for communication
Dileep. A.S, Chekkalavilakam, Alumthara, Mamoodu, Venjaramoodu (po) Trivandrum (Dist)
Kerala, 695607.e-mail-dr.dileepvjd@gmail.com

ECONOMIC IMPACT ON EDUCATION LOAN IN KERALA

Abstract
Education is a pre-condition to achieve sustainable growth. It is the
process of instruction aimed at the all round development of individuals, providing with
necessary tools to participate in day to day activities of the world. It generates a wide range of
social benefits such as better health, less crime, lower unemployment and so on. The growing
importance of education and knowledge in the social process and economic development
highlight the role of higher education as an engine for economic growth. In the knowledge era,
higher education has gained significant acceptance all over the world. The Government of India
introduces education loan scheme with the intention of ensuring equal access of higher education
to all strata of the economy. The main tenet of the scheme was its economic viability. Economic
viability can be achieved only through the proper functioning of this scheme. Hence this paper
aims at the proper understanding of the effective working of this scheme which is inevitable one
for finding the deficiencies of this scheme from economic perspective. The study is based on
both primary and secondary data. The primary data collected for the study is properly analysed
by using appropriate statistical techniques. The study reveals that as the major chunk of Kerala
population are belonging to either middle or low-income strata and their empowerment is
possible only by providing quality education and thereby making them as true resource to the
Nation. However, the existing loan policies are not capable of attaining this golden objective. To
be a true contributor to the national economy, commercial banks should reduce their loan
formalities and restructure the loan repayment. In addition the interest rate should be lowered
and to make it affordable to all sections of the people

Keywords
Education loan, financial empowerment, satisfaction, document formalities, repayment
structure, repayment period.

Economic Impact on Education Loan in Kerala

Education is a pre-condition to achieve sustainable growth. It is the
process of instruction aimed at the all round development of individuals, providing with
necessary tools to participate in day to day activities of the world ( Carneiro P, Heckman
J,2002)It generates a wide range of social benefits such as better health, less crime, lower
unemployment and so on. It not only impacts the human development and economic growth, but
also the fundamental requirements of democracy. All these emphasize the importance of
education in the present world (Baumgartner HJ, Steiner V, 2004) The growing importance of
education and knowledge in the social process and economic development highlight the role of
higher education as an engine for economic growth. In the knowledge era, higher education has
gained significant acceptance all over the world. The output of higher education is inevitable one
for meeting the changing requirements of the society and equal access to higher education is
predictable one for achieving the balanced development of the nation (Becker G, 1993).
In the early nineties, like other developing nations, india also faced
financial crisis. This will ultimately suffered the higher education in terms of allocations. The
reduction of allocation and raising access ratio in higher education paved the entry of many
private players in the field of higher education. This entry may lead to the dominance of private
sector in the field of professional courses like engineering, medicine, nursing and management
etc. They impose excessive tuition fees and capitation fees for their offerings. The government
and other authorities have no option to say anything to these players because of several reasons.
This will act as stumbling block for ensuring equal access of professional courses to all the strata
of the economy. In this scenario the education loan scheme comes in to focus in order to raise
access ratio in higher education.

Student loan financing is not a new phenomenon in India. Just after

independence, a scheme of student loans was started under which educational loans were
advanced to displaced students from East and West Pakistan through the Social Welfare and
Rehabilitation Directorate, New Delhi. Another such scheme was the interest-free scheme of
educational loans i.e. National Loan Scholarship Scheme introduced in 1963. This National Loan
Scholarship Scheme was run through the state governments. Under this scheme, interest free
loans were provided to meritorious students for pursuing post-matric education. But this
government sponsored National Loan Scholarship Scheme proved to be a failure when assessed
in terms of recovery of loan. Moreover, the economic crisis facing Government of India in the
early nineties necessitated the winding up of this scheme. Hence, it was dropped in the beginning
of the nineties. At the same time, it was realized that a similar type of educational- loan scheme
was required to cushion the impact of rising user-charges of higher education in India.
Accordingly, a new scheme of education loans, namely, Education Loan Scheme, was started.
The Government of India introduces this scheme with the intention of ensuring equal access of
higher education to all strata of the economy. The main tenet of the scheme was its economic
viability. Economic viability can be achieved only through the proper functioning of this scheme.
Hence the proper understanding of the effective working of this scheme is inevitable for finding
the deficiencies of this scheme from economic perspective.
Scope of the Study
There are many beneficiaries of education loan scheme. The major among
them are engineering students, medical students, management students, nursing students and
students of other professional courses. Since this study gives emphasis to the responses among

the students of medical and engineering courses with special reference to the Thiruvanathapuram
district.
Objectives of the Study
The main intent of the study is to evaluate the economic impact of the
education loan scheme.
Data Base and Methodology
In pursuance of the above mentioned objective, the following methodology
was adopted for conducting the study. The present study is an analytical one based on both
primary and secondary data.
Secondary Data
The secondary data for the present study have been collected from the
personal discussion with officials of commercial banks and from various publications of
numerous institutions.
Primary Data
Primary data required for the study have been collected from selected
beneficiaries (students of medical and engineering courses) from the selected commercial banks
from the district of Thiruvanathapuram.
Variables Selected for the Study
For evaluating the economic impact of education loan the following variables
are selected.1) satisfaction on document formalities, 2) satisfaction on procedural formalities, 3)
satisfaction on interest rate 4) satisfaction n repayment structure and repayment period

