Education loan NPAs on the rise

Photo for representation

With nearly 9% of education loans being declared as non-performing assets (NPAs), public sector banks in India are now faced with the challenge of understanding the reasons for the defaults and taking corrective measures.

Data published by the Indian Banks’ Association (IBA) point towards an increasing trend of loan amounts being written off as NPAs in the education sector.

Looking at the stream-wise data on educational loans, it can be inferred that the nursing stream has churned out the most number of NPAs, followed by engineering.

Stream % of educational loans which become NPAs
Nursing courses 21.28
Engineering 9.76
Other professions 9.49
Medical 6.06
MBA 5.59


The CARE Ratings report states that rising tuition costs have made education loans a necessity. This, combined with lower salaries for nurses as evidenced by protests in several parts of the country, could be one of the factors leading to higher NPAs. Bottlenecks to going abroad for work, which is one of the key drivers in the nursing sector, could be another factor in rising NPAs.

Engineering, where nearly 10% of the loans become NPAs, has a bad placement record in recent years. Only about 46% of the students who graduated from government and private engineering colleges across the country in 2016-17 managed to get a job placement, according to data given in the Rajya Sabha in July 2018.

Regions with high default rates

A region-wise look at the data published in the report released by Care Ratingsin 2018 shows that Tamil Nadu and Kerala account for 36% of the outstanding education loans, closely followed by Maharashtra, Karnataka, Andhra Pradesh and Telangana. These States are characterised by high levels of literacy and willingness to pursue higher education, as observed by a high number of loans given for postgraduate courses in those States.

Why are PSB’S churning out NPAS?

The Care Ratings report says that public sector banks fund about 95% of the education loans in the country.

The loan amount of PSBs is often below ₹4 lakh, which implies that these loans do not require a collateral and are unsecured. The private sector banks and NBFCs on the other hand lend to students pursuing graduate studies and the loan amount for these is often over ₹5 lakh, which implies these loans are tied to a collateral and are secured.

This is one explanation for why PSBs have been increasingly churning out bad loans over the years. Among PSB’s, State Bank of India had the highest amount of NPAs from 2015-17. The amount of loans advanced by SBI declared as NPAs shows an increasing trend.

The issue has been raised in the Lok Sabha and the government has come up with measures to tackle rising NPAs. The government has modified the IBA model education loan scheme by including a buffer period of one year in addition to the course period before calculating commencement of repayment.

The modified scheme also accounts for spells of underemployment/unemployment during the period of the loan and extends repayment period so as to bring down the EMI.

The government also aims to provide guarantee for 75% of the defaulted amount through its Credit Guarantee Fund Scheme for Education loans.

The impact of the schemes as well as corrective measures however, can only be gauged through a change in the amount of NPAs in the coming years.


Still paying off student loans? Don’t hold out for forgiveness

Everyone with debt from student loans loves the idea of a forgiveness program. College is more expensive than it’s ever been. Thanks to excessively high-interest rates, even graduates who completed their studies would benefit from such a program. The reality, however, isn’t as good as it sounds. Student loan forgiveness programs have strict qualification requirements that most people can’t meet.

If you’ve stopped paying back your student loans because you heard about a forgiveness program, it’s time to reconsider and start making those payments.

Why student loan forgiveness programs are desirable

Student loan forgiveness programs exist to wipe away debt carried by some former students. Forgiveness programs are few and have tough qualifications. Unlike personal debt, it’s not easy to eliminate student loan debt without paying it off.

People want forgiveness programs because standard debt reduction strategies don’t apply to student loans. Consolidation loans, for example, are one of the best ways to eliminate debt and reduce interest rates, but student loan debt can’t be consolidated. There’s also no statute of limitations on student loan debt – it will follow you forever.

Forgiveness programs aren’t working as intended

The idea of forgiving student loans is wonderful, but unfortunately, it’s not working as planned.

The most well-known forgiveness program is the Public Service Loan Forgiveness program signed into law in 2007. This program was created to forgive the debts of public servants working for the government and non-profit organizations.

The goal of the PSLF program is to help borrowers with high levels of debt to pursue their careers without debt hanging over their heads. Unfortunately, this program has yet to make good on its promises. As of December 2018, only 206 applicants out of 41,000 have been approved for the PSLF program, which essentially means there’s a 99% rejection rate. The reason? Strict requirements that were rarely, if ever, communicated to borrowers.

