‘Students wanting to study, but not being able to due to dearth of cheap long term credit’

 In the present Indian scenario, if a student wants funds for an education then bank loans are the best option. But, banks need collateral for this, and unfortunately, due to this most students or their families do not have an asset to keep as collateral for the kind of education that will enable a person to earn a living. Now, every company looks for safe investments; one such opportunity for them is government bonds, but if instead they invest it on a person’s education then they stand to harness more returns, the only problem is that unlike bonds, this investment may take several years to mature. No company will want to wait for a period this long for a return. This is where the government can step in, to provide regular returns to the investors. So, here the government acts as a middleman rather than banks, hence, collateral may not be necessary. The government can enter into a contract with the beneficiaries in order recover the investment in the form of taxes from the students when they start earning. So the main difference between education bond and other bonds would be that the interest liability will not be borne by the government, it will be paid back by the student in the form of additional taxes later on in his/her life. This simple three party deal provides a safe investment opportunity for companies, a means for government to channel private money directly into education and an opportunity for a person to educate himself and make his own living.

If this idea is implemented it would directly benefit children and students of all ages living in India, especially those who have missed out on educational opportunities due to lack of funds. Indian securities market has an outstanding issue size of Rs. 25,57,333 Cr during the current fiscal year as of Feb 10, 2012 (According to Dept of Economic affairs). Even if education bonds were to account for only 10% of this number then they can fund the entire education for more than 50 lakh students per year.