Data Analysis
Table 1 : Monthly Family Income wise classification of respondents in respect of Satisfaction on
document formalities
Family Income/
Satisfaction level

Less than
5000

5000-15000

15000-25000

More than
25000

Total

Highly satisfied

6.7

6.7

13.3

Moderately satisfied

6.7

6.7

6.7

20.0

No opinion

6.7

6.7

6.7

20.0

Dissatisfied

26.7

6.7

33.3

Highly dissatisfied

6.7

6.7

13.3

Total

40.1

26.9

20.0

13.3

100.0

Source: Survey Data. . All figures are in percentage.

value=.000

Chi-Square Values=38.33; p

It can be seen from the Table 1 that 6.7 per cent of the students belonging to the
monthly family income ranging between Rs 15000 Rs 25000 are highly and moderately
satisfied with the document formalities associated with the education loan. The same percentages
of students falling the monthly family income of more than Rs25000 are highly and moderately
satisfied with document formalities for education loan. The table results also shows that major
chunk of students (26.7 per cent) belonging to the monthly family income level of less than Rs
5000 are dissatisfied with the document formalities associated with the education loan. This is
an indication that the monthly family income increases the satisfaction level of students also
shows an enhanced level in respect of document formalities for education loan. The p value
shows that the difference seen in the satisfaction level of students grouped under different
monthly family income is statistically significant and meaningful.

Table 2
Monthly Family Income wise classification of respondents in respect of Satisfaction on
Procedural formalities
Family Income/
Satisfaction level

Less than
5000

5000-15000

15000-25000

More than
25000

Total

Highly satisfied

6.7

6.7

13.3

Moderately satisfied

13.3

6.7

6.7

26.7

No opinion

6.7

6.7

13.3

Dissatisfied

13.3

6.7

6.7

26.7

Highly dissatisfied

13.3

6.7

20.0

Total

26.6

26.7

26.7

20.0

100.0

Source: Survey Data. All figures are in percentage

value=.000

Chi-Square Values=46.250; p

Table 2 reveals that that the students who come under the monthly family
income ranges between Rs 15000 and above are highly and moderately satisfied with the
procedural formalities associated with the sanctioning of education loan. But the things are very
different in the case of students having lower family income. The table results shows that major
hunk of students falling under the lower monthly family income are dissatisfied or highly
dissatisfied with the legal formalities associated with the sanctioning of education loan. This is
an indication that when the monthly family income of students increases the satisfaction level in
this regard is also increased. The p value results shows that the satisfaction level of students
grouped under different monthly family income are statistically significant.

Table 3
Monthly Family Income wise classification of respondents in respect of Satisfaction on market
compatibility of interest
Family Income/
Satisfaction level

Less than
5000

5000-15000

15000-25000

More than
25000

Total

Highly satisfied

6.7

6.7

Moderately satisfied

6.7

6.7

13.3

No opinion

13.3

6.7

20.0

Dissatisfied

13.3

6.7

13.3

6.7

40.0

Highly dissatisfied

13.3

6.7

20.0

Total

26.7

26.7

26.7

20.0

100.0

Source: Survey Data

All figures are in percentage

Chi-Square Values=50.000; p value=.000

It is evident from the Table 3 that students belonging to lower family income
group are dissatisfied and highly dissatisfied with the market compatibility of the interest rate.
They feel that interest rate charged is not affordable and that is not capable of creating
satisfaction level among themselves. This is seen in the case of higher income groups also. The
table results shows that 6.7 per cent of students belonging to monthly family income more than
Rs.25000 and 13.3 per cent of students come under the monthly family income ranges between
Rs.15000-Rs.25000 are strongly exhibit their dissatisfaction in respect of interest rate. The p
value shows that the difference in the satisfaction level between students grouped on their family
monthly income in respect of market compatibility of rate of interest is statistically significant.

