The New Education Loan Map Of India: Why Tier II Cities Are Driving Demand

Indian lending landscape for education is shifting beyond the country’s metro cities; here, students from Tier II and Tier III cities are becoming the drivers of this growth. These cities account for the overwhelming majority of education loan applications and approvals.

According to lending data released by education financing platform Kuhoo, just between January 2025 and July 2026, the platform received more than 2.5 lakh education loan applications seeking financing of a total worth of Rs 7,500 crore.

From the total 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.

In another report by Knight Frank, namely, India’s 155 Million Student Mandate, it reveals 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 revealed 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 is through personal education loans.

Where The Majority Demand Came From?

The concentration of applications outside metro markets signals a shift in where demand is emerging. According to data shared in the report, educational aspirations are increasingly extending beyond India’s traditional metropolitan centres. Uttar Pradesh has emerged as the leading state by application volume, where it accounted for 12.87 per cent of applications. This is followed by Maharashtra with 12.52 per cent of applications. Karnataka, Bihar, and Tamil Nadu followed Maharashtra with 7.16 per cent, 6.91 per cent and 6.77 per cent, respectively.

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 enrol in professional programmes.

“Access to quality education should never be limited by financial constraints. 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. Our purpose has always been to ensure that deserving students can pursue their academic ambitions with confidence, irrespective of their financial background," says Prashant A. Bhonsle, Founder and CEO, Kuhoo.

Career-Focused Courses

The shift in the education loan market is not just concentrated geographically. The type of education students are borrowing for is also changing, evidently. Job training courses have also accounted for 41.70 per cent of total disbursals, making them the largest category. MBA programmes 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 programmes. A significant portion of borrowing is now directed towards job training and other career-oriented programmes.

“The education financing landscape in India is undergoing a significant transformation, with demand increasingly emerging from Tier II and Tier III cities. The fact that the majority of students rely on education loans reflects a broader shift in aspirations, accessibility, and the growing importance 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,” says Lakshmi Iyer, Chairperson, StudyIn India.