India’s Tier 2/3 Cities Fuel Education Loan Demand

If you’re looking at education loans, you might be surprised to learn that most applications now come from outside India’s biggest metropolitan areas. New data reveals that Tier 2 and Tier 3 cities are leading the charge in education loan demand, showcasing a clear shift in how students are investing in their future.

Key Trends in Education Loan Demand

Between January 2025 and July 2026, education financing platform Kuhoo received over 2.5 lakh loan applications, seeking a total of ₹7,500 crore. This massive demand highlights how crucial these loans are for accessing higher education.

• A significant 86.5% of these applications originated from students in Tier 2 and Tier 3 cities.
• Only 13.5% of the applications came from Tier 1 cities, showing a clear shift away from metros.
• Uttar Pradesh led all states, accounting for 12.87% of the applications.
• Close behind, Maharashtra made up 12.52% of the total demand.
• Other states like Karnataka, Bihar, and Tamil Nadu also showed strong interest.

This geographical spread means that students in smaller cities are increasingly willing to take on debt for professional and higher education. They see these loans as a necessary step to pursue programs that might otherwise be financially out of reach, especially when household incomes can’t cover upfront costs.

What Courses Are Students Choosing?

When it comes to what students are actually borrowing for, the focus is clearly on employability and future earnings. Kuhoo’s data on disbursals shows a strong preference for courses that offer direct career paths.

• Job training programs accounted for the largest share of disbursals at 41.70%.
• MBA programs followed, making up 29% of the total.
• Online courses secured 9.80% of the disbursals.
• Engineering programs represented 5.50%.
• Medical education loans made up 4.70%.

This trend suggests that you’re likely viewing education as a direct investment in your future earning potential. Prashant A. Bhonsle, Founder and CEO of Kuhoo, explains that “ambition is rapidly growing in India’s smaller cities and towns,” with students actively seeking transparent and goal-aligned financing for outcome-driven higher education.

Whether you’re from a metro or a smaller town, understanding these trends can help you see how others are strategically using education loans. It highlights a growing national commitment to skill development and career advancement, powered by accessible financing options.