INDIAN INSTITUTE OF MANAGEMENT BODH GAYA

BUSINESS RESEARCH METHODOLOGY

REPORT ON:

FACTORS AFFECTING DECISIONS IN APPLICATION OF

EDUCATIONAL LOAN
[A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS OF THE DEGREE OF MBA]

SUBMITTED TO:
Amresh Kumar [Asst. Professor]

SUBMITTED BY:
GROUP – 3

Shresth Gupta
Minalee Raghuwanshi
Rohit Vijay
Shivam Sagar
Risabh Srivastva

ABSTRACT
 ‘’The main hope of a nation lies in the proper education of its youth’’ – Erasmus

For every nation to prosper and be independent, education is always considered as the key
ingredient. With education comes dependency and a bright future. With this reality, the advent
of a variety of degrees and courses provided everyone with the opportunity to be educated.

To achieve the highest level of literacy rate in any country, financial aid/backup is necessary
due to high investments over the years. For this there is a huge demand of Educational loans
and aid throughout the world.

Due to such a high demand, the educational loans through banks and financial institutions are
considered as the quick and safest mode. It is to be noted that, education industry is set to
increase by 12% every year in India because of increased budgets year after year. To meet this
growing demand there are a number of loan providers with a variety of terms and conditions and
interest schemes.

As a result, we find this very important to assess the factors which directly or indirectly affects
the choices/decisions while applying for educational loans so that in future every party can take
the help and contribute in education to all

INTRODUCTION
Education plays a vital role in the development of a Nation. Due to the advent of self-financing
colleges, the cost of education became very high. Education loan have been a great assistance
to those students who have not been able to pursue professional education due to financial
constraints. But loan programmes turned out to be disappointing in terms of repayment status.
In this study we can analyze the importance of educational loans, Benefits of educational loans,
Issues in getting student loans, Problems faced by beneficiaries while taking education loans,
Repayment and recovery of education loans etc.

Above all, the studies analyze the problem of under financing of higher education. Till some
year’s back higher education and quality education was not affordable to some illustrious
students because of the financial constraints. There was not any alternative but to jump into the
job market prematurely. And this led to untimely end of budding talents and their forceful
transformation into to the mediocrity. Scholarships were there, but those were less so in
numbers that only luckier few could avail them. But now the scene has changed drastically.

An education loan is a sum of money borrowed to finance post-secondary education or higher

education-related expenses. Education loans are intended to cover the cost of tuition, books
and supplies, and living expenses while the borrower is in the process of pursuing a degree.
Payments are often deferred while students are in college and, depending on the lender,
sometimes they are deferred for an additional six-month period after earning a degree.

Education loans are issued for the purpose of attending an accredited college or a university
and pursuing an academic degree. Education loans can be obtained from the government or
through private-sector lending sources. Federal loans often offer lower interest rates, and some
also offer subsidized interest.

SIGNIFICANCE OF THE STUDY

Education is the most significant asset one makes in life. Higher studies and specialization in
specified fields demand for extra financial aid from time to time. Banks provide the immense
financial support needed to cover almost all the expenditures incurred for a fruitful completion of
the preferred course. Student loans make it easier for those who are from financially weak
backgrounds to acquire a respectable college education. Now days, the private and public
sector bankers providing financial assistance to the students’ for pursuing higher education like,
management, engineering, medicine, MCA, architecture, hotel management, agriculture, pure
sciences, arts and commerce courses. Hence, the study is attempted to analyze about factors
influencing the students to avail education loan.

Problem Statement

Education is one of the major areas of spending for various households. The financial support
offered by banks avail students to enroll in expensive courses in order to do higher studies.
Students who receive these education loans are more likely to enter into a university/institution.

The dominant factors preferred by them would make it easier for us to make it accessible to
them as well as help in mobilising more funds efficiently to educate the majority of population.
RESEARCH OBJECTIVES
The objectives of the study are –

1. To determine the most important factors affecting the selection of banks in the education
loans market
2. To find out which bank is favoured by IIM Bodh Gaya students for education loan
3. An analysis of choice criteria in the educational loans market

Chapter 2 : Literature Review

2.1 Introduction

This chapter contains all studies on the subject of the current research, and reviews
each study related to the objectives and questions raised in the current research plan.
On the other hand, we discussed the variables we adopt for formulate the hypotheses of
research, the factors that affect the customer’s decision to choose the bank from which
they borrow the Loan.
2.2 Theoretical

The role of public Sector banks in financing Students Loan, which shed light on the
emergence of two channels through which the financing of Educational loans by Public
& Private Sector Commercial banks, the first channel is through the Public Sector
Scheduled Commercial Banks and the other channel is through Private Sector
Commercial Banks to finance Students Educational Loans. Which we tried to Depict
through Our Questionnaire reflected in the increase in the volume of loans financed by
Public Sector Commercial banks, where we received 70 Responses in which close to
75 % of the respondents did avail the Education loan.

