Mumbai: Students from Tier II and Tier III cities have emerged as the drivers of growth in the lending landscape for education in India, accounting for the overwhelming majority of education loan applications and approvals.
According to data released by education financing platform Kuhoo, it had received more than 2.5 lakh education loan applications seeking financing of a total worth of Rs 7,500 crore just between January 2025 and July 2026.
Of these applications, 86.5 per cent came from Tier II and Tier III cities, while Tier I markets accounted for just 13.5 per cent. The data highlights a growing need for and access to higher education financing among students in Tier II and Tier III cities.
Another report titled “India’s 155-Million Student Mandate” by Knight Frank revealed that investment in higher education is seen as a strategic move towards employability and economic mobility, rather than just as a social necessity.
It also reported that the education loan disbursal reached a record high of Rs 2,239 billion as of November 2025 in India, out of which nearly 67 per cent was through personal education loans.
Demand Centers
According to data, educational aspirations are increasingly extending beyond India’s traditional metropolitan cities.
Uttar Pradesh has emerged as the leading state by application volume, where it accounted for 12.87 per cent of applications. Maharashtra is second with 12.52 per cent of applications, followed by Karnataka (7.16 per cent), Bihar (6.91 per cent) and Tamil Nadu (6.77 per cent).
The trend suggests that access to financing is becoming an important part of higher education aspirations in the smaller cities. Students are increasingly seeking a structured funding system to pursue education and even enroll in professional programs.
“What this data tells us is that ambition is no longer concentrated in the metros; it is rising fastest in India’s smaller cities and towns. Students want financing that is transparent, accessible, and aligned with their long-term goals, as higher education becomes outcome-driven,” Kuhoo CEO Prashant A Bhonsle said.
Career-Focused Courses
The shift in the education loan market is not just concentrated geographically. The type of education that students are borrowing for is also changing, evidently.
Job training courses have accounted for 41.70 per cent of total disbursals, making them the largest category. MBA programs followed with a 29 per cent disbursal. Online courses accounted for 9.80 per cent, while engineering and medical education represented 5.50 per cent and 4.70 per cent, respectively.
Rather than education financing being concentrated primarily around the conventional forms of educational programs, a significant portion of borrowing is now directed towards job training and other career-oriented programs.
“The fact that the majority of students rely on education loans reflects a broader shift in aspirations, accessibility, and the growing importance that students place on career-focused education. Young learners today are looking beyond traditional degree programmes and are actively seeking specialised courses that can improve their employability and long-term career prospects,” StudyIn India chairperson Lakshmi Iyer said.