Here is how education loans can help fight poverty

April 29, 2017
By Rang De Team
Access to education is a crucial step on breaking our of the vicious cycle of poverty

In India, when we think of education loans, we think of students taking on significant debts to study in foreign universities. We do not think of money taken by parents to send their children to school or funds borrowed by students from rural backgrounds to complete a technical course. But the sobering reality is that this is really the way a majority of families finance their children’s studies in the country.

Financial assistance for basic education remains a very real need for millions of students. Yet, for students who come from rural backgrounds or low-income communities, qualifying for an education loan can be difficult. Their parents have no fixed income or collateral to avail an education loan. Scholarships for deserving students are limited and hard to come by. With no support forthcoming, many of these students discontinue their education, dropping out of schools and colleges to support their families.

What does an education loan achieve?

With schools and colleges due to open in June, the expenses of sending a child to school can lead to a huge spike in household expenditure that is not covered by the meagre household income of most families. A low-cost education loan, which is repaid in small installments, can help these families tide over the costs of educating their children. The costs of education are not restricted to school fees alone; it includes the cost of new school uniforms, stationery, reading materials and other miscellaneous expenses that should be covered in an education loan.

Our loans for primary education allow families to cover various expenses associated with education

Students applying for an education loan on Rang De are associated with our field partners in one way or another. In Madhya Pradesh, we have been providing loans to students from the Sant Singaji Institute of Science and Management (SSISM). Many of these students hail from rural agricultural backgrounds and have eventually been employed by leading companies allowing them remit money back and support their families in the villages. We provide low-cost loans to weavers in Manipur so they can send their children to school — with variable incomes from their little shops, it is not possible for them to make a large lump-sum investments so these loans help them pay for the school fees in time. Similarly, in Bangalore we ensure that the children of waste pickers and scrap dealers (associated with Hasirudala, our field partner) have access to basic education facilities.

In Madhya Pradesh, we provide low-cost loans to students of SSISM who come from rural, agricultural backgrounds

How does an education loan help?

Around the world, there is an inextricable link between education and poverty. A lack of access to basic education facilities is one of the significant challenges to social development and the eradication of poverty. One way to break the cyclical nature of poverty and social discrimination is providing access to education.

Indira Raja is a scrap dealer from Kalasipalya in Bangalore who has taken an education loan. Her children attend an English medium school, a significant achievement among the families in her locality. Indira Raja, who is taking great pains to provide her children with an education, says “I want my daughter to enter a good job, to take up a different profession.”

When the school year starts, the provision of an education loan is a huge advantage for many families as it covers all education costs. The loan, to be paid in small installments through the year, allows the families to include the expenses of their children in their monthly budget.

For many students that Rang De supports, education offers a chance of social mobility and is a crucial step forward in the fight against poverty.

Of course, supporting education aspirations is a very long path out of poverty and does not show an immediate impact that our livelihood loans do but the benefits at the end are enormous as it breaks the generational trap that has kept millions of Indians locked into a life of servitude, low wages, low growth and high uncertainty.

It is a path that we are proud that our 12,000+ community supports every year ahead of the new school year in June.

You can contribute to this fight against poverty by lending for a child’s school fees here. If you have any questions or would like to know more about the education loans we provide then please write to empathy@rangde.org

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