Rishab Mehta is Founder and CEO of GrayQuest, a fintech start-up that is building pioneering credit products in India’s $120B education ecosystem. Rishab has led GrayQuest from being a 2 member start-up to a 100+ member team that is exclusive payment/financing partner for some of India’s most renowned educational brands and institutions. Rishab graduated Magna Cum Laude in Finance and Economics from Babson College, the renowned entrepreneurship institute in Massachusetts, USA.
Quality education is a must for a successful life and career. In today’s age of rising aspirations, providing one’s child with good quality education is a dream cherished by every parent. The cost of education, however, is increasing rapidly. According to studies, education costs are increasing at an average of 15% per annum. Most of these youngsters are pursuing higher studies and therefore spending a significant portion of their parents’ earnings and savings on education. The education fees paid in India every year can be estimated at $120 billion, of which less than 1% is currently financed through education loans.
The ongoing coronavirus pandemic has had a significant impact on everyone, especially people going through salary cuts, furloughs, and many even becoming jobless. In a country like India, where 85% of expenditure on education is borne by parents, Covid-19 has put a huge financial burden on them.
A major feature of conventional education loans is that they are designed assuming that a student would pay for his/her education with a 10+ year tenure and minimal repayment during the course tenure. This is a standard practice across the world. However, in India, due to various cultural reasons, we have noticed that in a majority of cases it’s the parents who are paying for their children’s education, especially until undergraduate courses. While the conventional education loan is a great boon for students who want to access education they otherwise couldn’t access, there is no product that addresses the cashflow strains for parents to pay a significant sum every semester/year.
In recent years, fintech lending platforms have come up with innovative financing models to reduce the fee payment burden on parents. Initiatives such as zero cost EMI for education fees, rewards and insurance benefits along with other models, where a parent is not required to be a guarantor, are slowly becoming popular in the education ecosystem. For example, the option to pay a Rs 2L annual college fees in easy and convenient bite-sized monthly instalments of Rs 20k has come as a boon to parents, instead of the existing option to pay the fee in two lump sum instalments of Rs 1L each.
The above trend has been picking up rapidly in the retail industry. Take TV sets, for example. Every one in three television is bought on EMI these days. This has led to the Buy Now-Pay Later (BNPL) concept where customers can opt for instant credit at no extra cost for small-ticket purchases, and a faster and safer checkout process. The growth of e-commerce and online and digital buying has given a major boost to BNPL over cash and credit card payments. This has great relevance in the education financing industry and, going forward, we should start seeing a new trend – Study Now, Pay Later.
Though there are a few platforms that have tied up with educational institutions across the country to offer the option of Study Now, Pay Later, there is still need to penetrate further and cater to as many students as possible in the coming year. This will not only reduce the financial burden on the parents but will also facilitate economic development of the country.
Another key trend we will see gaining great traction going forward is education financing becoming completely digital. Even today, the process of sanctioning education loans requires physical presence at the bank branches. The current pandemic has made it evident that this process also requires end-to-end digital transition. More and more banks need to implement digital processes which will be of a huge benefit to finance seekers. Covid-19 has increased the importance of online-based services.
2020 has been a significant year for both parents and children. The resultant impact will culminate in several ‘industry-firsts’ in India which will perhaps change education as well as the education financing industry. A focused approach during these times will go a long way in ensuring our education system becomes more accessible and affordable.