The problem of funding the poor and meritorious students at - National Institute of Technology, Rourkela, possible solutions: By Sandip K. Dasverma

Introduction:
Due commercialization of education it is usually a problem for the poor and meritorious to defray the expenses needed for NITR. I have been for last few years associated with different organizations, like FFE and Vikas, who offer scholarships. The demand has been found to be more than the supply. This is an evaluation/analysis/ solution based on my experience. I have tried to pen down possible solutions to raise about 40 more financial support to students, which in my opinion will resolve the problems. Various alternatives have been suggested and evaluated.
The loan alternatives will need formation of Self Help Groups to ensure return of the money loaned to ensure perpetuation of loan fund.

Possible solution:
One commonly known and suggested solution is to create a corpus fund for scholarships, which our friend Vallabha has kindly suggested and is in the process of actualizing. (See note)
To do so we need couple of crores. With Fixed interest in India hovering around 6% to give out 10 scholarships @ Rs. 25,000 each, we will need to raise and invest 42 lakhs for one year, to get the 2.5 lakhs needed.
A similar amount will be necessary to be raised every year to continue at level of 10 scholarships per year for 3 more years.
In other words to give 10 scholarships a year / batch would need:
=0.42*4(batches) =1.68 crore in the corpus fund.
Once this 42 lakhs is raised every year for 4 years, ten scholarships can be perpetually given for each admission year and continued for 4 years for each batch.

NOTE:
With present 10 lakh target we will get only 60 thousand to distribute at the end of the year after investment i.e. 3 scholarships of 20 thousand each or 2 scholarships of 30 thousand each only can be awarded.

Alternative 1.
Loan Scholarships:
We assume a similar amount of 42 lakhs are raised and invested in Bank fixed deposits. The interest earned is given out to students as loans. They will pay an interest equal to SBI interest rate on this loan. (or fixed deposit rate plus 3%, which ever is lower, to cover for inflation and default due to death / disability.)
Here also for the 1st, 4 years(@42 lakhs every year(a total of 1.68 crores have to be raised) but after first 4 batches, they will perpetuate. No further fund raising will be required.
However from the 5th year additional 10 scholarships can be awarded from money paid back, by graduated students. Thus every 4 years ten (10) additional loan scholarships can be started, without raising additional funds.

NOTE:
With the present 10 lakh target corpus fund, being raised at the initiative of vallabha and friends, we can afford only 3, 20 thou loan scholarships every year, from 2nd year of raising the funds.

Alternative 2:
With much less money(for example the 10 laksh being raised) we can ensure that 10 students, get money they need. This is by either using methods in option 1 or option 2, described below:

Option 1:
In this option the loans will be from commercial banks, only securitized by the Alumni Association corpus fund. We raise only 10 lakhs corpus fund and use the interest (Rs. 60 thou) of the fund to give security to the bank loan by buying insurance for the banks loans. ( I am forwarding this proposal to some banker friends of mine to get their inputs as to what is the constraint on this, I am sure Rs. 6 thou will be sufficient to insure each student’s life insurance for Rs. 25000, and loan insurance for death or disability / unemployment.)

Option 2:
In this option the loans will be from commercial banks, only securitized by the Alumni Association corpus fund. This method based on corpus fund Alumni association just issues a security of an amount of up to Rs. 25 thou of loan for each student from bank. This way 10 lakhs can be utilized to ensure a total of 40 scholarships per year. After one year it will become 42 scholarships and each year the number of scholarships will go up by 2 because the fund value will increase. (probably more than 40 loans can be securitized, it has to be checked with the banks)

Alternative 3:
Sponsored / Named loan scholarships:
• The Alumni Association will accept sponsored loan scholarships from Alumni, in the name of parents or beloved one(XYZ Memorial scholarship).
• Intending Alumni will donate 25 thou each year for 5 years, (alternatively they can also pay equivalent in lump sum at one time to be handled in the same way.)
• Alumni will donate Rs 25 thou for 5 years (one more year to cover the time after graduation the student will take to pay back the loan)
• When such money is received back from the student loan by the Alumni fund it will issue a loan scholarship to a fresh student. The scholarship continues to have the same name as previously by the donor.
• After graduation and landing on a job, each year student will pay back the loan principal and interest, at the prevailing bank student loan rates.
• Student will pay back each year amount of money equal to loan he took each year.
• Thus XYZ memorial scholarship will be perpetuated.
(I personally would prefer to go this alternative to establish two scholarships in the name of my deceased parents)
Alternative 4:
The Alumni Association and NIT authorities together can and should lobby the Banks and the Govt. of Orissa to declare NIT, Rourkela as an Institute of Excellence (like the IIMs and IITs) that IT IS, so all the students qualifying for admission get assured of unsecured Bank loans.

Advantages of alternative methods:
1. Alternative methods both reduce the investment needed (i.e. fund raised) and / or stretch the number of scholarships. When we convert the scholarships to loan scholarships, it increases very fast the number of scholarships, by making the money returnable when student is able to pay, i.e. they start in jobs. It brings a quick rise in number of scholarships.
2. Assured of money for support their ability for the students to work hard, on their future, is greatly enhanced.
3. Usually at the current pay level of an (2007) NIT Alumni, total loan is less than 4 to 5 month’s salary even in the 1st year of working. Thus they can easily repay in 5th years with interest, all money they needed, when they needed. Because they are paying when able and capable. It is recommended that they pay back each year, money they loaned each year in college.
4. In changed family situations of death or disability of key family members, loans can be started in 2nd year or 3rd year or even final year, because loan money is under control of Alumni Association and since college authorities are fully aware of such exigencies, it will come handy with their recommendation.
5. The alternative #3 is very attractive for many but the catch is in the execution. Transparent, efficient execution will really benefit the students.

Notes: I am informed by a banker friend that the fixed interest rates have gone up to 9%, so the figures will be more favorable for now.