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A Revamped Financial Model for Higher Education in India



Context


2020 started off as a game-changer for Education System in India as after more than two decades, the government decided to revamp the education policy of the country and launched National Education Policy 2020 (NEP 2020).


Although the policy provided for some major changes in the education system and education financing was given a boost by fixing 6% as budgetary allocation for Education, the government couldn’t bring about a revolutionary change in education financing model that is currently being followed here in India

 

Data from All India Survey on Higher Education (AISHE) 2018-19

  1. According to All India Survey on Higher Education (AISHE) 2018-19, there are a total of 993 Universities, 39931 Colleges and 10725 Stand Alone Institutions in India.

  2. There are 548 General, 142 Technical, 63 Agriculture & Allied, 58 Medical, 23 Law, 13 Sanskrit and 9 Language Universities and rest 106 Universities are of other categories.

  3. College Density or number of colleges per lakh eligible population is 7 in Bihar and contrasting 53 in Karnataka. All India Average College Density is 28.

  4. Total enrolment in higher education has been estimated to be 37.4 million with 19.2 million male and 18.2 million female. Female constitute 48.6% of the total enrolment.

  5. Gross Enrolment Ratio (GER) is the ratio between the number of students enrolled in higher education to number of students eligible in the country.

  6. GER in Higher education in India is 26.3%, which is calculated for 18-23 years of age group. GER for male population is 26.3% and for females, it is 26.4%. For Scheduled Castes, it is 23% and for Scheduled Tribes, it is 17.2% as compared to the national GER of 26.3%.

  7. Pupil Teacher Ratio (PTR) in Universities and Colleges is 29 if regular mode enrolment is considered whereas PTR for Universities and its Constituent Units is 18 for regular mode.

 

Challenges for Higher Education


Antediluvian Finance Model

  • The Financial model of Higher Education of India is handled by the Higher Education Finance Agency (HEFA) under the Ministry of Human Resource Development (MoHRD).

  • The ways of financing the higher education haven’t proved to be effective as in developed countries and the New Education Policy has tried to address the issue of education funding by allocating a fixed percentage of GDP for higher education and providing administrative autonomy to these institutions but we need a structural revamp and a diversified finance model for our institutions as of now.


Scarcity of proper Infrastructure and Facilities

  • Higher Education has been facing the challenge of poor infrastructure and facilities from a long time now and this problem is even worse in state-run educational institutions.

  • There is acute shortage of faculty in most of the public institutions and due to several reasons these institutions aren’t able to retain and attract well-qualified and efficient teachers who are the key to quality education.

  • Thousands of students having Ph.D. and qualifying National Eligibility Test today are wandering here and there for jobs where as the education system faces shortage of staff.

Enrolment

  • In India, as stated above, only 26.93% students enrol in higher education after finishing school education which is significantly lower than other developing countries.

  • The scarcity of scholarships, infrastructure, finance options, support etc. are the reasons responsible for such low enrolment.


Quality of Education


  • The Quality of Education in India has always been low and it’s the biggest challenge in front of the government. None of Indian Universities currently has been listed in the World’s Top 100 Universities List.

  • The lack of quality teachers, proper infrastructure, funding etc. have led to a significant decline in practical education and given rise to ‘rattafication' where students emphasize on passing the exam more than learning something.


Lack of Money


  • Education is the backbone of the economy but India spends way less than it should on education. This is reflected in the budgetary allocation on education by the government.

  • If India wants to revamp the existing institutions and create new ones, it has to scale up the money flow towards education and run the calls for money on a recurrent basis.


Poor Governance


  • The management of public institutions has been contaminated largely by political interference, over-centralization, lack of accountability & transparency and unprofessional conduct of operations.

  • This has resulted in excess of number of affiliated institutions for higher education and the focus of academics and research has been diluted.



 

Probable ways to fix the Financing Problems


Restructuring of Tuition Fees through Income Contingency Loans


  • In India, the education loans and financing for foreign education is an expensive process. Even the state-run finance institutions and banks charge around 10-15% interest rates on loans borrowed for educations.


  • Furthermore, the tuition fees in IITs amounts to just 6-7% of the total income whereas in developed economies like US, Australia etc. it makes up around 25% of the total income. This is due to the reason that due to economic and social reservation, only a handful of students (less than a quarter) pay full fees.

  • This money, if paid to colleges, can be utilized year-after-year in developmental initiatives for colleges.

  • What India can do is to use interest-free and collateral-free Income Contingency Loans (ICLs) through a Centralized Financial Structure.

  • In ICLs, there is an Income Contingent Repayment (ICR) System which makes repayment of loans much easier by pegging the monthly payments on basis of the borrower’s income, family size, and total amount borrowed.


  • ICLs are way different than conventional education loans and are very less likely to result in students’ debt. A similar model has been adopted in Australia and it’s called Higher Education Loan Program (HELP) in which the instalments are directly linked with debtor’s income and collected by tax authorities.


Outsourcing of Research Grants, Promoting Start-ups & Incubators and Tech-Transfer Mechanisms


  • Although research is mostly state-sponsored, still, countries like USA, France etc. raise up to one third of research funds from non-government resources through collaboration.

  • Higher Education Institutions in India which aren’t much successful in finding collaborators must look out for opportunities for tapping funds from private sectors, start investing in incubators and start ups and make the intellectual property rights & technology transfer initiatives as a mechanism for funding of research.

  • In India, such initiatives have already been started but India needs much more of such initiative to renew its higher education mechanism. Examples for such initiatives are Foundation of Innovative Technology Transfer (FIIT) at IIT Delhi, Society for Innovation and Entrepreneurship (SINE) at IIT Bombay etc.


Funding through Endowments

  • · An Endowment can be defined as a kind of aggregation of assets by a college or a university and investment of the aggregated sum towards its educational mission.

  • This system is common in world’s elite educational institutions like MIT, Harvard, Oxford, Stanford etc.

  • An endowment is kind of a crowd funding from a college in return of which a college assures the donors to fulfil the purpose as long as the institution exists.

  • To raise a successful endowment fund in India, an efficient model with an effective fund-raising campaign, proactive teams and investment policy changes will be required to overcome hurdles.

  • The endowments can be raised from students, alumni, philanthropists, governments etc.

  • In 2019, IIT Delhi launched an endowment fund with a target of raising $1 billion, that will provide a conservative investment income of 700 crore every year.