How Do Students Fund their Higher Education in India? A Study of Loan Financing in Engineering Education

Abstract

Funding policies in higher education have undergone significant changes over the years in many countries, including in India. Higher education which used to be heavily subsidised by the state, is increasingly becoming dependent on cost recovery measures such as student fee and student loans, both of which have become very popular methods in India since the beginning of the 1990s. Though state subsidises higher education through general and specific subsidies, students incur huge expenditure on engineering education in India. How do the students finance their education? Using the data collected from about 7,000 students studying in 40 engineering institutions in four states in India, it is attempted in the present paper to briefly analyse the pattern of distribution of scholarships among students and, secondly to examine the determinants of student loans, and also the determinants of the amount of student loan one receives in engineering education in India with the help of logit and OLS equations. The robust estimates suggest that gender, household economic conditions (household income, father’s occupation) and costs of education exercise considerable influence on opting for and/or receiving student loans from banks, and social background, parental occupation and ownership of assets like house and land, are important factors in explaining the amount of loan received by students.