New perspectives on financing education


The Subcommittee on Student Financial Aid which was formed by the Planning Commission has come up with different recommendations to find fund for the higher education sector in India. It has emphasized the increasing role of the Government of India in providing adequate fund for the higher education sector in the country. It has also realized the importance of the corporate sector in the funding of higher education sector in India.

Participation of corporate sector

The planning commission of India has placed NR Narayana Murthy in a responsible position to ensure flow of fund from the corporate sector. The committee headed by Murthy is asked to develop a framework to channelize private fund into the higher education sector in India.

The main objective is to develop an enabling structure that will promote the corporate houses in the country to contribute funds to the higher education institutions in Indian rather than foreign institutions. There has been instances in the past years where Tata group and Mahindra group has donated millions to Harvard University.

This move is as a part of the Twelfth five year plan process, which if made possible will bring in private sector investment into the higher education sector to promote research and development and innovation. This will address the issue of employability of graduates from Indian universities which is a matter of concern for the industry.

In India, the participation of the corporate sector in higher education in India is limited, in the terms of funding. Now an attempt is made to develop a structure that will make the participation possible, which will of great benefit for both the higher education sector and the corporate sector. This will promote quality, inclusiveness and innovation. The corporate sector which includes both private and public enterprises has been calling for greater role in the higher education sector in India. But it was never made clear what this role would be. Over the last three decades, the private investment in education has surpassed the investment by government which is due to the decline in the government spending in the field of higher education. However the private investment has been limited to setting up of higher education institutions including engineering colleges and management institutions.

But now the committee aims at encouraging the corporate sector to make meaningful participation, which was a hot topic in every education summits.

Scholarship to students

A major recommendation made by the committee is that the Union Government should take necessary steps to ensure that each and every student who wishes to go for higher education will receive scholarship. The committee says that the government should find provisions to finance the cost of such scholarships. The recommended provisions include increasing taxes or funds from other sources which redirected towards higher education.

The committee suggests that all the concerned parties in the higher education sector must take part actively in financing of education at different levels. The concerned parties include the students, the government and the industry. The government has a major role to play by providing grants to the institutions which help them to meet the capital required and the operating cost. Governments should also provide tax exemption in terms tax for institutions and also subsidy for inputs.

Presently scholarships are provided to students from scheduled caste, schedules tribe and other backward classes such as Muslims. The government must allocate Rs. 8000 crore for scholarships in the maiden year of the 12th five year plan. The amount should be increased by 15 per cent every year.

The committee recommends that the 10 per cent of the students in the rank list who secures the highest scores in all the examinations should be provided with scholarship which is equivalent to the amount collected by the respective institutions as tuition fees, in the case of any undergraduate courses in India. It also says that the government should motivate the institutions to write off the tuition fees for students who are in need.

Work study programme

Another recommendation made by the committee is on the introduction of work study programme, which will allow students to work in labs and other units in the institutions such as library, office etc. Based on this programme, the student should not be allowed to work for more than 20 hours a week and compensation should be provided which will help the student to meet the cost incurred in his education. The advantages are twofold - one is the earning which will help the student to meet the expenses and the experienced gained by working in any of the units in the institutions. The committee estimates an amount of Rs 500 crore to be allocated by the union government for the work study programme.

Bank loans

Another major recommendation made by the committee is that education loans should be provided to each and every student who qualify for higher education. While the loan is provided to students, their caste, creed, religion, or any other factors that discriminates them should not be considered.

Presently the banks take into account the income of the candidate’s family members to provide loans. In the case of the loan amount being higher than Rs. Ten lakhs, students are asked to provide collateral security to secure the loan. But now the committee recommends that the banks should not consider the income of the family and that collateral security should not be sought from the students while providing loans. The recommendations also states that the amount for the accommodation such as hostel facilities should be directly credited to the student’s bank account. The tuition fee must be paid to the institution directly.

The committee also recommends the government should give guarantee to the loan availed by every student. The period for repayment of the loan should be extended to 15 years in the case SC/ST and other backward and minority communities. In the case of other it should be made 12 years.

These whole processes of providing scholarships and loans should be enabled by an Information Technology driven system, which reduces the personal interaction between students and lending banks.



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