By Shalini S. Sharma
Moody’s Investor Services, the agency which provides rating for bonds issued by commercial and government entities, has downgraded the rating for US higher education from stable to negative. In layman terms, this means that the chances of returns from bonds issued by US higher education institutes are in the negative. The reasons for this, as explained by Moody’s, are “looming changes in federal policy or funding”. The changes that the Trump administration is reportedly working on include removing tax exemptions on certain components of tuition fee; increasing taxes on endowments and removing tax deduction on interest paid on advance bonds, among others.
In effect, the policy changes will make college education costlier for students by limiting the sources of financial support, take away money from institutes by charging more in taxes and push the entire system towards the narrow needs of employers. It will encourage for-profit players and restrict those working for public good.
All this is new for the Indian market, or the Indian higher education system. Our laws do not allow universities or educational institutions to raise funds through bonds though there has been a clamour for such options lately. Universities in the US had discovered this route of raising funds nearly two decades ago. According to an article in The Economist of May 2006, in that year Cornell University had sold bonds worth $250 million. Harvard and the University of Texas had also done the same, raising millions of dollars through the bond route in 2006. Other than an envious reputation or brand name, sprawling campuses or real estate, these institutes had, and still have, astounding amounts of money which had come to them as endowment. Harvard had $25 billion of endowment in 2006, University of Texas had $12 billion and Cornell had $4 billion.
Imagine if such bonds were to be issued by our own premier institutions – IITs and IIMs. There would be no dearth of takers or lenders what with the reputation and branding of these world famous houses of learning. But our heads of institutions would not be so comfortable with the idea of servicing debt. It would ultimately be a burden on them and would be like a threat looming over their heads which they would rather not have if they were to concentrate on research and improving their academic output. Where from does this clamour arise then?
The clamour for allowing the bond route to educational institutes mostly comes from the private sector which has have very little funding options at the moment. For public funded institutions, there is now HEFA or Higher Education Financing Agency which provides funds for building infrastructure. But the private sector, which accounts for more than 60 per cent of technical higher education, has nothing other than banks and financial institutions to borrow money from. For them bonds would be an attractive funding option. Now if only the proposed new education policy would allow that….
Study abroad
According to a recent survey conducted by the International Institute of Education (IIE), in partnership with HSBC, India is among the top countries in the world where 62 per cent parents want to send their children abroad for studies. Only the United Arab Emirates does better than India on this front with 65 per cent of its respondents confirming to send their ward overseas for higher studies.
World-wide, roughly 4 million young people study outside their countries. The top country where everybody wants to go for higher education is the US, followed by the UK, Australia and Canada. The US earns roughly $4 billion every year from overseas students. Indian students alone spend nearly $4 million on overseas education which is more than the entire government budget for education. Nobody can stem this mobility for better educational avenues but what can be done is attracting more students from overseas into India. At present, India gets only about 30,000 overseas students and this does not mean that every year these many number of international students come to India. Rather, at any given point of time, there are about 30,000 international students in India. There is a potential to increase this number to at least 200,000 and earn at least Rs 3,000 crore in the process.
So far the agenda of attracting international students and promoting India as a destination for higher education has solely been pursued by the ministry of external affairs and the ministry of commerce. The ministry of human resource development, the actual line ministry which is responsible for higher education, had so far been indifferent to this task. But following the directives of the party high command, it is also swinging into action and is believed to be planning a high profile marketing campaign on Study in India.
(The writer is a freelance journalist)
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