Encouraging young learners to choose education loans

The ultimate goal of every student is to build a successful career. Higher education accelerates the path to success by honing the skills, developing expert knowledge, and chiselling a better personality of the aspirants to be career-ready. Hence, it has always been considered the natural next step in a student's life, guaranteed to cement a stable future for them. Today, students seek financial independence and hence, choose education loans over parents' financial help or family savings to finance their higher studies.

"Financial independence is the ability to live from the income of your own personal resources." — Jim Rohn, entrepreneur, author and motivational speaker.

In its most basic sense, financial independence means being self-reliant and paying your bills. Simply put, it means having enough assets to pay for one's expenses without depending on anyone else. By the time students reach the age where they are eligible for an education loan, they are often old enough to understand the finer nuances of financial independence and what this actually entails for their financial health. However, this independence comes with its own set of responsibilities, as it is imperative to repay the education loan responsibly.

Nevertheless, education loan is gaining massive popularity among young students, as it is a prudent choice amid the rising cost of higher education. As per the All India Survey on Higher Education, an increase in enrollment for higher studies coupled with education inflation has led to a surge in demand for student loans.

Here's what encourages young learners to choose education loans to be financially independent.

Capability-based lending: There are various pre-set parameters used by lenders to evaluate the repayment capabilities of individuals. Many new-age lenders prioritise students' employability potential over the co-borrower's financial background. In order to determine a student's employability potential, financial institutions evaluate various elements such as past academic performance, entrance test scores, the pedigree of the university or institute they studied at, along with other parameters. This helps them decide on the student's future repayment capacity.

Judicious decisions: Shouldering the responsibility of repaying a loan instils financially prudent habits early on in their lives. They tend to control their frivolous expenses in order to maintain liquidity, aside from maintaining a corpus for emergencies. Hence, students adopt healthy financial habits from an early age.

Build credit scores: Students are at a crucial juncture in life and will require other financial products. Post-completion of the student's academic journey, they may require additional finances in the form of a car loan, home loan or credit card. By repaying the education loan responsibly, students can build a healthy credit score, increasing their chances of acquiring future loans at better terms.

Access to quality education: Many students are sometimes forced to give up on their dreams of further studies – be it in India or abroad - due to a lack of funds. Rising inflation and cost of living further add to monetary pressures. An education loan covers the holistic cost of education, including airfare, tuition fees, accommodation costs, study material costs, living expenses, cost of learning devices, and other education-related expenses, thereby ensuring that they are not forced to compromise on their aspirations of availing superior quality education.

Preserve family savings: With easy access to education loans, students and their families need not dig into their family savings, sell family gold, liquidate assets, or close FDs. Instead, these savings can immensely help in case of a health or other emergency.

Career boost: Access to superior-quality education at a premier institute opens up a multitude of possibilities for students. They have a chance to pursue the profession of their choice and have access to avenues to work for some of the best brands in the world or even become successful entrepreneurs.

The easy availability of education financing solutions allows easy access to quality education. New-age lenders have geared up to bridge the gap between the aspirants and their academic aspirations to ensure deserving students get the education loans to finance their higher education. With the help of technology and insightful data, they are best poised to create hyper-personalised solutions to fit every applicant. The education loan will earn students the very coveted 'self-made' badge.

(The author is the Chief Business Officer – Education Loans, Avanse Financial Services )