In a country where education is seen as a powerful ladder to upward mobility, the role of education financing has never been more crucial. With rising tuition costs and increasing enrolment rates, higher education in India is rapidly transforming from a personal aspiration into a significant financial investment. In this exclusive interview, Vivek Kumar Baranwal, Chief Business Officer – Education Loans Domestic Business, Avanse Financial Services, Mumbai delves into the shifting dynamics of India’s education loan ecosystem. He discusses the growing awareness among students, the evolving expectations from lenders, and the innovative, student-focused solutions that are redefining how Indian families approach education financing. From practical advice to systemic insights, Baranwal highlights how inclusive, flexible financial products are enabling today’s learners to pursue academic and professional goals with confidence.
How has the demand for higher education loans in India evolved in recent years?
India’s deep-rooted cultural belief in education as a means to upward mobility continues to drive aspirations across households. Today, higher education is not just seen as an academic milestone but as a long-term investment in personal and professional growth. Students are playing a far more active role in this journey—researching institutions, selecting career-oriented courses, and making informed decisions about financing. With families encouraging this independence, there is a clear and sustained rise in demand for education financing solutions that enable students to pursue their goals on their own terms.
This growing interest is also reflected in the broader trends within India’s education landscape. With one of the world’s youngest populations, the country continues to experience a rise in higher education enrolments. The market is projected to expand at a CAGR of 11–13% between FY24 and FY29. The cost of attending college is rising – by FY29, the average annual tuition fee per student is expected to reach ₹1,36,000–₹1,38,000, while the overall cost of attendance (including tuition fees, boarding fees of the university or college) is projected to reach ₹1,68,000–₹1,70,000.
Education loans have increasingly emerged as a key financial enabler for students pursuing higher education in India. The domestic higher education loan portfolio in India is projected to surpass ₹2 trillion by FY29, growing at an estimated CAGR of 20% between FY23 and FY29. This growth is being shaped in part by student-focused non-banking financial companies (NBFCs) such as Avanse Financial Services, which have introduced flexible, transparent, and tailored loan products that align with students’ academic aspirations. With this evolving ecosystem, education loans are emerging as a preferred financing option for ambitious learners across the country.
What challenges do students face in securing higher education loans, and how can they overcome them?
For many students, applying for a higher education loan is their first step into the formal credit system. Since students are first-time borrowers, they may not be familiar with the nuances of the education loan. Therefore, extensive research to understand various aspects such as EMIs, tenure, application process, eligibility criteria, documents required and repayment options, is extremely crucial.
Furthermore, the most common mistake that students make when shortlisting the education loan provider is considering limited parameters such as the interest rates. They should understand that several other parameters need to be kept in mind, including domain expertise of the lender, costs covered, features & benefits, customer service, repayment options, time taken to sanction the student loan, customer experience and more during evaluating and finalising the loan partner.
Another challenge might be the absence of a credit history, which can make the assessment process feel unfamiliar. Students may not fully understand how lenders evaluate loan applications in such cases, especially when there’s no existing credit score. New-age education financing has implemented a unique way of assessing student profiles for education loans. Rather than only depending on the co-borrowers’ financial background, student-centric financial institutions evaluate the student thoroughly. As a part of this approach, they assess students’ past academic performance, entrance exam scores, pedigree of the university & course, continuity in education, and more such focused parameters to generate the future employability potential of the student.
After shortlisting the financier, creating a document checklist and arranging all the documents in advance helps simplify the process. This proactive approach reduces back-and-forth and allows students to focus on their admission milestones. Students must also know their financial requirements, such as whether they want to opt for a secured (with collateral) or an unsecured (without collateral) loan and the loan amount. At Avanse, we offer online tools such as the Education Loan EMI Calculator to check the suitable EMIs, College Course Expense Calculator to know potential college expenses and Education Loan Eligibility Calculator to understand the approximate student loan amount a student is eligible to borrow.
What are the key factors students should consider when planning for a higher education loan in India?
Education loans have become an important enabler for students pursuing higher education in India. They provide access to quality academic opportunities while allowing families to manage their finances more effectively. However, to make the most of this opportunity, students must plan carefully and consider a few key factors before applying for a loan.
Understand the complete cost of education: Students should evaluate all academic-related expenses—tuition fees, accommodation, books, learning devices, and other education-related expenses. Education-focused lenders like Avanse offer holistic financing that covers these essential components so students can entirely focus on their studies instead of stressing about the various costs involved.
Stay prepared with documentation and apply early: Keeping academic records, admission letters, identity proof, and co-borrower documents ready helps streamline the process. Applying soon after admission confirmation ensures timely disbursement before university fee deadlines.
Understand how loans are evaluated: Avanse uses a student-centric approach—assessing academic performance, entrance scores, course quality, and future career prospects, rather than relying solely on the co-borrower’s financial background. This ensures the student’s potential plays a central role in the evaluation process.
Plan for repayment from the beginning: Although full repayments are deferred during the course through a grace period, this is not an interest-free phase. Interest continues to accrue during this time. Students are encouraged to make small contributions in the form of simple or partial interest payments during their studies. This helps ease future repayment and builds responsible financial habits early on. Moreover, it is crucial to create an emergency corpus and spend judiciously to continue with the repayment even during any challenging situations.
By approaching the process with clarity and preparation, students can make confident, informed choices and access the financial support they need to pursue higher education in India.
What factors do lenders evaluate when assessing a loan applicant?
When evaluating an education loan application, lenders focus first on the student’s profile, prioritising the student’s potential over the co-applicant’s financial background. Key aspects such as past academic performance, entrance test scores, the pedigree of the university and course, and the career prospects associated with the selected program are closely reviewed. These factors help determine the student’s future employability and earning potential. After evaluating the student’s profile, the co-borrower’s financial capability is assessed to ensure overall repayment responsibility. Generally, a parent or guardian takes on this role, and their income and financial stability help support the student’s application. This holistic approach enables responsible lending while helping students access quality education confidently.
At Avanse, we adopt an analytics-driven, scorecard-based underwriting approach that builds on this student-first evaluation philosophy. We assess applicants across 20 thoughtfully designed parameters that capture both academic merit and the potential of the selected course and institution. The aim is to gain a forward-looking view of the student’s future prospects, allowing us to design loan solutions that are in sync with their educational goals. This approach supports responsible credit decisions while making education financing more inclusive and student-centric.