ABSTRACT
Loan financing of higher education is not a new phenomenon. Based on the arguments on the nature of higher education as a good, determines financing of it. Several countries have experimented with the loan financing of higher education based on the argument on higher education as a quasi-public good or a private good for which the cost of it must be shared with the students who are benefitted from higher education. Besides, there are other arguments on efficiency, equity and others which supports loan financing of higher education. Therefore, the policies formulated globally are in favour of neo-liberal market principles and new public management (basically focused towards developing countries) which intends to cut down less prior expenditure and this is where higher education falls in the trap. The prevalent inequality that exists in the access to higher education in the diverse Indian society, the financial constraint is a major constraint towards equal access. Some empirical exercise is carried out in this context to find out the efficacy of educational loan as an alternative to finance higher education. The findings as discussed in this chapter reveals that though the students in T/P courses get the educational loan (which covers their partial or total course fee) to finance their higher studies but at a higher cost due to the disincentive effects of educational loan, it may distort the choices of the students from the low-income families.
