One decade is a long time. One decade back getting offer letter from IIMs could have made you jumped into sky. Sweets could have been distributed by your parents among your neighbors on this extraordinary achievement. I also get remind of winning and confident attitudes of the students at these premier institutes those days. There was the time how students used to attend the interviews in shorts and get selected with promise of fat paychecks. I also remember how newspaper front pages filled with unbelievable top salary figures (1 crore+ ) coming at IIMs and even at other B-schools such as ISB, etc.
It was also the time when Shri Atal Bihar Vajpayee ji led first BJP Govt. was at the center [1999-2004]. The then serving H’ble HRD Minister Shri Murli Manohar Joshi ji (incidentally who was friend of my late grand father) wanted to drastically reduce fees of mighty IIMs reasoning that fees is too high and probably not affordable. Fees that time was 3 lakhs for 2 year MBA programs. H’ble Minister wanted to bring it to 0.75 lakhs – a steep reduction by 75% in order to make it affordable to common class.
Ex HRD Minister Shri Murli Manohar Joshi along with present HRD Minister Shir Prakash Javadekar
However BJP did not returned to form the Govt. and Congress came at center. The issue got lost meanwhile.
IIMs planned to create their own endowment fund by then after getting nervous by this govt. plan. IIMs argued that their students are getting hefty packages and fees is too less against expenses. Hence they started hiking the fees incrementally or rather steeply. That time ISB was charging 20 lakhs+ fees while IIMs were charging mere 3 lakhs. IIMs also argued fees is substantially less than their global peers. (not very good argument when one looks at global per capita income vs. Indian per capita income). Following IIMs, even other B-schools got emboldened to increase fees by 4-5 times in a short duration of time.
Worryingly during last one decade: Fees at IIMs went up by leaps and bounds right from 3 lakhs to 25 lakhs. But avg. placements are almost stuck there only.
Lets take a case. A middle class family scene.
Father is briefed by his beloved son of his feat of scoring 99% CAT score and securing seat in several of IIMs and other leading B-Schools of India. His son also shares other details of offer letter including fees of the program close to 20 lakhs INR.
His father might not be even sure what expressions to bring on face. I assume in 90% cases he will react happily under hope some great fortune is on the way.
They (parents) are not aware/ realizing that their son or daughter is going to take an educational loan of 20 lakhs for his MBA program. This turns out to be 35000/- monthly installment for whopping 7 years.
Let me tell you, this amount (35000/- EMI) which you need to pay month on month for full 7 years is going to be a very heavy burden on your head and going to take a toll on your smile and rather carefree life.
Adding here, please realize a middle class family which hardly makes anywhere between 10000-30000 per month is entering into a loan of 35000 per month for 7 years. And your asset is tacit. You cannot touch it. It is a degree rather than some house or car. You cannot sell it even if you want. I might sound rude here but fact is fact. The boy or girl who is going to probably earn more than 50000 per month (please don’t assume that all IIM graduates earn more than 1.5 – 2 lakhs per month) is also walking a very risky and frustrating path. What if something happens to that boy or girl. He or she will further slip into loan trap and it will be very difficult for simple parents to rescue their son or daughter from a chronic tension of monthly installments. Don’t forget these sons/ daughters have moral duty to support their old parents / younger siblings financially as they are expected to come forward in this age group.
A fees of 20 lakhs in a developing nation India is highly unwanted when the applicant is already cracking some national exam (> 99 percentile) to earn his seat.
India has per capita income of some 2000/- INR per month. Imagine a son who is admitted to big institutes with hefty tuition fees tag of 20 lakhs coming from such a family.
Over the years admission procedures at IITs / IIMs have become highly skewed in favor of people coming from “well off” families rather than poor class.
Biggest irony is that in India prevailing Education Loan Interest Rate is 12-14% whereas Home Loan / Car Loan Interest Rates stands at only 10%/ 8% respectively.
Moreover, with such a hefty loan on your head drastically reduces your bargaining power with recruiting companies on campus. Which results in sub-ordinary packages cum job profiles. Over the years it becomes even more difficult to land in suitable roles.
Now compare this scenario that your son or daughter gets admit into IAS / NDA / PCS / PSUs, etc.
Scenario 1: your son gets into IAS (Indian Administrative Services)
- Wonderful. He is getting admission to Lal Bahadur Shastri National Academy of Administration, Mussoorie. Also he will start getting monthly stipend / salary for one year of his training. After completion of training he is going to get close to 60-80k per month along with other perks.
Scenario 2: your son gets into NDA (National Defense Academy)
- Great. He is getting admission to Indian Military Academy, Dehradun. Also he will start getting decent monthly stipend / salary for 3 years of his training. After starting his career as Officer of Army he is going to get close to 60k per month along with other perks.
Scenario 3: your son gets into PSU (Public Sector Units such as Indian Oil. etc.)
- Good. He is again going to get close to monthly salary no less than 60k when service gets started.
In all the above scenarios, all 3 are permanent jobs with the Govt. Hence comparing it with your voluntary choice of getting into IIMs cannot be correctly compared.
While into permanent govt. jobs people are having a fix good pay structure but it was the trend people used to try for premier IIMs in order to get into top corporate jobs and aiming top salary packages which can be close to 200k per month.
But I don’t think this is happening any more. Firstly your salary has got reduced to mediocre 50k-100k per month on majority basis (not talking of few 10% who make it to 200k per month). Secondly which is more worrisome that you are having a loan with EMI of 35k for full seven years dear. Please note that you cannot even think of a break in these seven years supposedly (due to any reasons – start ups or something like that) even if you need/ aspire for.
More ironically IIT/ IIM graduates along with other top T/ B School graduates are expected to lead/ start their own start-ups (these guys have great potential for start ups). Which is again a noble move. But with above facts as I mentioned, at least for a middle class family background guy is simple “no-no”.
By very virtue of high fees structure IIMs are no longer attracting best of best minds from Indian Middle Class society. Rather they are only attracting / offering privilege convent educated kids from metros who already groom themselves for these elite institutes. Have a look at selection procedure and one can easily figure out how one stand no chance when one is from Hindi / Regional Medium school with “humble” (read poor) family background.
We should not forget IIMs are prestigious institutes set up by Govt. of India with vision of providing leaders to society. Citizens already pay Income Tax and all other applicable taxes. It is govt.’s responsibility to at least maintain affordable fees to their best institutes so that all segments of society can aspire to get into.
I hope present BJP govt. shall look into their unfinished agenda and have a good thought how justified is charging 20 lakhs fees from very those students who crack CAT 99% score and are invited to join these prestigious education echelons. This is also necessary if govt. wants their Start Up India initiative to succeed.
My thoughts only.