According to a study conducted by credit bureau TransUnion CIBIL, around 9% of the education loans that banks have disbursed ended up as non-performing assets. The study also reflected that small-sized education loans up to Rs.4 lakh are more prone to turning bad in comparison to large-sized loans that go up to Rs.15 lakh.
Small-ticket education loans are taken to study in middle-ranked institutes and the probability of these turning bad indicates the inadequacy in job opportunities associated with this segment.
The TransUnion CIBIL Market Insights Report on Education Loans shows an emerging trend among small-ticket student loans. The study focussed on the education loans disbursed from 2012 onward. The delinquency rate for large student loans (above Rs.15 lakh) has been stable.
Out of the total amount of Rs.77,000 crore that was lent through 28 lakh bank accounts as education loans, around Rs.7,000 crore (from 3.5 lakh bank accounts) have turned bad.
Harshala Chandorkar, Chief Operating Officer of TransUnion CIBIL, mentioned that the study shows the risk associated with the future generation of borrowers, in addition to reflecting the potential job opportunities in the employment market.
The prevalence of low delinquency rates on large-ticket student loans (of size Rs.15 lakh and above) shows the availability of jobs for the graduating students from premiere professional institutes.
An education loan is a debt that is taken over a time frame of 2 to 4 years, based on the academic course for which it was availed. The repayment under the loan will be due only after the borrower finishes the course and a moratorium period of 6 months to 1 year is completed. Therefore, loans that were disbursed after 2014 will have low delinquency rates as of now.