Reality Check India

IIMs outrageous moves

Posted in Uncategorized by realitycheck on March 30, 2008

Sorry about the attention grabbing title. Nothing, except being normal is outrageous in India.

Back when Murli Manohar Joshi was the HRD Minister and I did not have a blog, I used to comment under the name of realitycheck on Indian Express forums. This lasted a while until they blocked me. I remember kicking up a storm when I said the IIMs really do not get the reason they even exist. At that time, the overarching ambition for the powers-that-be was to open campuses abroad in places such as Singapore, Dubai, San Jose, etc. Some events recently have confirmed that they still do not get it. Clue : Government aided institute in a developing country.

A couple of days IIM-Ahmedabad (IIM-A) hiked their fees, scratch that. They doubled their fees. IIM-Bangalore (IIM-B) wasted no time in following suit.

Why is this a problem ? What is wrong in charging students what it actually costs to educate them ? The devil is in the details of how they plan to deal with those who cannot afford.

First the news clippings:

AHMEDABAD: The Indian Institute of Management, Ahmedabad, on Saturday announced a quantum jump in its fees structure raising it from the present Rs. 2.5 lakh per annum to Rs. 5.5 lakh per annum for the first year and Rs. 6 lakh for the second year of the two-year post-graduate programme in management.

The decision was taken at the annual meeting of the Board of governors of the IIM-A held here on Saturday just before its 43rd annual convocation later in the evening addressed by the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia.

Despite reports that both the Central and the State government nominees on the IIM-A Board were opposed to such astronomical rise in fees at one go, a spokesman of the IIM-A claimed that the fee hike decision was “unanimous.” The spokesman claimed that the government nominees were present at the Board meeting and agreed to the proposal.

Source : Hindu

Then a magnanimous gesture :

The institution, however, reiterated its commitment to support eligible students from the economically weaker sections. No student, if found eligible for admission to the IIM-A, would be deprived of the opportunity purely for financial reasons, he said.

In view of the fee hike, the Board also decided to increase the family income limit for eligibility for financial support from Rs. 2 lakh per annum to Rs. 6 lakh. “Graded need-based financial aid will be available to eligible students who qualify for financial support,” Mr. Singhania said.

Source : Hindu (emp added)

I could go on about how the IIMs primary goal must be to make quality management education accessible to Indians. Even though they do not get it, lets no belabor the point.

The issue I have is the effect of this hike on the “approachability factor”. Words like “eligible”, “need-based”, “family limit”, “deserving student” – are evil, no matter how well intentioned they are. They act as barriers and only encourage groups which are confident of negotiating them.
Back to the fee issue. The whole “no deserving student left behind for economic reasons” argument holds no water. Here is why !

  • The 6 Lacs per annum limit is arbitrary and without justification.
  • There is a risk of making the whole program unapproachable due to perception of cost and nervousness with the proposed aid system. “What if they reject my financial application on some flimsy grounds ? What if the loan officer does not like my looks, caste, religion, whatever ? My dad earns 7 lakhs, but is in deep debt, can I pull off the aid ? Is this “IIM” thing for rich kids, like Manipal, I do not know if I should try out ? What if by chance my aid gets rejected, I dont have a backup plan ?

The right approach : An automatic aid system

A guaranteed financial aid system. This must be automatic for those who apply.

This must feature :

  • no collateral
  • no eligibility cut offs such as the Rs 6 Lakh figure cited by the board
  • no personal interviews
  • no demands on parents or guardians
  • the interest rates must be nominal and must be on easy terms, there must be an option to start payments after a year or two of employment
  • this must be clearly advertised in the announcement notices for the CAT exam

In short, the lower or middle income group Indian must feel, “IIMs are expensive and my family is not in great shape. This is not a factor because they have this automatic aid package. I know I am guaranteed aid and I can pay back once I get a job on soft terms. No ifs and buts.”

An alternative is to keep IIM fees the same or to LOWER them. The selection process is still strong, so the brightest will make it anyway. Maybe, they have to slum it out and not be as flashy as the ISB or Great Lakes. They should let private schools go after the higher end and begin measuring their own operations to their original charter. They should go “wide” more then “deep”. If this means conceding top place to ISB, then so be it. IIMs cant fight the ISBs in the long run, as long as they accept taxpayer money.

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12 Responses

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  1. Sharan Sharma said, on March 31, 2008 at 11:51 am

    Hi RC, two basic questions, both stemming from the fact that IIM graduates will land up with much-more-than-decently-paying jobs:
    1) Why have an institutional financial aid system at all?
    2) > I know I am guaranteed aid and I can pay back once I get a job on soft terms.
    Why should the repayment be on soft terms? I think most banks anyway have a years holiday period for repayment.

    Maybe my questions stem from lack of understanding of the educational loan scene. Is it is a problem getting a loan of this magnitude? Or is collateral the problem? Are there relaxations if admission is secured in institutions like the IITs/IIMs?

  2. realitycheck said, on March 31, 2008 at 12:50 pm

    Sharan,

    Today almost all IIMs have cited the IIM-A decision and have their fees to astronomical levels. Other schools like SP Jain have also followed suit. When the dust settles we are sure to see a major rise in all institutes.

    It is no secret that IIT and IIMs win on the selection process. I do not think their faculty is writing books or undertaking significant consulting work, which happens in schools like Wharton. Along with any fee hike, they must also commit to increase their non-fee sources of revenue. As more quality seats open up, which I strongly think should be in the private sector (Great Lakes, ISB, etc) – the median salaries will come down.

    The loan process is daunting for people who have never had much interaction with organized finance. The preparation is a real grind and students who are on the financial edge will start balking at such astronomical fees. 11.5 Laks (I am not sure if this includes hostel + placement fees) is too high for a country of Indias per-capita.

