Educational loans have caught large sections of South Indian youth in a debt trap and the problem is so acute that even if the recipients manage to repay the loans, they suffer life-long consequences, from which there is no easy escape.
The problem is particularly bad in the case of Kerala, with its high rate of literacy, where the aspirational value of education as a means of securing a better life is much stronger compared to many other states. Kerala also is one of the most exemplary examples of how education and certain professions have lifted whole communities out of the social and economic hierarchy.
It is no wonder, therefore, that Kerala accounts for the largest disbursement of educational loans by banks and financial institutions for any single state. Over half of total educational loans in India are disbursed in South India, according to rating agency Care Ratings; and Kerala and Tamil Nadu together account for 36 percent of all outstanding educational loans in the country, which gives an idea about the high dependence on bank finance for education in the two states. About 95 percent of the loans are provided by the public sector banks under priority lending, with State Bank of India leading the pack by far.