Parents, Student Loans, and Repayment: The Dynamic of Financial Literacy in Colleges of India

Parents, Student Loans, and Repayment: The Dynamic of Financial Literacy in Colleges of India

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Parents, Student Loans, and Repayment: The Dynamic of Financial Literacy in Colleges

In the quest for higher education, students and their parents in India often grapple with the daunting prospect of student loans and the subsequent repayment process. The cost of education has been steadily rising in the country, and as a result, student loans have become an indispensable part of many students’ academic journeys. However, navigating the complex world of loans and understanding the nuances of repayment requires a high level of financial literacy, which needs to be improved among students and their parents. In this comprehensive blog, we will delve into the dynamic of financial literacy in Indian colleges, shedding light on the challenges students and their families face in managing student loans and emphasizing the importance of improving financial literacy to make informed decisions.

The Rising Cost of Education

Over the years, the cost of higher education in India has significantly increased. According to the All India Survey on Higher Education (AISHE) data, the average annual fee for undergraduate courses in India has risen consistently. In 2015-16, the average fee was approximately INR 20,000; by 2019-20, it had increased to approximately INR 30,000. While this might seem manageable, the reality is that fees can vary significantly depending on the institution, course, and location. For many, these costs are beyond their means, necessitating student loans.

Student Loans in India

Student loans have emerged as a lifeline for pursuing higher education. Financial institutions and the government offer loans to eligible students, covering tuition fees, accommodation, and other educational expenses. These loans often have favorable terms, including low interest rates and deferred repayment options. However, despite these benefits, students’ and parents’ lack of financial literacy poses significant challenges when managing and repaying these loans.

Also Read: Types of Student Loans for Certificate Programs: A Comprehensive Guide 

The Financial Literacy Gap

Financial literacy is the bedrock of making informed financial decisions. Unfortunately, this crucial aspect of education is often overlooked in India. A survey revealed that 96% of parents think their children lack basic financial literacy skills. Many need to be aware of the various types of loans available, the associated interest rates, and the intricacies of the repayment process.

Challenges Faced by Students and Parents

  1. Loan Selection: One of the primary challenges students and parents face is selecting the correct type of loan. They often rely on advice from peers or make hasty decisions without fully understanding the terms and conditions. This can lead to future financial hardships, as different loans have different interest rates, repayment tenures, and eligibility criteria.
  2. Interest Accumulation: Many borrowers know how interest accrues on their loans. As a result, they may need to pay more attention to the long-term financial implications of their borrowing choices. This lack of understanding can lead to difficulties in repayment.
  3. Repayment Stress: Repaying student loans can be stressful, especially for those who need to be financially literate. The debt burden can take a toll on mental health and overall well-being. With a clear understanding of loan repayment options, borrowers may feel safe.
  4. Financial Planning: Financial literacy is not limited to understanding loans but extends to budgeting and financial planning. Students and parents often struggle to manage their finances during the loan repayment period, leading to economic instability.

The Importance of Financial Literacy

Improving financial literacy among students and parents is essential for several reasons:

  1. Informed Decision-Making: With adequate financial literacy, students and parents can make informed decisions about loan selection, reducing the risk of excessive debt.
  2. Effective Budgeting: Financial literacy equips individuals with the skills to create and stick to a budget, ensuring they can meet their loan repayment obligations without compromising their financial stability.
  3. Reduced Stress: Understanding the loan repayment process can alleviate stress and anxiety associated with debt. Financially literate individuals are better equipped to manage their loans and stay on top of their financial obligations.
  4. Long-term Financial Security: Financial literacy goes beyond managing student loans; it prepares individuals for a financially secure future by imparting knowledge about investments, savings, and retirement planning.

Also Read: What is the biggest problem with student loans and how to solve them?

Steps Towards Improving Financial Literacy

  1. Incorporate Financial Education in Schools: Introducing financial education as part of the school curriculum can help lay the foundation for financial literacy from a young age. This can include topics such as saving, budgeting, and understanding loans.
  2. Workshops and Seminars: Colleges and universities should actively organize workshops and seminars on financial literacy to educate students and parents about loans, budgeting, investments, and other essential financial concepts.
  3. Online Resources: The government and financial institutions can create user-friendly online resources, such as loan calculators and informative websites, to help individuals understand their loan options and plan repayment.
  4. Financial Counseling: Establishing dedicated financial counseling centers on campuses where students and parents can seek expert advice on financial matters can be instrumental in improving financial literacy.
  5. Awareness Campaigns: Government and educational institutions should launch awareness campaigns highlighting the importance of financial literacy and the available resources for students and parents.


The dynamic of financial literacy in Indian colleges plays a pivotal role in managing student loans and the subsequent repayment process. As education costs continue to rise, colleges must equip students and parents with the necessary knowledge and skills to make informed financial decisions. By addressing the financial literacy gap through education, workshops, resources, and awareness campaigns, India can empower its youth to achieve their academic goals while ensuring long-term financial security. Ultimately, an educated and financially literate populace is the key to a prosperous future for individuals and the nation. Financial literacy is not just an educational priority; it’s an economic and social imperative.


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