    IIMs have started an unhealthy trend of government institutes cashing in on the low capacity/high paying jobs situation. There will be no incentive for them to increase capacity, to do research or consulting work.

    What if AIIMS / IITs / state universities/ decide to cash in too ?

  3. realitycheck said, on March 31, 2008 at 1:03 pm

    IIMs can tie up with banks for aid. Obtaining an educational loan without collateral is not easy. My cousins parents had to go through a tough time to get a loan, they eventually had to put their tiny shop as collateral. (This was for an undergraduate degree in a private engineering college). They had to run from pillar to post to get finally get it.

    I really dont want to see this situation in any taxpayer funded institute.

    A simple cut off of 6 Lakhs does not make sense at all. What if a family has two kids, what if the family just blew 5 Lakhs on a daughters wedding ? For an institute that trains tommorows leaders, these guys disappoint big time.

    They should study the US Federal aid program (FAFSA). They need take into account a variety of factors before deducing how much contribution is expected from parental / personal sources.

    I doubt they can come up with a more nuanced approach given their own abilities and the lack of credit/financial data available. THis is why I suggest they remove all eligibility criteria. Sure, a few rich guys might also avail of it. I cant see the problem.

  4. Bruno said, on April 1, 2008 at 1:45 pm

    Well said

    //Obtaining an educational loan without collateral is not easy. //
    Yes.
    The practical problems are enormous.

    //I do not think their faculty is writing books or undertaking significant consulting work, which happens in schools like Wharton//

    Yeah… It is high time we allow them officially to do consulting and get paid for that also

    //What if AIIMS / IITs / state universities/ decide to cash in too ?//
    I do not know about IIT / State Universities, but as far as Medical Colleges are concerned, the expenses of a medical college can be divided into

    1. Expenses for Education – Less than 10 % of the total expenses
    2. Expenses for Treatment – More than 90 % of the total expenses

    This 90 % is already got from the government as Health Subsidy. So there is not that much of a danger of a hike

    The fees in AIIMS and JIPMER are very very low

    I am not sure about the current values, but in 2006, the annual fees was
    1. AIIMS Rs 250
    2. JIPMER Rs 1000

    Please see http://www.targetpg.net/2006/03/stateinstitute-wise-comparison-of.html for the other fees structures

    By the way, I have started writing in my Tamil Blog at http://payanangal.blogspot.com/
    Covers few topics that you may be interested 🙂

  5. […] check has criticized the decision of the Indian Institute of Management (A) to raise its tuitions. He calls it an ”outrageous […]

  6. […] check has criticized the decision of the Indian Institute of Management (A) to raise its tuitions. He calls it an ”outrageous […]

  7. Unknown Indian said, on April 5, 2008 at 6:42 am

    Sorry buddy, but you are barking up the wrong tree. Subsidising management education (or post graduate education of any type)is completely unjustifiable – people who can’t afford the fees should work for a reasonable time, save money and then go for a post graduate degree. In fact, scholarships for people who hail from poor families are also completely unjustifiable at the IIM level – the poor can work for a while and then pay for management education. And given the kind of stipends firms pay for summers, (and the salaries they get after graduating) students can easily afford to pay their fees. To illustrate the pt, Indian investment banks were not able to get their pick of students despite offering starting salaries in excess of Rs. 20 lakhs!!! (+ bonuses)

    I have no problems with loans for management education however – but the free market will provide that at some rate – paying 20% p.a. on Rs. 11 lakhs to up your salary from Rs. 6 lakhs (for an engineer) or Rs. 3 lakhs (for a BCom) to Rs. 12 lakh + is a phenomenallygood investment – and people who cant do this simple math have no place in IIMs. The only role for government is probably to make interest on these loans deductible without any limit

  8. IIM-A Fee Hike | DesiPundit said, on April 7, 2008 at 4:30 pm

    […] Reality Check opposes the fee hike implemented by IIM-Ahmedabad. Let the students decide if IIMs fees are appropriate or not; if they feel the value of education is not worth the cost, the students will choose institutions which offer better value for money. It would illustrative to remember that there has been absolutely no protest in any of the IIMs–perhaps, the students realize that they will recover their investment in a few months. […]

  9. Vibhash said, on April 7, 2008 at 6:33 pm

    for all those who support the fee hike saying IIMs fetch u much more than wht you pay there….they fetch u once u pass out from there..i.e. after two years…waht about people who aint rich enough to pay such a fee…i heard IIMA is going to charge 11 lacks…thts huge..

  10. Arun Sharma said, on July 26, 2008 at 12:55 pm

    well…………………..This kind of hike can be rather controversal coz these kinds of things compel an aspirant to worry about various aspects besides working hard on his preparation of entrance tests……………moreover he will be dangling in the horizon of uncertainity what if i couldn’t be sanctioned loan…….and also the measures of judging the financial positon of the guradians the aspirants r not so effective coz a few papers of ITR can’t depict the whole fin-condition of a person…………

  11. rahul said, on June 4, 2009 at 7:12 am

    this is not good….education should not be so expensive…education system of any country should be such that so that all the countryment can have easy access to the education because education is the power of any country. A country should always motivate its generation for studies not demotivate by such type of things like huge fee hike…Ok packages are huge after completion of the caurse but but that is after completion but one shold be free enough to study these two years…so on the whole this much fee hike is not fare……

  12. rahul said, on June 4, 2009 at 7:15 am

    O my countries Education Ministry…please do not sleep and see what is happening. We all belong to a poor country. We are not very rich only few are rich..Please do something. Think of all not about few.


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