The numbers alone are cause for concern!

According to findings presented before Parliament’s Standing Committee on Education, the number of active education loan accounts declined from approximately 23.36 lakh in 2014 to 20.63 lakh in 2025. During the same period, however, the total outstanding education loan amount surged from ₹52,327 crore to ₹1,37,474 crore, an increase of nearly 2.6 times.

The conclusion is inescapable: fewer students are accessing loans, but those who do are taking on significantly larger debt burdens.

In a country where tuition fees, particularly in private professional institutions, have steadily escalated, this trend does not signal improved efficiency. It signals narrowing access and growing financial strain.

Even more troubling is the estimate that barely 4% of students in higher education receive bank-funded education loans. In practical terms, this means that 96 out of every 100 students must rely on family savings, informal borrowing, or personal sacrifice to finance their studies.

For a country aspiring to be a global knowledge economy, that is not merely a gap. It is a systemic failure.

A Commercial Lens on a Public Good

India’s education loan framework remains predominantly bank-led and risk-averse. Loan approval often depends on collateral, guarantors, and parental creditworthiness. Interest frequently begins accruing during the study period. Repayment timelines are fixed, irrespective of employment outcomes.

Such conditions might be appropriate for commercial lending. They are ill-suited to financing human capital.

The government often highlights rising loan disbursements: ₹17,668 crore in 2022–23, compared with ₹11,448 crore in 2020–21. But higher disbursement values combined with declining borrower numbers suggest a simple reality: students are borrowing more because education costs more, not because access has widened.

Inflation in loan size is not included. It is a cost transfer.

Global Comparisons Expose the Policy Gap

Other countries have adopted models that align repayment with capacity and treat education as a long-term national investment.

In Australia, the Higher Education Loan Program (HELP) allows students to defer repayment until their income exceeds a defined threshold. Repayments adjust according to earnings. In 2025, Australia legislated a 20% reduction in student loan debt for millions of borrowers while raising repayment thresholds. It is an explicit acknowledgment of financial stress among graduates.

In Germany, the emphasis is even more structural. Public universities charge minimal or no tuition fees. Government-backed support reduces reliance on high-interest borrowing. The focus is not on expanding loan books but on limiting the need for debt altogether.

India’s Gross Enrolment Ratio in higher education remains around 26–28%, below the global average. Yet even within this limited access framework, loan penetration remains minimal. Expansion without affordability is not reform. It is deferred inequality.

The Cost Beyond Numbers

The consequences of this financing model extend beyond balance sheets:

• Students abandon admission offers due to delayed or denied loan approvals.
• Families mortgage land or liquidate savings to meet collateral requirements.
• Graduates accept lower-paying jobs out of repayment anxiety rather than career fit.
• Financial stress compounds mental health challenges in an already competitive labour market.

Education, ideally a vehicle of mobility, risks becoming a multiplier of economic precarity.

Reform Cannot Be Cosmetic

India does not lack schemes. It lacks structural redesign.

A credible reform agenda would include:

• Income-contingent repayment systems, linked to verified earnings.
• Expanded sovereign guarantees, reducing collateral dependence.
• Zero-interest accrual during study and moratorium periods.
• Greater public investment in affordable institutions, reducing reliance on private fee inflation.
• Transparent data on loan approvals, rejections, and socioeconomic distribution.

Without such measures, the promise of education as an equalizer will remain rhetorical.

A Question of Political Will

India stands at a demographic inflection point. The coming decades will determine whether its youth become an engine of growth or a generation constrained by avoidable financial burdens.

If education is truly central to national development, financing it cannot be treated as a peripheral banking issue. It must be recognized as a matter of economic strategy and social justice.

The choice before policymakers is clear: continue to celebrate enrollment statistics while limiting financial access, or build a system where ambition is not filtered by collateral.

Until then, India’s education loan regime will remain what it increasingly appears to be, not a bridge to opportunity, but a narrow gate through which only the financially secure may pass.

(The writer is Head - Strategic Alliances, URBAN MONEY, a seasoned Banker and Mortgage Specialist. He writes about financial policy, digital services, and public infrastructure in India.)