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Student worries: loan repayments, fake job offers

Student worries: loan repayments, fake job offers
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First Published: Sun, Mar 22 2009. 10 18 PM IST

Updated: Sun, Mar 22 2009. 10 18 PM IST
The majority of business school students graduating this year are checkmated by the economic downturn.
No jobs and low salaries are obviously the main student concerns. There are other concerns, too, such as repayment of loans and fake placements. The government should be proactive in mitigating the suffering of students. The immediate step that should be taken is to prolong the moratorium and repayment period of student loans; the interest rates should also be lowered. Students also need to be vigilant against fraudulent companies that take a training fee or surety money while giving offer letters. Such companies are more likely to disappear with the money.
Most B-school students now finance their studies. Following the unjustified steep fee hike in the Indian Institutes of Management (IIMs) in the last two years, many other B-schools have also increased their fees to at least Rs6 lakh. For a loan of Rs6 lakh, the monthly repayment instalment is about Rs18,000, which the students have to start paying six months after getting a job.
The academic year 2008-09 is coming to an end and in many B-schools at least half the graduating batch is without jobs.
Even in some top-ranked B-schools, the median salary is about Rs4.5 lakh per annum, which translates to about Rs20,000 per month after deducting taxes and house rent allowance, etc. In lower-rung B-schools, many students have settled for jobs of about Rs10,000 per month. With such low salaries, paying loan instalments after six months will be tough.
There have been media reports that some nationalized banks are ready to reschedule loans on a case-by-case basis. This is a welcome move, but more needs to be done. The government should, through the Reserve Bank of India, direct all banks to increase the moratorium period by at least another six months.
Need for vigil: Students at IIM Calcutta. Exploiting the insecurity among students, racketeers masquerading as consultants and company executives are now promising jobs—they take a training fee or security ranging from Rs35,000 to Rs2 lakh, and then disappear. Indranil Bhoumik / Mint
For those students who don’t get a job, the repayment period starts after one year. This period, too, should be prolonged by another six months. The repayment duration should also be extended and the interest rate decreased so that the monthly instalment to be paid is below Rs10,000 for a loan of Rs6 lakh.
B-schools, on their part, should consider decreasing the fees they charge. At the same time, those institutes that have doctoral programmes should increase the stipend offered to research scholars to at least Rs30,000 a month. This will encourage competent students to take the profession of teaching since the chips are down in the corporate sector.
Students also need to be careful about fake placements. Exploiting the insecurity among students, there are now racketeers masquerading as consultants and company executives. They promise jobs, in fact give the offer letter, take a training fee or security that ranges from Rs35,000 to Rs2 lakh, and then suddenly disappear. Such cases have been reported in Uttar Pradesh, Orissa and Andhra Pradesh.
Recently, in Padmanava College of Engineering in Rourkela, 31 students were cheated of Rs50,000 each by a dud information technology firm. The money had been deposited as surety a few months back by students who were given offer letters. “Executives” of the fake firm also made pre-placement presentations to the students.
In another case, a firm took Rs60,000 per student as training fee and got the trainees to sign a two-year bond. It paid each student Rs7,000 per month for three months and then conducted a “test” in which all the students were failed and asked to go without any refund. The victims are students of Institute of Technology and Management, Gorakhpur, Azad Institute of Technology Lucknow, Sagar Institute of Technology and Moradabad Institute of Technology.
Besides taking steps against fraud companies, the government should also be proactive in generating jobs. The present government has not done enough to counter the economic downturn. It has to drastically increase public spending in areas that generate more jobs.
For example, if work on the national highways project had not been delayed, it would have had a great spin-off effect on jobs. Since political leaders are engaged with elections, nothing much can be expected from them in the near future—unless the plight of students is made into a political issue.
Premchand Palety is director of Centre for Forecasting & Research (C-fore) in New Delhi, from where he keeps a close eye on India’s business schools. Comments are welcome at businesscase@livemint.com
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First Published: Sun, Mar 22 2009. 10 18 PM IST