The IIT Hike: Debunking the myths

High fee, low returns and loan burden can potentially kill the purpose and lure of IITs

The IIT Hike: Debunking the myths
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The Union government has given its nod to increase Indian Institutes of Technology’s tuition fee from Rs 90,000 per annum to Rs 2,00,000 per annum. Except for SC/ST students and certain others who qualify for a fee waiver, the hike will affect all other students.

The national discourse surrounding the fee hike is filled with half-truths and farcical arguments of all hues, masquerading as justifications for the hike. Here, we attempt to counter those arguments, and point out adverse impacts of the hike.

Pay your way

The first argument in support of the increase is that education after school isn’t the government’s responsibility and therefore should be charged to the student. However, the principle of charging all post-school education to students doesn’t make pragmatic sense. With only 4.5 per cent of the population possessing postgraduate degrees, it seems obvious that the need of the hour is for the government to make higher education more easily accessible in India. To expect a return from students seems premature. For instance, Union Health Minister Dr Harsh Vardhan once remarked that the government spends Rs 8-10 crore on the education of each student at All India Institute of Medical Sciences. Would the government therefore expect to recover Rs 8-10 crore from each AIIMS graduate? One needs to take more factors, like the ability of students to repay, into consideration.

Payback points

This brings us to the second argument in support of the hike —the supposed salaries of IIT graduates. Fresh graduates are supposed to earn enough to repay a student loan within a reasonable time frame. For instance, the Firstpost article on the IIT fee hike assumes that the average salary of a fresh IIT graduate is Rs. 12 lakh per annum. This is in line with the widespread perception that salaries of many fresh IIT graduates are in crores per annum. Such perceptions are way off the mark. In reality, the salaries are far more modest. The median salary of fresh IIT graduates is Rs. 8-9 lakh, cost to company (CTC), per annum. The Dr. Kakodkar Committee of 2011 on IITs also says that the typical salary of a fresh graduate is around Rs 6. lakh per annum. This means that 50 per cent of students earn less than Rs 8-9 lakh (CTC) per annum. The net income would then be a little more than Rs. 50,000 per month. This is the salary earned by a median IIT graduate.

The salaries in crores quoted in media are highly misleading because they are foreign offers to a handful of students and their salaries in Dollars are converted into Rupees. The Report of the Review Committee of IITs (2004) notes that over 70 per cent of IIT graduates live in India, which makes this Dollar-Rupee conversion all the more misleading.

The total fee at an IIT, per annum, comes to around Rs 3 lakh, with a tuition fee of Rs 2 lakh per annum along with hostel and other expenses. If this were to be taken as a loan, the total loan amount would be Rs 12 lakh for a four-year course and Rs 15 lakh for a five-year course. Back-of-the-envelope calculations suggest that one has to pay an EMI of around Rs 30,000 per month for 5-plus years. With a take-home salary of Rs 50,000 a month — assuming Rs 20,000 living expenses in a metro and the salary increase is on par with increase in expenses — one has to live on meagre savings for five to seven years after graduation to pay back the loan. Thus paying back this amount isn’t as easy as it is being portrayed and the time frame for payback is certainly not two years for a median case, as is being presumed by many.

All of this is assuming that there are no economic downturns in between and no emergencies. If any such event occurs, one has to end up paying for an even longer time. We’ll come to the adverse impacts of this scenario later.

Management vs Technology

This then brings us to the third argument in support of the hike — if students take loans to study in Indian Institutes of Management, why shouldn’t the same be expected from graduates of IITs?

There are two factors at play here, the median salary in comparison to the loan burden and the stage of career at which the course is pursued. First, the median salary of IIM graduates is higher for a similar or slightly higher loan burden of Rs 12-21 lakh, depending on the IIM (one of lowest fees amongst IIMs is at Raipur, and one of the highest is at Bangalore).

Second, IIM is a postgraduate professional course, often pursued at a later stage in one’s career. This implies that many of those who opt for MBAs have made a planned, conscious decision to pursue it. This is in contrast to IIT undergraduates who earn lower median salaries and are at early stages of their career. A high loan burden doesn’t clip the wings of management graduates as much it does an undergraduate’s.

Coaching class

It’s also been observed that many students pay Rs 1 lakh per year or more for joint entrance examination coaching and therefore should also pay the same for an education at IIT. However, parents are investing their savings in the coaching system due to the failure of public systems. This is no reason to burden anyone with greater debt.

The IIT effect

The contribution of IITs is hard to quantify, especially the counterfactual. What would have happened without IITs? The best documented estimates of these are by a report jointly published by India Brand Equity Foundation, a trust established by the Union Ministry of Commerce and Industry, and Zinnov Management Consulting, released in 2008 by the then Prime Minister Dr Manmohan Singh. It documents the contribution of IIT graduates in several sectors –- economy, social, research and so on. Summarising all the details in this article would be beyond its scope. Some of the pointers are presented below:

  • On an average, an IIT Alumnus is associated with the creation of around 100 jobs and close to 71 per cent of the jobs generated, directly or indirectly, by IIT alumni are in India.
  • Average revenue responsibility per alumnus in India is close to USD 7 million where revenue responsibility is defined as the overall revenue that IIT Alumni control or are responsible for across the globe in various roles.
  • Eight per cent of the alumni work is in social sector transformation.

Further, Review Committee of 2004 also lists some of the contributions. These estimates suggest that returns have exceeded investments made, which would suggest there is no reason to raise the fees.

The final argument justifying the hike is that many other countries charge students for higher education and India is overspending on higher education. Here again, the evidence doesn’t support this. A 2004 paper on expenditure on higher education in India says,

“…higher education is heavily subsidised by the state in most parts of the world, and that the level of subsidy in India is not at all high in comparison with others. Similarly the rate of cost recovery in higher education in India is also fairly comparable with many other developed and developing countries.”

The paper also points that there is little evidence to suggest that subsidy to higher education is less progressive than that to elementary education, in the Indian case. Considering the position of India in its evolutionary stage, there is a need to invest more in higher education to leverage its human capital, rather than decreasing it.

Under the circumstances, the raised fees are completely unjustified. Worse still, because the hike has been reported as necessary or justified, there’s little attention being focused upon the possible adverse effects of this move.

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