Financing HE is liked with the job opportunities. In many countries it failed and worked well. In Hong Kong this system was launched in 1969 and operates efficiently (Bray, 1986). Many countries adopted policies to face the challenges of student loans. Weifang (1991) classified the challenges in Chinese higher education system and reformed it. Now the costs of higher education are shared by and recovered partially from the beneficiaries, and student. Loan programs have been set up for students from needy families. Shantakumar (1992) focused on: full employment, high private returns to higher education, and an efficient banking system and financial infrastructure for higher education in Singapore.

Tilak (1992) highlighted the declining public budgets for education on the one hand, and the need for more financial resources for HE in developing countries. Woodhall (1992) concluded that student loans are feasible, and can promote wider cost-sharing and help to generate additional resources for higher education, in Asia and English-speaking African countries. Tilak (1993) revealed that financing HE is a complicated problem due to theoretical and practical issues. Also the needs of the HE system have been growing rapidly but funding for higher education is insufficient, and sectors of mass education are starved of even bare needs. Johnstone (2006) and Mastrosov (2007) focused on risk due to the inevitable need of HE cost sharing. Francis (2008) focused on loan repayment issues and student bankruptcy/defaults. The main challenges faced by Indian managers are supported by literature as mentioned below in Table 1.

Table 1 : Literature survey on challenges for financing higher education

Author (s) Challenges of Higher Education Finance
Kapoor (2011); Dukkipati (2010); Prakash (2007); Kaul (2006) Growth of HE Finance•    Need to increase public funding for HE•    Use of private investment to raise status of HE•    Enhancing Access Equity and quality offer more self-financing courses to be self-reliant•    Cost recovery becomes difficult for academic institutions•    Great need for financial innovation for HE sector•    Need to develop a strong system of student loan financing as well as fiscal tax exemption/credits in case of loans
Oosterbeek & Broek, (2009); Booij, et al. (2008); Johnstone, (2006); Vossensteyn (2004); Reasons for borrowing:•    To pay for hiked tuition expenses•    Hiked Cost of education being increasingly shifted from Government to parents & students•    Lack of sufficient Parental Financial Support•    Highly paying courses•    Entering into reputed academic institutes•    Earnings prospects influence borrowing decisions

•    Positive association between knowledge about loan conditions and borrowing

Serena,( 2010); Voorhees, (2004); Salmi (2003); Tilak, (1992); Woodhall, (1987) Bank policy on HE loan:•    Need to set up centralized bank i.e. education development bank•    Subsidization makes loan returns less attractive for banks•    No well developed mechanism to fix loan amount due to different fee structures for different courses•    Transparent eligibility criteria to ensure that any subsidy element be targeted to the most deserving students (academically and socially)•    High default rates
Brown, et al. (2011); Gross, et al. (2009); Johnstone & Marcucci, (2009); Woodhall, (2004); Tilak (1992); Credit worthiness:•    Most of the student loan schemes treat the loans as expenditures rather than as assets•    Need to Tap Private Capital for financing HE•    Student loans are too frequently becoming NPA•    High default rate & high administrative costs of recovery•    Students from less wealthy backgrounds are less likely to finance education through loans due to debt aversion•    Students’ employment and income after college

•    How to define default and what default signifies: What is an acceptable rate of default? What factors contribute to default?

•    No reimbursed by the Government for the defaults in case of subsidized/unsubsidized student loans

Kaul, (2006); Sahin, (2004) Penalosa &Walde (2000); Chapman, (1997); Johnson (1984); Subsidization of HE loan;•    Makes education loan policy less attractive for private & foreign banks•    Subsidization reduces rates of return for public sector banks even•    Un-subsidization renders the student loans less effective for really needy & deserving students•    Private lending institutions are generally reluctant to lend without suitable collateral, hence Govt. subsidies are necessarily required to support the needy students•    Subsidy can actually decrease educational efficiency, if the government•    Subsidizes students without making the subsidy contingent on their ability

•    Subsidization of the interest rate for students should be based on his and his family income

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

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