2.2.1 Bank Selection Criteria

We Floated a Google Form with quite a Number of questions ,to find out the reasons for
the preference of customers to other bank that one of the most important factors in the
selection of a bank and its preference to other banks is the behavior of government
employees and employees in other Banks to provide Digital Banking Facilities to the
students of IIM Bodhgaya The presence of bank branches in different locations or even
bank offices, appropriate working hours, as well as the presence of a calm and
comfortable environment and atmosphere with a uniform commitment and uniformity of
the employees, which gives a kind of comfort and confidence to the Students who want
Education Loan. In addition to giving Effective Customer Support and having an
effective and serious system for receiving customer complaints. For the Purpose of
Students taking Education Loan it is necessary that the banks meet the customers
expectation with regard to what should be their Current interest rate Should it be a
Floating Rate or a Fixed Rate. Customer confidence is important as banking is based
on trust and integrity.

The most important factors that affect the attraction of Students to the bank for
Educational Loans are in short:
1. Customers trust Public Sector Banks due to their long history in market,
reputation and safety of their Interests.
2. The location of the bank and the geographical spread of its various branches.
3. The ability of employees to meet the needs of clients in a distinguished
professional manner.
4. Speed and accuracy of transactions and the variety of products that meet all the
needs of customers.
5. Reliance on Digital technological systems and methods in executing
transactions.
6. The internal organization of the branches of the Bank in line with the needs of
work and customer satisfaction and privacy during the implementation of their
transactions.
7. Maintain complete confidentiality of all data and transactions of customers under
the laws and customs in force.

2.2.2 Banking Loans

Most of the interest rate on the Education loan is applied on a floating

Basis and the borrowers are expected to repay the outstanding
installments at specified intervals. We can see where modern banks
get their ideas. In fact, the word of the bank is derived from the "banca",
and the seats that sat on the moneylenders when trading. Through Our
Research We tried to figure out the Role of Commercial Banks in
Financing Higher Educational Loans.
1. It is clear to us from the questionnaire’s response received that
Students do check different Banks loan’s Terms & Conditions and
can be classified as the by the Banks according to many criteria and
various measures and this according to its objective, medium-term
or long-term or according to bank’s economic function and the
nature of the subject of funding.

2. Such classification is due in particular to the nature of the

transaction, the size of the amount submitted and the nature of the
risks and guarantees provided.

On the one hand, the term and duration of the loan is of long-term financing,
usually in the form of a loan that is in a period of more than one year and may
be up to five years or more depending on the type of project and its needs. In
 order to obtain long-term financing, you have to go through more complex
procedures.

The amount of the loan, the ways and means of payment and the interest rate, as well
as the submission of project documents and budgets, as well as guarantees to make
the bank secure on his money such as letters of guarantee and ownership of fixed
assets and usually bank guarantees in his favor. The Bank may request additional
collateral to increase confidence, avoid risk and minimize possible loss in the event of
default by the Students, inability to pay the loan or late payment.

2.3 Customer Service

The study found that there is a difference in the relative importance of

customers in evaluating the services quality of banking and the need to
develop the skills and expertise of employees in order to provide the best
services to customers, especially the customer relations management to
know the detailed information about customers and their needs and desires.
Our Study aimed to test the impact of the characteristics of the service
provider on the degree of customer satisfaction and confidence, and to test
the impact of the degree of customer satisfaction and confidence in the
service provider on developing customer commitment. We also found that
quality is the fulfillment of the expectations and requirements of the individual
service or product provided by a particular institution or entity, and can be
measured by knowing the satisfaction of individuals about the services and
products provided, and is achieved by avoiding the occurrence of errors and
defects and deficiencies. The degree of friendliness of staff will also have
affected the result of customers choosing a bank.

Quality of service is one of the basic principles that precede customer

satisfaction. On the other hand, customer satisfaction influences the
customer's future purchasing decision and his understanding. The quality of
the banking service is a prerequisite for satisfying and retaining the
customer's desire.
We Observed that there are five dimensions to determining the quality of
banking service -
1-Trust: It means the ability to perform the service independently and accurately.
2 -Response: It means the desire to help the client and the development of the
service provided.
3- Incarnation: means the physical facilities, equipment and appearance of the
employees.
4- Safety: It means knowledge and integrity of employees and to give
confidence and safety to the client.
5 -Empathy: means the level of care and personal attention provided to the client.

