ABSTRACT. Student loans are increasingly viewed as an important method of financing higher education in both industrialized and developing countries. The pattern in the methods and practices of student loans in about more than 50 student loan programs is examined by considering the major parameters in the design and operation of student loans. While doing this, the paper builds up hypothetical scenarios on hidden grant versus full loan. Based on the world experience, the paper further elucidates the implications for the current student loan program of India, which was introduced in 2001. The Indian student loan programme is insensitive to the needs of the weaker sections. Hence, an alternative loan programme must be evolved and flexible enough to suit their requirements. Such an alternative loan scheme needs to encourage equal access and participation of the weaker sections. However, considering the generous hidden grant, higher cost of administration of such a loan programme besides low recovery rates, means-tested grants / scholarships are recommended to be in place. pp. 105–125
JEL Classification: H81, I23

Keywords: higher education, student loans, hidden grant, India

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National University of Educational Planning
and Administration, New Delhi

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