These days, the proportion of students having to pay tuition fees is increasing dramatically. We are not necessarily advocating a return to Soviet order when higher education was free to all those with the necessary talent, but instead, the introduction of a system that works in every market economy – that of student loans.

The Small Business Assistance Center held a roundtable at The Academy of National Economy, on the 26th of January, to discuss the issue of student loans systems in Russia. Or to put it better, the near absence of such a system. Not a single representative of a financial institution attended the roundtable, a sad indication that they are not going to pay much attention to the matter in the near future.

In attendance were representatives of business schools and one State Duma deputy who is a member of the parliament’s educational committee. Observing the lack of interest from banks in student loans, those at the roundtable suggested the state do something. However, while the state here regulates many industries unnecessarily, in this instance they have chosen not to intervene, when they should. Education is a predominantly non-profit sector in most other developed countries.

There are over 1300 banks in Russia and only one of them grants student loans. But, relatively few students actually apply to these banks for loans. Sberbank, The Savings Bank of the Russian Federation launched its student loan system in July of last year. They claim that the loan can be issued in rubles and may amount to no more than 70 percent of the total tuition fee. It is up to the applicant to find other sources for the remaining 30 percent. The annual interest rate of the loan is said to be 22 percent and the bank has the right to change it. The repayment period is up to 10 years depending on the length of studies. The applicant must obtain the guarantee of high-income individuals or companies, or pledge securities and other liquid actives, such as real estate property, to the bank. Experts from the business schools say such terms are not easy to follow and they think the loan is not popular with students.

Marina Lebedeva, financial director of the Institute of Business and Administration, a non-state funded educational institution, said banks are not really interested in student loans due to shortfalls of the system of guarantees and the fact that higher education in Russia by no means guarantees a higher income for graduates.

Andrey Kolesnikov of The Small Business Center said Sberbank’s announcement was more of an image-building stunt. He doubts Sberbank has granted any such loans. "The banks will not be interested unless authorities do something to guarantee repayment of the loans or develop a mechanism of chip credits for the students."

He says that he hopes business training programs will be able to develop a loans system with less of the procrastination effecting loans for students of regular higher education, because these training programs are short-term and focus on a specific group of specialists, who are set to find a high-income job. Some lucky students on such programs may be able to get a future employer to act as a guarantor, thus assuring the bank that they will get the lent sum back.