With education loan disbursals reaching ₹28,699 crore in FY24, up 15% from the previous year, the Indian student loan segment is gaining strength. However, a critical challenge is now coming into sharp focus: should student loans be classified as non-performing if the parent or guardian (co-borrower) defaults on a separate personal loan?
Currently, under RBI's IRAC norms, a borrower's default impacts all associated loan accounts. This has unintended consequences for students, where an unrelated financial stress on parents can derail a young borrower's education or future career plans. The government and the RBI are now reviewing whether education loans deserve special treatment to ensure students' repayment behaviour is assessed independently.
Given the sharp fall in education loan GNPA from 7.2% in September 2021 to an expected 2.7% by September 2024, the sector shows resilience. With initiatives like the Pradhan Mantri Vidyalakshmi Scheme offering credit guarantees and subsidies, the move towards protecting student borrowers seems both timely and necessary.
Besides traditional loans, innovative, loan-free solutions are emerging to make education financing more accessible and resilient. Platforms like Flashaid offer alternative models such as SmartFee, where tuition payments are split into manageable EMIs. These options provide families and students the flexibility to manage educational expenses without the burden of formal lending processes or the risks tied to parents' financial histories.
By offering insurance-backed, auto-EMI tuition payment solutions instead of credit, platforms like Flashaid empower students to pursue their education without the fear of credit rejections or the complications of inherited financial setbacks. These innovations create a more inclusive and supportive education financing ecosystem.
Gunjali Kothari, Founder at Flashaid, shares,"At Flashaid, we are building an alternative path to fund education, without entering the lending space. With SmartFee, we enable students and families to pay tuition fees through simple, automated instalments, without the need for credit scores. In today's global landscape, education must be treated as an enabler, not as a liability tied to legacy financial challenges. By offering flexible, loan-free solutions, we give students the freedom to invest in their futures without being impacted by their co-borrowers' financial histories. The future of education financing must be resilient, fair, and focused on opportunities, and that's the vision we are working towards at Flashaid."
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