Degrees on credit: Will students pay for their education in shares?
India's higher education sector has also grown. The All India Survey on Higher Education (AISHE) report of 2021–22 found a jump in student enrolment from 3.42 crore in 2014–15 to 4.33 crore in 2021–22. Private universities, too, are booming. Their numbers climbed from 276 in 2015–16 to 473 in 2021–22, as per the Economic Survey report of 2023–24. But this growth comes with a caveat: cost. A three-year undergraduate degree in Political Science at Ashoka University, for instance, costs 36 lakh.
Private universities are booming; their numbers climbed from 276 in 2015–16 to 473 in 2021–22. Credit: Vaani Gupta
advertisementTHE LOAN TRAPGone are the days when a parent's savings alone could cover higher education costs. Today, it is found that families take out large loans, they borrow from relatives, or are compelled to sell property in the hope that a prestigious degree for their children would lead to a lucrative career option. According to RBI, the outstanding student education loan amount was pegged at Rs 1.31 lakh crore as of November 2024. A 17% increase over the previous year. The Indian Banks' Association also noted that loan disbursements grew at a 10% CAGR from 2015 to 2023, crossing 25,000 crore annually.Unfortunately, repayment is a concern. Education loan NPAs (non-performing assets) stood at 7.61% in FY20, indicating that many borrowers struggle to pay back what they owe.ALTERNATE MODELSMany countries are exploring alternative financing models, such as crowdfunded education investment, skills-based repayment plans, equity-based education financing, human Capital Contracts (HCCs), and even Income-Share Agreements (ISAs). This is where students commit a fixed percentage of their future income instead of repaying a traditional loan.'In 2019, a Forbes study revisited Milton Friedman's 1955 idea of Income-Share Agreements,' explains Dr. Girish Jain, Professor of Finance and Chairperson of Admissions at BIMTECH, Greater Noida. He points to Purdue University's 'Back a Boiler' program, which launched in 2016, where one engineering graduate chose an ISA over a conventional loan, agreeing to pay 8% of his salary for 10 years, capped at a reasonable limit.THE NEP OPPORTUNITYadvertisementDr. Jain believes that for these models to work in India, financial literacy must be embedded in higher education alongside scholarships, boot-camps, and government support. The National Education Policy (NEP) 2020, which targets 50% gross enrolment in higher education by 2035, could become the framework for these financing ideas.India Inc. could also play a game-changing role. Dr. Jain shares a compelling vision: 'Imagine TCS funds 1,000 tech students each year through income-linked repayment plans. Graduates pay back 5–7% of their salaries for eight years, but only if they're employed. It's not charity—it's a calculated bet on talent. CSR becomes smarter — aligning with ESG goals and workforce needs.'Even HDFC could fund management students, who repay through a portion of their bonuses. Risky? Perhaps. But revolutionary? Definitely.
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