To qualify for this program, borrowers must:

• Have a direct federal loan (not indirect)

• Be enrolled in an approved repayment plan (some repayment plans don’t qualify)

• Be employed in a government job or work for a 501(c)(3)

• Have made 120 payments on time (not necessarily consecutive) with one catch

Borrowers who regularly paid more than their required minimum payment may be out of luck due to the way those payments are processed in the system. Making higher payments puts borrowers in paid-ahead status, which pushes out the due date of their next payment, which then disqualifies that payment as an on-time payment in the eyes of PSLF.

In other words, say you have $300 due on January 10, and you pay on time, but you pay $500 instead. You’re put into paid-ahead status, and your next due date might be February 25. Say you pay another $500 on time by February 25. That payment is considered late because the previous payment pushed the due date out. Your next payment will be considered late as well because you’ll be put in paid-ahead status again.

Even though the lender changed your due date, you suffer the consequences. It doesn’t make sense and it’s not fair, but that’s the reality of this program.

With all of this coming to light, it’s clear something isn’t right. The problem is so apparent, according to MarketWatch, the American Federation of Teachers is launching an investigation into how student loan companies and the government may have sabotaged the program.

If you don’t qualify for the PSLF program, there’s one other program you might qualify for if your school closed.

Debt forgiveness for closed schools

In December 2018, the Department of Education (DOE) announced it will cancel $150 million in federal student loan debt. This forgiveness will be applied to some students whose schools closed before they could finish their program. The schools include:

• Charlotte School of Law

• Kaplan University

• DeVry University

• ITT Tech

• Everest College

• Brookstone College

• Brightwood College

Even though tens of thousands of students were affected, not everyone will qualify for this program. It’s unclear how the government will determine qualifications, but if you qualify, you’ll get a letter from the DOE.

If you didn’t attend one of the colleges listed above, and your college didn’t close before you were able to complete your degree, you definitely won’t qualify for this program.

Don’t wait for a forgiveness program

It’s clear that student loan forgiveness programs aren’t easy to qualify for, even when you think you meet the requirements. Don’t wait for a program you qualify for. Start repaying your loans to the best of your ability. Arrange to pay what you can afford and get your loan in good standing. If a better forgiveness program is created under a new administration in the future, being in good standing might help you qualify.


Yes, you still need to pay your student loans during the shutdown — but you could hit some snags

Despite the partial government shutdown, it should (mostly) be business as usual for students relying on federal student loans to afford college and borrowers repaying them.

The Department of Education remains fully funded, which means its contractors are still collecting student loan payments and the agency is still dispersing grants and federal student loans. Still, students, borrowers and schools may experience some hiccups for tasks that require information from another agency experiencing greater impacts from the shutdown, like the IRS.

“It’s the other departments that are running into some issues,” said Mark Kantrowitz, the publisher of and a financial aid expert.

Here’s what you need to know:

Borrowers repaying their student loans

Perhaps the most important thing that borrowers who are repaying their student loans should know is that the shutdown doesn’t affect their student loan bills.

Borrowers “should be operating as if everything is normal and there is no disruption at all,” said Justin Draeger, the president of the National Association of Financial Aid Administrators, a professional association for financial aid officers. In other words: “Don’t stop paying your loans,” he says.

Still, the shutdown could impact some borrowers trying to manage their debt. Borrowers who want to take advantage of the government’s income-driven repayment plans, which allow them to pay off their debt as a percentage of their income, need to show proof of income to their student loan servicer. They also need to recertify their income every year to stay on the plans.

The IRS, which has had many of its duties curtailed due to the shutdown, typically plays a role in both cases. Usually, borrowers will use the IRS data retrieval tool, which electronically transfers tax information into their income driven repayment plan application. Department of Education officials say the tool is operating as normal. The IRS did not respond immediately to a request for comment.

Borrowers applying for an income-driven repayment plan or re-certifying their income for an IDR plan should try to use the data retrieval tool, Kantrowitz said. If for some reason, they hit a snag — the tools don’t always run perfectly, he noted — under normal circumstances a borrower would download their tax transcript from the IRS and file a paper application.

