Lenders & borrowers in hopeful anticipation
Lenders explain the current scenario and the new outlook:
Covid has changed the ways of the world and education is one sector that is adversely impacted by the outbreak of the pandemic and the ensuing pandemonium. It is still uncertain whether traditional models are changing for ever or it is just a temporary phase. Online just recently was the medium used by experienced professionals to upskill themselves, but today it is virtually the resort for mainstream educational institutions right from pre-primary classes.
With almost one third of the global population under a l ockdown, the pandemic has caused serious economic impact all across the world. With movement totally restrained educational institutions are compelled to run online classes with the help of technology. While online is not new in several developed countries, institutions in India have not adopted this medium on a vast scale. But now they are forced to do so. Prashant Bhonsle, CEO - Student Loans & head – Marketing at InCred, says Indian families see high quality education as the bridge to prosperity and they want their children to go to campuses abroad for getting the best education possible. “There is also a structural reason for that: the sheer number of bright students coming out of Indian schools and undergraduate colleges is huge,” says he.
He believes that it will exceedingly be difficult for Indian institutions to ramp up quickly to absorb all these talented students and give them quality infrastructure, pedagogy and diversified learning experience.
The r e a r e s t u d e n t s who a r e apprehensive about travelling abroad, especially to countries like Italy, France and USA. In these circumstances, it is possible that an online plus offline (on campus) models will emerge quickly even as efforts are on to find out a cure or a vaccine for the coronavirus.
Students are awaiting clarity on the visa processes, employment, immigration laws and impact of the pandemic on sectors of their interest. Arijit Sanyal, MD & CEO at HDFC Credila Financial Services, explains the changes in the sector: “Many universities are opting to either start the session with online classes or choosing for a late start to the semester, depending on the lifting of the lockdown. As the decisions are still being made by universities, students are evaluating their choices of preferred destinations basis the multiple criteria that impact their decisions.”
IMPACT ON DEMAND
As the impact of covid debilitating on all economies, students are generally hopeful and excited about taking admission offers and going ahead with their plans, but parents are more apprehensive about the well-being of their wards. Several colleges are not able to conduct exams, thereby forcing them to either reschedule the new sessions or defer it completely. Various universities are still trying hard to find innovative ways to ensure business as usual. Students planning to travel overseas are not able to do so because international travel has not yet resumed and there is uncertainty about visa laws and work permits.
Educational institutions in India too are also impacted by the lockdown and there have been delays in conducting examinations as also in conducting a d mis s i o n p r o c e d u r e s . P r a s h a n t Bhonsle says it is possible that there will be relaxations soon. Until there is clarity about the lockdown and about universities resuming their activities, the demand for education loans will take a dip,” says he.
Arijit Sanyal promotes online classes for the students: “Many universities are now proposing to start online classes and hybrid courses, and the fees payments for these courses would be due shortly. With cash crunch still prevailing and the impact on rupee depreciation caused by the pandemic, we expect higher number of people opting for education loans in the future.”
REPAYMENTS OF EXISTING LOANS
Education loan is a unique asset class, structurally different from other loan categories because it has an inbuilt moratorium option for students while they study. During this moratorium, they must only pay a simple interest (relatively smaller amount than EMI) instead of the full EMI. There are also a grace periods
provided as part of the conditions allowing students to continue to pay only simple interest for one year after they finish the course or get a job, whichever is earlier. Additional moratorium given by the government has also helped these students and parents to manage their finances better.
Arijit Sanyal says while it is still too early to assess the impact of covid on the repayments of existing education loans, as of now HDFC Credila has not seen any stress or impact of the repayments of existing educations loans.
For InCred only 15% students and parents have requested for the special moratorium offered by RBI. Students who have completed the studies are servicing EMIs after getting jobs as most students seem to have their jobs intact and confident that they will continue to have their jobs.
Prashant Bhonsle predicts better opportunity for the science, technology, engineering and mathematics (STEM) students: “We are seeing that students who studied STEM courses and going abroad will continue to be in high demand as the supply of these workforce is much lesser than the acute demand for these professionals. Now, with the accelerating technology revolution, STEM students may have better opportunities than before,” he says.
There will be potential increase in STEM careers as the pandemic has led to rise in digital initiatives.
IMPACTED SEGMENTS
Students planning to go abroad for higher studies are impacted also because of the uncertainties about the start dates of the Fall 2020 session. Yet, many students, especially those who got the admissions from universities earlier, are hopeful and are applying for loans, according to Prashant Bhonsle. He adds: “Demand for online courses have gone up exponentially for the short term and there is increase in demand for vocational courses.”
Arijit Sanyal feels in the current scenario it is difficult to assess the impacted segments. He says universities colleges and relevant law-making bodies are still evaluating the situation and HDFC Credila is closely watching the market scenario and gauging the impact on all segments as the decisions unfold in the coming weeks.
OVERCOMING CHALLENGES
HDFC Credila has kept its operations open and has been encouraging aspiring students to apply online and continue the process of loan evaluation. The process has been made convenient and the company is encouraging students to use the time under lockdown to put together their papers and be ready with the finance before the admissions and visa process restarts. This will keep them better prepared and avoid last minute hassles and running around.
The company has also adapted its business operations to enable employees to work from home during the period of the lockdown. It is also advising its customers to use online and digital platforms to carry out transactions and it has enabled application process through its online platforms.
Arijit Sanyal says the company’s r e l a t i o n s h i p managers h e l p the applicants in the process of submitting their applications using telephone and online conversations. “We strongly believe that students must use this time to evaluate their financial needs for further education and be well prepared with their loan sanctions when the admission process resumes,” says he.
InCred is keeping its customers informed about l a t e s t r e g ul a t or y guidelines pertaining to financial services. It has conducted webinars on education loans to help students understand the nitty-gritty of foreign education. Prashant Bhonsle says the company has sent out communications to all borrowers regarding the details about their loan status and things they should know. The company has also set up e-helplines and appointed dedicated relationship managers for education loans.
FUTURE PROSPECTS
InCred offers l oans to educational institutions like schools, unsecured personal loans and loans to MSMEs. It will continue its focus on these products as well.
HDFC Credila is reviewing its services, processes and exploring ways to go more digital. Arijit Sanyal says the company feels the evaluation criteria may have to be reassessed for some applications in the light of new norms of admission, changed course structure, etc. Services like accepting online applications and educating customers about online platforms for ease of transactions are among some of the initiatives undertaken by company.
Companies like HDFC Credila and InCred are likely to focus on providing add on services like assistance in forex transactions and securing health and travel insurance for its student customers. They are also inviting experts from across the world to guide students through webinar platforms on the admission processes, new opportunities, relevant news and other information that can help them to make the right decisions.