Table 4
Monthly Family Income wise classification of respondents in respect of Satisfaction on
repayment structure
Family Income/
Satisfaction level

Less than
5000

5000-15000

15000-25000

More than
25000

Total

Highly satisfied

6.7

6.7

Moderately satisfied

6.7

13.3

20.0

No opinion

13.3

13.3

Dissatisfied

13.3

13.3

13.3

6.7

46.7

Highly dissatisfied

13.3

13.3

Total

26.6

26.6

26.7

20.0

100.0

Source: Survey Data. All figures are in percentage

value=.000

Chi-Square Values=75.238; p

It can seen from Table 4 that the students belong to lower family income
finds difficulty to make the repayment of loan amount. They are dissatisfied and highly
dissatisfied with the existing repayment schedule. The table results shows that 6.7 per cent of
students each belonging to the monthly family income of Rs. 15000- Rs.25000 are highly and
moderately satisfied with the present repayment structure, while 13.3 per cent of students falling
under the same income shows their dissatisfaction level regarding the repayment structure. The
6.7 per cent of students belonging to higher income groups are not satisfied with the existing
repayment system followed by the lending institutions. The p value shows that the difference in
the satisfaction level between students grouped on their family monthly income in respect of
repayment structure is statistically significant.

Table 5
Monthly Family Income wise classification of respondents in respect of Satisfaction on
Repayment period
Family Income/
Satisfaction level

Less than
5000

5000-15000

15000-25000

Highly satisfied

6.7

Moderately satisfied

6.7

20.0

26.7

No opinion

6.7

6.7

Dissatisfied

6.7

20.0

13.3

40.0

Highly dissatisfied

13.3

6.7

20.0

Total

26.6

26.6

26.7

20.0

100.0

Source: Primary data.All figures are in percentage

More than
25000

Total

6.7

Chi-Square Values=78.750; p value=.000

It is seen from Table 5 that 20 per cent of the students monthly

family income more than Rs. 25000 are moderately satisfied with respect to the repayment
period. The table results also shows that students belongs to monthly family income ranges
between Rs 15000 Rs.25000 (13.4 per cent) are feel satisfaction in respect of repayment period
of education loan and 13.3 per cent of students fall under the same income groups are dissatisfied
with the repayment period. The noticeable thing observed from the table results that the students
fall under lower income groups are not satisfied with the existing repayment period of education
loan. The p value shows that the difference in the satisfaction level between students grouped on
their family monthly income in respect of repayment period is statistically significant.

Table 6
Monthly Family Income wise classification of respondents in respect of Financial empowerment
through loan
Family Income/
Satisfaction level

Less than
5000

5000-15000

15000-25000

More than
25000

Total

Highly satisfied

6.7

6.7

13.3

Moderately satisfied

--

6.7

6.7

13.3

No opinion

6.7

Dissatisfied

6.7

13.3

6.7

13.3

Highly dissatisfied

13.3

13.3

13.3

40.0

Total

26.7

26.7

26.7

20.0

100.0

Source: Primary data. All figures are in percentage

Chi-Square Values=78.750; p value=.000

It can be seen from the Table 6 that the major group of students fall
under lower monthly income groups feel that the education loan is not capable of creating
satisfaction in respect of financial empowerment. The fifty per cent of students fall under high
income groups opined that education loan is capable of creating financial empowerment. The
remaining students in the same income group opined that education loan did not play any role in
creating financial loan among themselves. The p value shows that the difference in the
satisfaction level between students grouped on their family monthly income in respect of
repayment period is statistically significant.
Findings
The study is mainly intent to identify and evaluate the economic impact of
educational loan. The data collected was analysed through appropriate statistical tools and it
leads to the following findings.

1) Low income groups are not satisfied with the document formalities prescribed by the bank for
sanctioning of loan.
2) People who are in the low strata of income level are dissatisfied with the procedural
formalities stipulated by the bank in connection with education loan.
3) Respondents belonging to lower family income group are highly dissatisfied with the market
compatibility of the interest rate.
4) People belong to lower family income finds difficulty to make the repayment of loan amount.
5) Lower income groups are not satisfied with the existing repayment period of education loan.
6) Majority of respondents fall under lower monthly income groups feel that the education loan
is not capable of creating satisfaction in respect of financial empowerment.
Conclusion
In the post modern economic era middle and low income groups cannot
afford the cost of education (Nielsen HS, Srensen T, Taber C, 2010). Cost of education is
increasing day by day and now quality education has becoming a dream for lower sections of the
people (Card D,1999). Major chunk of Kerala population are belonging to either middle or lowincome strata and their empowerment is possible only by providing quality education and
thereby making them as true resource to the Nation. However, the existing loan policies are not
capable of attaining this golden objective. To be a true contributor to the national economy,
commercial banks should reduce their loan formalities and restructure the loan repayment. In
addition the interest rate should be lowered and to make it affordable to all sections of the

people. Through adopting these people friendly attitude and approach in providing educational
loan, the commercial bank can prove that they are the economic balancer of the nation.
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