But the tax transcript service is currently down. Officials at the Department of Education and the IRS told Politico the outage isn’t due to the shutdown and they expect the tool to be back up on January 14. In the meantime, while the shutdown persists, borrowers trying to get their tax information will likely struggle to find someone to take their calls at the IRS, Kantrowitz said.

Borrowers whose circumstances have changed since they last filed their tax return — information that won’t be reflected in the data retrieval tool — can use other documentation to prove their income, like pay stubs or a letter from their employer. But because those documents typically show net income and not gross income — which is available through tax documents and on which the calculation for income-driven repayment plans are usually based — borrowers’ loan payments could wind up being higher, Kantrowitz said.

Students applying for and receiving aid

The lack of availability of tax transcripts is also causing a snag for some students applying for aid, experts say. Roughly 30% of students who fill out the Free Application for Federal Student Aid, or FAFSA, are flagged for verification each year, a process that requires them to prove their income. Typically these students use a tax transcript to verify their income.

“Basically there’s a big bottleneck in the process at this point,” said David Baime, the senior vice president for government relations and policy analysis at the American Association of Community Colleges.

Baime said his organization has heard from its member schools “with great concern” about students unable to complete their FAFSA due to the tax transcript issue. Unfortunately, this issue is likely affecting students who need the funds the most — college officials say they observe that low-income students are more likely to be flagged for verification.

“The bottom line is that our colleges — and their students more importantly — are really in many places in a very difficult situation in terms of financing,” Baime said.

Again, the agencies say this delay isn’t related to the government shutdown, but is the result of scheduled maintenance.

Students who find themselves in this situation should contact the schools they’re working with to find out what they need to submit and when they need to submit it, Draeger said. In some cases, colleges are working with students to allow them to start the semester in the absence of financing until the issues are resolved, Baime said.

Questions on the FAFSA that require interactions with other agencies are also causing hiccups for some students and schools. In order to qualify for federal financial aid, male students need to register for the draft. The FAFSA typically performs a database match with the Selective Service Administration to make sure required students have registered, but right now that match is failing, Draeger said. Colleges are able to look students up individually to make sure they’re registered, he said.

Despite these challenges, for the most part, students shouldn’t see any effect on their financial aid during the shutdown, Draeger said.

“The Department [of Education] is funded, federal student aid dollars are flowing,” he said.

Government workers affected by the shutdown

Though most student loan borrowers aren’t impacted by the shutdown, those who belong to the group of government workers that are furloughed and not receiving a paycheck may be struggling to make their monthly payments.

The Department of Education advises borrowers for whom that’s the case to contact their student loan servicer to discuss their repayment options.

Adam Minsky, a Boston-based student loan lawyer, suggests government workers who are furloughed and on an income-driven plan apply to have their monthly payments reduced based on their changed circumstances. If possible, they should resist entering a forbearance — a temporary status that pauses payments, but where interest accrues.

Entering forbearance could wind up costing borrowers more in the long run both because interest capitalizes at the end of a forbearance period and because any time spent in forbearance delays progress towards Public Service Loan Forgiveness, which allows borrowers working in public service, including for the federal government, to have their loans forgiven after at least 10 years of payments.


Raghuram Rajan To Prannoy Roy On India’s 3 Biggest Economic Problems: Highlights

Raghuram Rajan To Prannoy Roy On India's 3 Biggest Economic Problems: HighlightsFormer Reserve Bank of India Governor Raghuram Rajan spoke to NDTV’s Prannoy Roy on a range of challenges in front of the Indian economy today. Dr Rajan said the three biggest problems for the Indian economy today are the agrarian distress, the ailing power sector and the crisis in the banking system. The 55-year-old economist, who was the first RBI governor to not seek a second term in nearly two decades after his tenure ended in 2016, said government interference in institutions could affect both global and domestic investment. Mr Rajan’s comments come amid a row between the central bank and the government over its autonomy.


Bulandshahr Violence Updates: Killed Cop’s Family Meets Yogi Adityanath

Bulandshahr Violence Updates: Killed Cop's Family Meets Yogi Adityanath

hree days after police inspector Subodh Kumar Singh was killed by a mob protesting cow slaughter in Uttar Pradesh’s Bulandshahr, Chief Minister Yogi Adityanath met with his family.

The police officer’s wife, two sons and sister travelled from Etah to the Chief Minister’s home in Lucknow for the meeting, which took place only after massive criticism after Yogi Adityanath did not mention the murder but focused more on cow slaughter at a security review meet.

