Government Simplifies Education Loan Process for Higher Studies
Wednesday, 05 February 2025, 11:10 IST
The Indian government has taken bold steps in further simplifying the education loan procedure and opening wider avenues of easy access to this loan. So, it shall not hamper meritorious students who could not get their higher studies just because of lack of money. According to an RBI advisory all Scheduled Commercial Banks have to adhere to the model education loan scheme formulated by Indian Banks' Association. This scheme offers loans based on need, disbursed without requiring any collateral and up to Rs 7.50 lakh under either the Central Sector Interest Subsidy Scheme, CSIS or the Credit Guarantee Fund Scheme for Education Loans, CGFSEL. There is also no margin needed for loans less than Rs 4 lakh and the benefit of a moratorium period for the course duration, including one year. Loan repayment can be extended up to 15 years, easing financial pressure on graduates.
While collateral is not necessary for loans up to Rs 7.50 lakh, public sector banks can grant more amounts without collateral on a case-to-case basis. The government has clarified that data of loan rejections from public sector banks is not maintained centrally but banks are supposed to provide written reasons for rejection and seek higher authorities' approval before rejecting an application.
As a major initiative, the government on November 6, 2024, rolled out the PM Vidyalaxmi scheme, aimed at making the education loan process smooth for students who are able to get admission into the 860 best higher education institutions in India. The scheme makes the loan process completely digital, transparent, and student-friendly and does not require any collateral and guarantors. It also covers full tuition fees and other expenses related to education for the eligible students. In addition, three percent interest subvention on loans up to Rs 10 lakh is provided to up to one lakh students every year who belong to financially weaker sections but have family income less than Rs 8 lakh. Students from families earning Rs 4.5 lakh pa are already eligible for hundred percent interest subvention under the CSIS scheme.
The government will provide a 75 per cent credit guarantee for loans up to Rs 7.50 lakh through the National Credit Guarantee Trustee Company to boost bank confidence in lending. This reduces lending risks and ensures students can secure loans without additional security.
The proactive government steps reaffirmed its commitment in making quality higher education more available and affordable to students across the country. Equipped with strong loan frameworks as well as technological integration, all these reforms set out to improve financial burdens affecting students and bring them closer toward achieving their education goals without encumbrance.
While collateral is not necessary for loans up to Rs 7.50 lakh, public sector banks can grant more amounts without collateral on a case-to-case basis. The government has clarified that data of loan rejections from public sector banks is not maintained centrally but banks are supposed to provide written reasons for rejection and seek higher authorities' approval before rejecting an application.
As a major initiative, the government on November 6, 2024, rolled out the PM Vidyalaxmi scheme, aimed at making the education loan process smooth for students who are able to get admission into the 860 best higher education institutions in India. The scheme makes the loan process completely digital, transparent, and student-friendly and does not require any collateral and guarantors. It also covers full tuition fees and other expenses related to education for the eligible students. In addition, three percent interest subvention on loans up to Rs 10 lakh is provided to up to one lakh students every year who belong to financially weaker sections but have family income less than Rs 8 lakh. Students from families earning Rs 4.5 lakh pa are already eligible for hundred percent interest subvention under the CSIS scheme.
The government will provide a 75 per cent credit guarantee for loans up to Rs 7.50 lakh through the National Credit Guarantee Trustee Company to boost bank confidence in lending. This reduces lending risks and ensures students can secure loans without additional security.
The proactive government steps reaffirmed its commitment in making quality higher education more available and affordable to students across the country. Equipped with strong loan frameworks as well as technological integration, all these reforms set out to improve financial burdens affecting students and bring them closer toward achieving their education goals without encumbrance.
