Business Today - - CONTENTS - @ EKu­marSharma

Man­age­ment graduates ac­count for a small per­cent­age, 5-10 per cent, of hires for some big sec­tors, but more than dou­ble that in terms of value

LIFE AF­TER THE evanes­cent time within the B-school cam­pus can be tough if there is a huge stu­dent loan to clear. Sadly, this is the case with quite a few stu­dents grad­u­at­ing from elite busi­ness schools of In­dia. One can ar­gue that a premier ed­u­ca­tion would not be easy on the purse. But then, not all who grad­u­ate take off equally. For ex­am­ple, the me­dian salary at IIM-Ahmed­abad in 2018 was ` 18 lakh (fixed yearly cash com­po­nent). It means half the class got com­pen­sa­tion pack­ages less than this amount. The fee at the in­sti­tute is cur­rently

` 22 lakh (up by a cou­ple of lakhs in the last cou­ple of years). About 60 per cent of the stu­dents take loans of over ` 22 lakh.

One of the stu­dents who took such a loan says it is usu­ally a 15-year loan but stu­dents pre­fer to pay it in 3-10 years as there isn’t any pre­pay­ment charge. The in­ter­est rates are at MCLR (Mar­ginal Cost of Funds Based Lend­ing Rate), which is the low­est avail­able rate in the mar­ket. There’s also a six-month mo­ra­to­rium on re­pay­ment af­ter the com­ple­tion of the course. So, for a loan of ` 22 lakh, the EMI is around ` 26,000 per month, but for those who want to re­pay in less than 10 years, the EMI can be ` 36,000 or more. This can prove to be a bur­den if the monthly salary level (me­dian level) is around ` 1.5 lakh.

The bor­rower also has to pay on time as any de­lay will af­fect the credit score, and thus the fu­ture cred­it­tak­ing ca­pac­ity. How­ever, as one of the stu­dents, who did not wish to be iden­ti­fied, said, the con­cern was not re­ally re­gard­ing the re­pay­ment abil­ity but that the risk-tak­ing abil­ity gets cur­tailed. “We tend to be­come risk-averse (if there is a loan to re­pay), which is one rea­son why we don’t want to ex­per­i­ment. This is also the rea­son why de­spite in­crease in stu­dent in­take, al­most no­body goes into aca­demics or takes up a doc­toral pro­gramme or opts to be­come an artist or ven­ture deeply into the so­cial sec­tor or go on an en­trepreneurial jour­ney, which may be a big­ger loss,” the stu­dent says.

What is the way out? One op­tion could be a com­plete re-think on the fees and its struc­ture. An­other way could be to open up other ar­eas of re­source mo­bil­i­sa­tion for the schools. The in­sti­tute it­self can also in­ter­vene, which is what Amit Karna, Chair­per­son-place­ments, at IIM-Ahmed­abad says his in­sti­tute has done over the past cou­ple of years. “There is a sys­tem wherein for stu­dents who are not able to af­ford the fees, the in­sti­tute pays the in­ter­est on the bank loan un­til the com­ple­tion of the pro­gramme,” says Karna. That apart, he says, in this same time pe­riod, the in­sti­tute has “in­tro­duced an ad­mis­sion de­fer­ment pol­icy for fresh­ers (a small per­cent­age of them) to gain in­dus­try ex­pe­ri­ence for up to two years be­fore join­ing the pro­gramme. Some stu­dents have also opted for this.” The in­sti­tute may un­der­line work ex­pe­ri­ence but to some stu­dents, it could well be a chance to build a fi­nan­cial kitty be­fore head­ing to the class­room.

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