Here are the Updates of the meeting of cop’s family with Uttar Pradesh Chief Minister:

Inspector General Ram Kumar said police requires evidence to act. “We can only act on evidence. We need to forensically tests. It is not clear who shot the police officer, who shot Sumit (the second man killed in mob violence),” the police officer told NDTV.

Three days after an UP inspector was murdered in mob frenzy over cow slaughter allegations, the main accused, Yogesh Raj, remains missing.
Yogesh Raj, a Bajrang Dal activist, has sent out a WhatsApp video proclaiming his innocence.
Three have been arrested. Four others arrested since the Monday incident are accused in a separate case of cow slaughter, which was filed by Yogesh.
Asked what message he would convey to the chief minister on Hindu-Muslim politics, the teen said: “Not just the chief minister, I would appeal to the entire country, please stop Hindu-Muslim violence. People get violent at the slightest provocation. People should understand and think, that they are bound by the law.”

Subodh Kumar Singh’s son put out a strong appeal against “mob culture” and “Hindu-Muslim” violence.
“Today my father has died. Tomorrow a mob could kill a top police officer. Then someday it will be a minister. Should mob-killing culture be allowed to go on like this? Absolutely not,” said Abhishek Singh, speaking to NDTV’s Ravish Kumar.
“I hope a day doesn’t come when we are killing each other within India. Then Pakistan, China or whoever…they would not have to do anything at all.”

Inspector Subodh Kumar Singh’s elder son Shrey Singh said, “The chief minister has assured us that he will remain with us in this difficult time and will ensure justice for us. He said strict action will be taken against those involved.”
Dec 06, 2018
13:29 (IST)

Uttar Pradesh State Minister Atul Garg who met the family of Subodh Kumar Singh said, “The chief minister has decided that the government will pay off Rs. 25-30 lakh loans taken by him for education and house.”
“A college will also be named after Singh to recognise and remember his courage,” he added.
Dec 06, 2018
12:51 (IST)

DGP OP Singh, who shared details of the meeting, at a media briefing informed about various relief measures that have been announced for the family of the slain official.
Mr Singh said, “It has already been said that family of the dead is being provided with a financial aid of 50 lakh rupees. Some bank loan was also taken by the family for the education of the children and the government will also take care of the same. In an informal way, we will be providing assistance to both the children of the dead for coaching. The wife of the deceased will also be provided with an extraordinary pension.”

PM Modi In Dharamshala As BJP Completes 1 Year In Himachal: Highlights

PM Modi In Dharamshala As BJP Completes 1 Year In Himachal: Highlights

PM Modi addressing a public rally-Jan Aabhar Rally-in Dharamshala.

New Delhi: 

Prime Minister Narendra Modi was in Dharamshala in Himachal Pradesh to mark a year of the BJP government in the state. PM Modi addressed a public rally-Jan Aabhar Rally-in Dharamshala. PM Modi also released a booklet on the achievements of the BJP government in Himachal Pradesh. Meanwhile, the opposition Congress observed December 27-the first anniversary of the BJP government in Himachal Pradesh-as “Nikamma Diwas”. The Congress demanded appropriate action against the BJP government by handing over documents of “scams” and “failures” of the Jai Ram Thakur government in Himachal Pradesh along with the “charge sheet” of allegations on inefficient government to the Governor.

The BJP had wrested power from the Congress in the Himachal Pradesh assembly elections last year.

Here are the HIGHLIGHTS of PM Modi’s visit to Dharamshala:

Dec 27, 2018
15:53 (IST)
Comparing the financial incentives extended by the previous United Progressive Alliance-led Congress government at the Centre with his present government, PM Modi said during the previous government, Himachal Pradesh used to get Rs. 21,000 crore. “When the BJP government came to power, I was given a chance to serve you all, and Himachal is being given Rs. 71,000 crore. It has only become possible because the government of India believes that each and every penny from this amount will be spent by the Himachal government judiciously for the state’s development,” news agency IANS quoted the prime minister.
Dec 27, 2018
14:45 (IST)
PM Modi also claimed that it was his BJP government that implemented the “One Rank One Pension” in “real” sense while the previous Congress government “misled” nation, news agency PTI reported.
Dec 27, 2018
14:43 (IST)
PM Modi alleged that Congress was misleading farmers in the name of loan waiver, news agency PTI reported.
Dec 27, 2018
14:20 (IST)

