Emergence Of Fee Financing Reinforces Demand For Quality Education

The Indian education system is going through an era of revolutionary changes. On one side the Government of India recently unveiled the new education policy while online education emerged as a potent option on the other side. Technology is rapidly making inroads into the country’s education sector. The concept of online education is helping quality education reach even the remotest parts of the country. However, among all the new changes coming to India’s education sector, the emergence of alternative finance options for education fees has the maximum potential of revolutionising the system.

Until recently, self-finance was the predominant option for financing education in the country. In fact, for primary and secondary school fees, this was possibly the only option. Education loans were available for higher education though. The school fee was an additional financial obligation for the families of the student. In case of any emergency or loss of income, when there was a choice between survival and education of the wards, the families went for the obvious choice. This is one of the primary reasons for high drop-out rates from the school the primary and the second levels. The result of which had huge socio-economic implications on the country's macro landscape.

Over the past few years, the education industry is attracting impact models that have the potential to overhaul and evolve the system on a modern-day track. The solutions are being incubated and one such option which has emerged to be a pathbreaking model for funding education is Fee Financing. Fee Financing is an arrangement where the financing company pays for the entire year’s fee upfront to the schools and the families of the students can pay the fee back to the company in easy instalments which are often cost-free. This creates a win-win situation for both parties. Parents are able to fund the education of their wards without any extra burden, even during tough times. On the other hand, the schools/ institutions get the entire session’s fee upfront. With a larger capital in hand, the schools can plan their activities better and invest in modern infrastructure. 

Besides the above-mentioned benefits, one of the most significant benefits of the fee financing model is the surge in the demand for quality education. In the past, when parents had to fund the fee entirely from their own pockets, they had to choose the education institution for the kids which would fit their budget. The budget had the primary say in the decision on which institution their student would go to. The consideration of the quality of education was almost non-existent for the low-income groups of the society. As many such parents were often late in paying the fees and other funds to the schools, they were not able to raise any demands in front of the institute administrations. 

Also from the point of view of the institute, there was an acute shortage of funds. Almost every educational institute across the country was running on breakeven unless run by some multimillionaire corporate or the government. The funds received by the schools were in small instalments and institutes hardly had enough money in hand to invest in development activities. Fee financing, however, is changing things rapidly. Now the parents need not face any budget constraints while paying for the education of their wards. This enables them to go to the next consideration, the quality of education. They can now freely choose the best educational institution for their kids. Now they can also raise their concerns and demands in front of the institute regarding the quality of the education their kids receive. 

On the other hand, when institutes receive the entire session’s fees in advance, they have a bigger sum available to utilize in improving the facilities and invest in the quality. This further eases their burden of raising funds from banks and financial institutions where the cost of borrowing is higher and the process is tedious. Similarly, at the higher levels, students can fund their education with fee financing and look for the best education alternatives available in the market. With alternative sources of finance available, students can now look for the best institutions providing their intended courses. This has created a healthy competition between the institutions and in order to attract students, institutions are focusing on providing the highest possible quality of education.

Fee financing has emerged as a boon for the Indian education system. It not only has a potential of drastically reducing the drop-out rates in primary and secondary education but it also has the ability to empower the students and fuel the demand for quality education on the other. Fee financing in India is still in its early days but it is growing rapidly. It can revolutionize the Indian education sector in a matter of a few years, however, it needs strong institutional support from the government and the corporate world. Most importantly, there is an immediate need of spreading awareness about this new discipline.

Sunit Gajbhiye

Guest Author The author is CBO and Co-Founder, Financepeer