The Hindu Business Line : Financing management education

The management education fee is not just controversial but has also raised a number of larger issues. P. P. Prabhu suggests a simple loan arrangement that helps students discreetly, keeps the government expenditure minimal as it needs provide no subsidy, and allows the institutes to fix fees on the basis of actual cost.

IIM-B students getting ready for placement interviews at the institute... An automatic loan scheme is one solution for poor students who may not be able to raise the initial amount needed to join IIMs. They should easily be able to pay back the loan as they get well-paying jobs once they graduate.

THE fee issue of the Indian Institutes of Management has not only become controversial but unfortunately acrimonious. The subsidisation of higher education as well as the issue of autonomy of educational institutions are important matters deserving much deliberation as they have great impact on our most precious human resource. We need to develop a culture of debate and discussion to resolve such contentious issues.

The fee charged for higher education, especially for management, technical and medical education has been the subject of debate for quite some time. The argument advanced against subsidisation of management education is that the funds available for education is limited and hence the scarce resources are better devoted for elementary and high school education.

There can be no two opinion that the government must spend very much more on elementary and school education which remain badly neglected (and is the major cause of our backwardness). But this particular contention is not weighty enough argument against subsidisation of management education as the amount that will have to be spared by the government for such higher education is so small compared to the thousands of crores of rupees required for elementary and school education.

Another argument advanced against subsidisation is that while it may be logical to subsidise core education — for example, medical, engineering or pure sciences, there is no merit or need to subsidise business oriented education, say, fashion design or business management.

This again is an unacceptable argument simply because every bright but poor student should have the opportunity as well the freedom to pursue such employment oriented courses which promise bright careers. It will be unfair to deny the right to pursue higher studies in management when the market demand for such qualification is very high.

A persuasive argument in favour of higher fee for IIM courses is that no student selected for the IIM course need worry about the fee as there are enough scholarships and loan facilities for the needy. But scholarships may be limited; also grant of loans and scholarships becomes, to some extent, subjective. It is not known how many students have been provided with scholarships in the last few years and whether they cover the entire tuition fee.

It cannot be denied that the overall cost of pursuing an IIM course or for that matter an IIT course has become high because, apart from the high tuition fees, hostel expenses, books and other incidental expenses run up to a tidy sum. Hence, perhaps a few bright students may not even embark on the exercise of attempting for the IIM entrance tests because of the perception that the overall costs of pursuing management education even if they can hope to secure a scholarship, may be beyond their capacity to bear.

Scholarship also connotes low economic status of the student; perhaps some students aspiring for such management courses may be very sensitive to this aspect of family economic status. (Recently in the course of a debate on admissions in prestigious schools in Delhi being restricted to neighbourhood children only, regardless of the economic status, some girls were arguing against the concept on the ground that the poor students who get admission on the basis of such policy would feel small and embarrassed, if not humiliated, when the rich students spend lavishly on various aspects.) Lowering the fees and even the availability of scholarships covering tuition fees cannot solve the basic problem of poor students. The only argument in favour of higher fees is that IIM and IIT graduates get fabulous compensation once they qualify and hence the students can afford to treat the cost of their studies as sound investment for an assured future career.

This argument begs the question: How can the poor students aspiring to join IIMs find the initial investment necessary for prosecuting management studies?

There is no doubt that IIM and IIT students can afford and should be able to reimburse the cost of education over a period of time, after they successfully complete the courses. Hence one possible solution to the issue could be an automatic loan scheme to all students who need the facility. This could be easily managed.

Along with the letter of admission to the course, all students could be informed of the expected expenses on hostel, books, project preparation and other sundry items, besides the fees, so that a student can decide in advance the amount that he may need to borrow to pursue the course. A loan application form (from a bank) could be sent along with the admission letter and the student requested to indicate the funds required over the period of study.

The bank shall be required to sanction the amount sought as loan subject to a ceiling, with no questions asked, and credit the loan amount (other than fees which perhaps could be directly sent to the institute) to the bank account of the student every month so that the student can draw the funds as required.

Such an automatic but simple loan scheme will also obviate the embarrassment of having to reveal the family income status of the student. The scheme could be and needs to be administered in such a manner that, none other than the student is privy to the loan facility. All such loans shall be covered with government guarantee and hence the interest rate also could be low.

The student will have to obviously consent to repay the loan amount after he secures employment, but there shall be no requirement of any guarantee or security for the loan amount. Likely a few students who could afford to bear the cost of such education also may then seek the facility; even then the amount that will be required to be provided as loan will be very small.

Probably some students may find it difficult to repay the loans if they were not successful. There may be even some deliberate defaulters, but such cases will be rare. Hence, the total liability that will devolve upon the government may be very little.

This scheme of automatic loan assistance to students pursuing IIM, or IIT courses takes care many concerns expressed in regard to the issue. Even poor but bright students who may in the normal course not even contemplate prosecuting such higher education because of the total cost involved, would be emboldened to seriously pursue such higher education.

The expenditure to the government on higher education will be minimal as no subsidy need be provided. (Actual defaults will be very few.)

Such a scheme will properly address the concern that students who are provided with the opportunity, at great cost to the government, to pursue higher education which will enable them to earn handsome future earnings should bear the cost of such higher education. The institutes then can fix the fees on the basis of actual cost and need not depend upon government for any financial support.

A criticism of this scheme may be that limiting the automatic loan scheme facility to only IIM or IIT courses may be unfair and discriminatory.

The rationale for such distinction would be that admission to these courses are on merit and hence it is reasonably certain that practically all students who qualify for such courses are bound to succeed in their career.

The same cannot be said of university education especially as many arts courses are pursued by many students just to get a degree. Also university education is quite affordable in most States.

There is however every justification and need to extend the benefit of such a scheme, in course of time, to many other courses, so that opportunity for pursuing higher education is available to all meritorious students irrespective of economic status and at the same the cost of higher education is borne by the beneficiaries.

(The author is a former Union Commerce Secretary.)

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