2.3.3 Interest Rates

With the increasing awareness of the need to prepare and qualify employees in the
institutions for security, safety and occupational health and the interest of private and
private institutions, the provision of specialized administrative security support, technical
consultations and coordinated participation of security information and security training
for institutional staff is an important duty.
According to the responses received, the bank's reputation could be explained by the
decision to choose the bank. Customers take the bank's reputation into account before
making the decision to borrow, because customers are concerned about whether the
bank's security is stable or not. The bank will have the most guarantee of advantage
against an unsecured bank.
The concept of trust and security is a key element in creating long-term relationships with
customers, especially by keeping customer information confidential and committed to delivering
the best over time. The concept of trust is generally formed between the organization and its
customers through
(1) efficiency and competence in service delivery
(2) interest in both the interest of the client and the company's interest, reflecting the company's
social side of the market.

Through the responses received we also found out that Customers depend on banks
in the following cases:

1. When the interest of customers is preferable to the interest of the bank.

2. The system of preparing accounts in the bank is trustworthy.
3. Bank policies and practices are trustworthy.
 4. The process of providing the service in the bank is safe.

We found that there are other factors that influence the customer's decision to choose or
continue with the banks:

1. Efficiency in service delivery

2. Use advanced technology in service delivery.
3. Follow-up changes in the needs and desires of customers
4. The degree of flexibility of the bank's policy.
5. Spread of branches and ATMs.
6. Interest justice.
7. Extended working hours for customer service.

2.4 Conclusion

We conclude from this chapter that the subject of bank loans is one of the most
important activities of the banking system. This chapter dealt with our findings related to
borrowing from banks and how banks deal with their customers. We conclude from this
literature review that there are common points for both Students and Banks when it
comes to borrowing & lending . We also note that most studies have reached almost the
same results, that is, there are common factors among customers that affect the
decision of the customer to choose the bank and borrow from it.

CHAPTER 3 : Research Methodology

Introduction
This chapter includes everything related to the research model and the study variables. After we
talked in the first chapter about the problem of the study and the main question of this research,
we are here to formulate hypotheses research, so we reach the objectives of research to show
the impact of the factors mentioned in the Conceptual Model on the decision of IIM Bodh Gaya
to borrow education loan from banks.
Research Design
This study used descriptive research. Descriptive research involves gathering data that describe
events and then organizes, tabulates, depicts, and describes the data collection.
It often uses visual aids such as graphs and charts to aid the reader in understanding the data
distribution and therefore offered a better clarification on online advertising, and ultimately give a
clear picture on the effectiveness and reliability of online advertising and its relationship to
purchase decision. Our Research Design Includes the following Points :-

No. of Respondents: 70

Target Audience : IPM'01, PGP '06 and MBA '07

Research Method: Questionnaire

Sampling Method: Convenience Sampling

Independent Variable: Interest Rate, Customer Service & Security

Dependent Variable: Customer Decision

Research Hypothesis
H1: Customer Service affects the customer's decision to take an education loan.

H2: Security affects the customer's decision to take an education loan.

H3: Interest Rates affects the customer's decision to take an education loan

Population of the Study

Indian Institute of Management Bodh Gaya has over 400-450 registered students in the current
batch of both years passing 22/23. Also we have included IPM 01 batch for collecting data. This
study targeted students of Indian Institute of Management Bodh Gaya because of the easy
availability of data, There for the final collection of data we included MBA batch 06, 07 & IPM 01
Sample Design

Data Collection
The research made use of primary data, which was collected using a structured questionnaire
distributed to the 70 respondents sampled from the Indian institute of Management. The
administered questionnaires were collected after completion by the respondents on the same
day and their responses used for analysis.

Validity and Reliability

Content validity refers to the extent to which an instrument represents the factors under study.
To achieve content validity, questionnaires included a variety of questions on the knowledge of
students on internet advertising and consumer behaviour. All the subjects completed the
questionnaires in the presence of the researcher. This was done to prevent subjects from giving
questionnaires to other people to complete on their behalf. Reliability can be ensured by
minimizing sources of measurement error like data collector bias. Data collector bias was
minimized by the researcher’s being the only one to administer the questionnaires, and
standardizing conditions such as exhibiting similar personal attributes to all respondents, e.g.,
friendliness and support. Pilot testing was carried out by the researcher to identify any flaws on
the questionnaire to reduce errors of measurement and test for consistency.
Here, In our Case we have used Cronbach's alpha, is a simple measure for determining a
composite score's reliability, or internal consistency.
This test Checks The Oveall Reliablity of Data. If Alpha value is greater than 0.6 then we
consider the Sample have enough potensial to proceed for further analysis. If Not, we Simply
Reject the Data.
 CHAPTER FOUR
DATA ANALYSIS, RESULTS AND DISCUSSION

4.1 Introduction
This chapter presents analysis and findings of the study as set out in the research
methodology. The results were presented on the factors affecting the selection of
educations loans;the case of University of IIM Bodh Gaya Students. The study targeted
70 respondents out of which all the 70 respondents responded and returned their
questionnaires contributing to a response rate of 100%. The chapter covers the
demographic information, and the findings based on the objectives.