Earlier in Dharamshala today, PM Modi went through an exhibition put up by the BJP government in Himachal Pradesh to showcase the benefits of state and Centre-sponsored schemes for the general public.
Dec 27, 2018
14:18 (IST)
In Dharamshala, PM Modi said that projects worth Rs. 26,000 crore were underway in Himachal Pradesh.
Dec 27, 2018
14:13 (IST)

The opposition Congress in Himachal Pradesh submitted a “chargesheet” against the BJP government. As the BJP is celebrating a year of their government in Himachal Pradesh, Congress is observing the day as “Nikamma Diwas”.
Dec 27, 2018
14:01 (IST)
Congratulating Jai Ram Thakur on completing one year as chief minister, PM Modi said, “Himachal Pradesh is like my home. I worked here for several years for the party’s organisational work.”
Dec 27, 2018
13:41 (IST)

“Himachal is land of brave soldiers, ever ready for supreme sacrifice,” news agency PTI quoted PM Modi.
Dec 27, 2018
13:41 (IST)
“I have worked here, learnt a lot travelling through state. I feel happiness seeing those I worked with become front line leaders,” PM Modi said in Dharamshala.

Days After Bulandshahr Violence, Yogi Adityanath Meets PM Modi In Delhi

Days After Bulandshahr Violence, Yogi Adityanath Meets PM Modi In Delhi

New Delhi: Days after the Bulandshahr violence that led to the killing of two, including one policeman, Uttar Pradesh Chief Minister Yogi Adityanath met Prime Minister Narendra Modi at his official home in New Delhi on Thursday.

Even though what transpired between them was not officially communicated, sources in the Bharatiya Janata Party (BJP) said the Chief Minister invited PM Modi for the “Ardh-Kumbh” to be held in Allahabad next month.

Sources also said that CM Yogi briefed PM Modi about the recent violence in Bulandshahr in which Police Inspector Subodh Kumar Singh was killed by a mob.

Earlier yesterday, family members of the killed policeman met the CM Yogi in Lucknow. Yogi Adityanath announced a compensation of Rs. 50 lakh to the family and assured them justice in the case.

Yogi Adityanath has promised education loans and a government job to one of the family members of the Bulandshahr violence victim.


The policeman was hit by a stone and was then shot dead in a violence on December 3 that erupted after cow vigilantes blocked a main road alleging cow slaughter.


Students From Non-Reserved Category To Get More Financial Assistance In Gujarat

Students From Non-Reserved Category To Get More Financial Assistance In Gujarat

The schemes are offered by the Gujarat Unreserved Educational and Economical Development Corporation

Ahmedabad: The Gujarat government Tuesday widened benefits offered to students from the non-reserved category by raising annual income limits and providing more assistance in terms of educational loans. To avail benefits of schemes offered by the Gujarat Unreserved Educational and Economical Development Corporation, the annual income limit has been raised from Rs. 3 lakh to Rs4.5 lakh, Deputy Chief Minister Nitin Patel said.

The state-run corporation was set up last year to provide financial assistance to students from non-reserved categories, including help for tuition, coaching, food and competitive exam preparations.

It also helps students from unreserved category for education, employment, study abroad, and for self-employment.

Also, to avail up loans of up to Rs. 15 lakh to study abroad, the annual income limit of the student’s kin has been raised from Rs. 4.5 lakh to Rs. 6 lakh, he said.

The loan, which was earlier provided only to pursue medical education in foreign countries, will now be given to students to pursue any post-graduate course or higher programmes abroad, he added.

Mr Patel said the scope of Rs. 10-lakh loan provided to pursue medical and technical education in institutes in Gujarat has been further extended.

Now, students can avail loan facility even for admission to institutes outside Gujarat, Mr Patel said, adding that, additionally, students can avail educational loans to study in national institutions like IIM, IIT, NID, NIRMA, NIFT among others.

The corporation was set up last year to counter demands made by Patidar community under the leadership of Hardik Patel to provide assistance to 58 castes in the states that are not entitled to any reservation benefits.

The state government had last year announced several schemes to benefit students from this category by offering assistance in terms of jobs and education.