Students in Tier 2 and Tier 3 cities now account for over 86% of education loan applications, signalling a major shift in India’s higher education financing trends towards smaller urban centres and employability-focused courses.
India’s education-loan market is being reshaped by borrowers far beyond the country’s biggest cities, with students in smaller urban centres accounting for the vast majority of demand, according to Business Standard. Kuhoo, an education-financing platform, said it received more than 2.5 lakh applications between January 2025 and July 2026, seeking loans worth ₹7,500 crore, and 86.5% of those applications came from Tier 2 and Tier 3 locations.
That leaves just 13.5% of applications coming from Tier 1 cities, underscoring how sharply demand has broadened beyond metro areas. The pattern suggests that students and families in smaller towns are increasingly willing to take on debt for higher education, particularly when they believe a course can improve job prospects and future earnings.
The strongest demand is concentrated in job-focused courses. Kuhoo said job training programmes accounted for 41.70% of disbursals, while MBA courses made up 29%. Online programmes accounted for 9.80%, engineering for 5.50% and medical education for 4.70%. Together, job training and MBA loans represented 70.7% of disbursals, reinforcing the view that many borrowers now see education primarily as a route to employability rather than a qualification alone.
The regional spread is equally notable. Uttar Pradesh led applications with 12.87%, narrowly ahead of Maharashtra at 12.52%, followed by Karnataka, Bihar and Tamil Nadu. The remaining states in the top 10 were Andhra Pradesh, Madhya Pradesh, Telangana, West Bengal and Rajasthan. The trend comes as other reports point to a wider rise in education borrowing in India, with The Week noting a 17% increase in students receiving loans from public sector banks in FY2023-24 and a near 40% rise in outstanding education loans over three years.
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