Indian students who returned home from war-ravaged Ukraine are a worried lot. Not only have their studies been disrupted, but those with education loans may also face the burden of paying penalties on repayments if their graduation and job placements are delayed.
Moneycontrol reached out to State Bank of India, Bank of Baroda, Axis Bank, Canara Bank, Federal Bank, Union Bank of India, HDFC Credila and other lenders for their views on the matter, but did not immediately get a response from them.
Will lenders give students a moratorium?
A retail banker who spoke on condition of anonymity said the bank is “assessing the impact of this crisis on repayment of education loans”.
They might restructure the loan, extend the tenure, or provide a longer loan moratorium on a case-by-case basis. The banker said so far, the Indian Banks’ Association hasn’t announced any formal financial support for students who had taken education loans and returned from Ukraine.
This may mean that if banks and non-banking finance companies extend any help, it would be on a case-by-case basis, and would depend on the lender.
How are lenders supporting students who have returned from Ukraine in this crisis?
Amit Gainda, MD and CEO of Avanse Financial Services, which has given out education loans for studying in Ukraine, said his company will be reaching out to students who have returned from there.
“We are giving them time to settle down and come out of the stress that they faced,” said Gainda. “We might restructure the loans as per regulatory guidelines.”
Gainda said Avanse is preparing counselling sessions for borrowers who need guidance in this crisis.
GyanDhan, an NBFC who doesn’t have any students taken an education loan for studying in Ukraine, is coming forward. Its co-founder and chief executive officer Ankit Mehra tells us that they will assist impacted student borrowers to restructure their loans, by coordinating with its partner lenders. For this, GyanDhan might charge a small fee.
Do student loan agreements have a provision for relief when education is disrupted by war?
Student loan agreements do not have provisions for relief due to war, unlike life insurance policies.
Officials said that during unusual times of crisis, banks may be willing to negotiate with borrowers. Student borrowers should visit their bank and seek help from senior officials.
“We are committed to helping students who have been distressed by the Ukraine crisis. We will carefully review the applicants seeking financial aid and extend it to cases which look genuine,” said Mehra.
What are the consequences of defaulting on education loan repayments?
“If there’s a default, it will hit the borrower’s credit score hard and any collateral could be forfeited,” said Adhil Shetty, CEO of BankBazaar. Also, if there’s a delay in repayment, interest costs will increase.
So far, anecdotal evidence suggests that due to the low fees for medical colleges in Ukraine, many students have not taken education loans. For the few students that have taken education loans, repaying them is crucial, otherwise it could affect their credit score.
A small comfort in education loans is that it automatically comes with a moratorium of 6-12 months after the course is completed. Repayment of a loan starts after the moratorium period. In the current situation, many students are yet to complete their courses.
“It may be premature to talk about loan repayment now. Once normalcy returns in Ukraine, students may resume their courses in hybrid mode or online, get their qualifications and can start repayment thereafter,” said Shetty.
Shetty’s advice: Wait a little longer and see how the Russia-Ukraine crisis unfolds. Wait for some sort of normalcy and see how the universities respond. However, interest may add up if there are delays and there may not be a way around this at the moment.
Should students who are getting admission in another college make the switch?
That’s more a career choice than loan mathematics. Assuming that the choice of the new college is good, the next question is: Can the loan be transferred?
According to a retail banker who spoke to Moneycontrol on condition of anonymity, lenders typically allow the transfer of education loans, considering the merit of the students. Ukraine has been known for good medical courses at reasonable fees. That may not be the case elsewhere.
Shetty urges students to do the loan math to see how much more they need to borrow and how much the equated monthly instalments (EMIs) would add up to when the time comes for repayment.Students must remain confident that once their careers get back on track, they will be able to repay their dues in full.