“It is impossible to create a similar product without government support”

Sberbank (MOEX: SBER) provides more than 98% of educational loans issued in Russia. The director of the “Borrow and Save” department of Sberbank told Kommersant about how educational loans with state support work in practice. Sergey Shirokov.

— In 2023, 1.2 million students entered Russian universities, and the total volume of educational loans issued did not exceed 100 thousand. What is the market potential for such loans?

— Educational lending with state support has enormous potential. And every year the number of loans issued doubles. This year we plan to grow at the same or greater rates, increasing the number of issued educational loans to 150 thousand.

Now one of the main tasks is to convey to future students the necessary useful information. Despite the fact that an educational loan has a serious appeal and there are no tangible obstacles to obtaining it, most applicants learn about it only when entering a university. Because of this, they cannot plan ahead for the possibility of taking out a student loan.

— Who should inform applicants about this opportunity?

— I think this is a common task – for banks, relevant ministries, and, most importantly, educational institutions. All universities in the country that have a state license participate in the state program. At the same time, there is no direct relationship between the bank and the educational institution; we are in contact only with the Ministry of Science and Higher Education and the Ministry of Education. The scheme works like this: an applicant comes to a university, determines which faculty he will study at for a fee, enters into an agreement and goes with him to Sberbank for financing.

— What specializations do students apply for educational loans more often?

— Law, management, economics and medicine.

— What criteria are used to select a borrower? How many students does the bank refuse a loan?

— The approval rate for the educational loan program with state support is very high, exceeding 95%. The fact is that state support not only subsidizes the rate, but also compensates for a certain risk for the bank.

Subsidizing the rate allows the student to receive a loan at 3% per annum for 15 years. Moreover, during training only interest is repaid, and in the first years – only part of this interest, so the monthly payment in the first years is comparable to the cost of a cup of coffee. The actual interest rate on the loan is 18.7% per annum, the difference is compensated by the state.

The student can pay for any period of study. It is more convenient to choose the full period of study and apply for a single loan for the entire amount. In this case, the required amount is reserved for the client, and tuition is paid in tranches for each academic period or year. The bank gradually increases the amount of debt and charges interest on the amount that is used. That is, the debt burden is growing gradually.

– But this only applies to percentages. The return of what part of the main body of the loan is guaranteed by the state?

– Less than half. A complex formula is used, but in fact this gives us the opportunity to approve loans to almost everyone who has a desire to study and has entered into an agreement with the university. It is important for students that there is no requirement for employment—loan obligations will not distract them from their studies.

— Probably, it won’t be possible to issue a loan to everyone anyway… Is there a limit that the state allocates for this program?

— Unlike many other state credit subsidy programs, in the case of educational loans we did not encounter any limits or restrictions.

— Many borrowers drop out of school. How many of them repay their loans?

— This product has an extremely low level of delinquency – no more than 0.5%. If the client stops studying, he receives an obligation to repay the loan at full rate without government subsidies.

— Are there any guarantors for the loan, for example, parents?

— The borrower is the student himself without guarantors. It is important that the product has a very wide age range, from 14 to 75 years. That is, not only children, but also adults can take out a student loan. Today, about 30% of borrowers are over 25 years old. Since last year, the program has been extended to those wishing to receive a paid secondary vocational education. This is a targeted loan. Clients do not receive money in their hands. Funds are transferred directly from the bank to the educational institution to eliminate the risk of them being used for other purposes.

— Can you get a loan only for your first higher education?

— No, it can be a second higher education or a master’s degree. That is, any education that involves obtaining a certificate of higher or secondary vocational education.

— How often do borrowers resort to early repayment?

— Clients rarely prefer to repay the loan ahead of schedule, even those who have already completed their studies. Although this can be done at any time.

— Has Sberbank considered the option of creating its own educational loan program without government support?

“We thought about this, especially since there was a certain break in the state program. In its current form, it actually started in 2020. But we understand that it is impossible to create a similar product without government support. The cost of lending is the most important parameter, and a commercial bank cannot offer a rate of 3% per annum without subsidizing it. In addition, this loan has a unique repayment structure that is clearly tailored to the student’s convenience. It is almost impossible to create an alternative that will also be beneficial and convenient for the client.

— But banks that create their own educational loan programs.

— We also have non-targeted consumer lending, which can be considered a competitor to educational loans. But there is still a different audience there. If limits appear in the state program and we have to refuse a large number of students or the key rate decreases and we ourselves will be able to issue loans for 15 years at 3% per annum, then we will probably return to the idea. But so far there is no such potential for developments. There are types of education that the program does not cover, for example, additional education, language courses or advanced training. But we have POS lending for them.

— Was the previous state program very different from the current one?

“It also involved subsidizing the rate and providing guarantees to banks, but the scale was limited. It seems to me that in 2020, when the program was updated, the factor of the general readiness of market participants worked, and we saw an increase in the popularity of the product. Now the program is open to all universities and secondary educational institutions with state accreditation and to all banks.

Interview taken by Maxim Builov