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With education loan disbursals reaching ₹28,699 crore in FY24, up 15%from the previous year, the Indianstudentloan segment is gaining strength. However, a critical challenge is now coming into sharp focus: shouldstudentloansbe classified as non-performing if the parent or guardian (co-borrower)defaultson a separate personal loan?
Currently, under RBIֱ IRAC norms,a borrowerֱ default impacts all associated loan accounts. This has unintended consequences for students, where an unrelatedfinancialstress onparentscan derail a young borrowerֱ education or future career plans. The government and the RBI are now reviewing whether educationloansdeserve 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 expected2.7% by September 2024,the sector shows resilience. With initiatives like the Pradhan Mantri Vidyalakshmi Scheme offering credit guarantees and subsidies, the move towards protectingstudentborrowers seems both timely and necessary.
Besides traditionalloans,innovative, loan-free solutionsare emerging to make education financing more accessible and resilient. Platforms likeFlashaidoffer alternative models such asSmartFee, 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 toparents‘financialhistories.
By offeringinsurance-backed, auto-EMI tuition payment solutionsinstead of credit, platforms like Flashaid empower students to pursue their education without the fear of credit rejections or the complications of inheritedfinancialsetbacks. 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, educationmustbe treated as an enabler, not as a liability tied to legacyfinancialchallenges. By offering flexible, loan-free solutions, we give students the freedom to invest in their futures without being impacted by their co-borrowers’financialhistories. The future of education financingmustbe resilient, fair, and focused on opportunities, and that’s the vision we are working towards at Flashaid.”