4.2 Demographic Information

The study has classified respondents based on age, gender and nature of degree
studied by them in IIM Bodh Gaya.

As shown in table 4.1, the study sample was representative of all age group targeted
with the 17–20-year-old students forming the highest proportion of the sample.

The sample was representative of both of the genders, with males being the most
dominant respondents, with 46 out of 70 respondents identifying as male.
 4.3 Descriptive Statistics
The standard deviation of customer decision is high signifying that customers will be inclined
to leave if they do not find the security, customer service and interest rates satisfactory.

4.4 The concept of multiple linear

regression
Linear regression analysis is one of the most important research tools used in various
fields. It aims to study the interrelationship between an affected variable or a dependent
variable and more than one independent variable, by tools of a mathematical equation
called the multiple linear regression models:
Multiple Regression: Y = a + b1X1 + b2X2 + b3X3 + ... + bnXn + u Where:

Y = the variable that you are trying to predict (dependent variable -Customer Decision)
X1 = the variable that you are using to predict Y (independent variable – Customer
Service)
X2 = the variable that you are using to predict Y (independent variable – Security)
X3 = the variable that you are using to predict Y (independent variable – Interest Rates)
a = the intercept or constant term

b = the slope or partial regression coefficient of variables

u = the regression residual

4.5 Model Summary

 The Adjusted R squared shows the goodness of fit of the model used, it is
high enough at 48.2% which suggests that the independent variables of customer
service, security and interest rates can account for the changes in customer
decision amounting to 48.2%, the rest of 51.8% of customer decision is affected by
variables which are not under this study.

ANOVA of the regression

We see that F value is 22.444, which mean there is variance between

variables. F-statistic is also significant at 1% level of significance. This means that
at least one independent variable affects the dependent variable.

Co-efficients

From the above results and by applying the multiple regression

equation that we have discussed in detail in the chapter of the
research methodology, we conclude the following:

Y = b0 + b1X1 + b2X2 + b3X3 + u

Customer decision = 0.558 + 0.176*Interest rate + 0.355*Customer Service +

0.371*security

We understand from this that the higher the percentage of an

independent variable (as the other variables are constant) they
positively affect the high decision-making percentage of the
customer.

4.6 Test Hypothesis of the Study

It is clear from the above that the study has achieved its objectives; the
study clearly identified the most important factors affecting the decision of
customers to choose the banks from which they borrow. The results of the
study were as follows:

As presented in the table, the coefficients of Constant, Customer Service,

and Security are significant at 1% level of significance, that‟s supported
our hypotheses as the p-value in coefficients less than 0.05 (P< 0.05) but
the p-value of Interest Rates is 0.081 showing that the customer decision
is not affected by Interest rates.
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 CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction
This chapter presents summary of findings, conclusion and recommendations of the
study in line with the objectives of the study.

5.2 Main Questions of the research

 To achieve its objectives, the study was raised the following
research question:

What factors affect customers' decision for taking out education loans.

1- Do Customer Service affects the customers' decision to take an

education loan.

2- Do Security affects the customers' decision to take an

education loan.

3- Do Interest Rates affect the customers' decision to take

an education loan.

5.3 Findings
The main question of this study cannot be answered with the word
yes. It should be said that there are several factors that affect the
decision of the customer to choose the bank which he/she is
borrowing from it.

As for the sub-questions presented in this study, it is possible to

answer them through the following points, which are also factors
that our study concluded that affect the customer‟s decision for
taking a loan out the bank.
 1- There is an impact of the customer service quality
provided by the bank on the customer's decision to take
an education loan.

2- Security Factors affects the customer's decision to take a loan.

3- Interest rates do not affect the customers' decision to take an

education loan.

5.4 Limitations of the study

One limitation that has slowed down our process is not finding
enough customers.During the period of the field survey for the
distribution of questionnaires to borrowers we obtained only
received 70 responses.

5.5 Recommendations and Suggestions

In this study, we encountered several obstacles in finding the largest

number of customers. In order to overcome these difficulties, we
present several suggestions and recommendations for future
research.

The study was conducted on one sector, the banking sector.

Therefore, there is an opportunity to conduct a comparative study of
the factors influencing customers' decision for two different sectors,
such as banks and other financial institutions.
Future studies should include all types of banks that provide
loans.The subject of the study was addressed in one institution,
while future studies may examine a wider area.
It is important that the current researcher or other researchers in the
future focus on new factors (such as technology, bank loyalty,
convenience, and other factors) that influence customers to choose
banks to borrow from them or other transactions.