The discussion with bank managers and consultants the major Challenges of Higher Education Finance have been identified as follows:

Growth of HE Finance: Much of the progress especially in Higher education has been credited to various public institutions. The private education market in India is merely 5% although in terms of value it is estimated to be worth $40 billion in 2008 and will increase to $68 billion by 2012. India has increased its public expenditure on higher education from Rs.140 million in the first Five-Year plan to Rs. 15,000 million in the eighth Five-Year. There is an increment in higher education budget by 34% to US$2.9 billion for 2011-12. India currently spends around Rs.46, 200 crore on higher education. The government has set a target of achieving 30% GER (gross enrollment ratio) by 2020. Discussion with the bank managers revealed that growth in HE finance has been due to active policies of Government of India. They also added that banks are playing active role in promoting HE and its accessibility. Many authors also show growth pattern of public funding for HE (Kapoor, 2011; Dukkipati, 2010; Prakash, 2007; Kaul, 2006).

Reasons for borrowing: The primary reason for borrowing is the rapid and persistent rise in tuition fees since the last few years. Scholarships, grants etc. are not available to all the students. So, most of them have to rely on finance from banks for pursuing the courses of their own choice. Financing HE helps the needy and deserving students to complete their studies without asking for much monetary support from their parents. It also helps them to study in good institutes and getting admission in highly paying professional courses (Johnstone, 2006; Vossensteyn 2004; Woodhall, 2004).

Bank policy on HE loan: The discussion held with the bank managers and professionals involved in designing the policy on HE finance, reveals that they prepare guidelines for HE loan policy, conduct entry & exit interview of the students borrowers, charge marginal lending rates and, consider rating and type of the institute(government/private) before sanctioning loan. Despite these investigations they feel that extending credit without collateral is quite unsafe. (Sahin , 2004; Voorhees, 2004; Salmi 2003; Tilak, 1992; Woodhall, 1987)

Credit Worthiness: The discussion with the bank managers revealed that they sanction the HE loan after checking; credit worthiness, likely risk of default, reputation of the institute, loan duration, residential proof, courses opted, previous track record of the borrower and the financial condition of co-signatories to the loan deed. Though these points are taken care of before sanctioning loan but still some of the bank managers, especially in private sector, are reluctant to sanction HE loan. They say that students mostly borrow for pursuing education in abroad. This results in brain drain and loan recovery from such students too becomes a challenge for banks. Some have also developed policy measures to handle issues relating to creditworthiness and default risk (Brown et al., 2011; Gross et al., 2009; Johnstone and Marcucci, 2009; Volkwein and Szelest 1995; Tilak 1992; Greene 1989)

Subsidization of HE loan: During the discussion with the bank managers it is found that subsidies help needy students to complete their studies. Some of the managers favor that education loan should be treated like any consumer loan by making them unsubsidized and private. They also added that HE loan should be limited to advanced professional courses only such as medicine, management, engineering and law so that the recovery for banks becomes easy because student borrowers pursuing these courses, on completion of their studies will get good paying jobs (Kaul, 2006; Sahin, 2004; Penalosa and Walde 2000; Chapman, 1997; Johnson 1984).

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.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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