Mumbai: The Union budget has proposed to subsidize loans of up ₹10 lakh for students seeking higher education in domestic institutions, a move aimed to benefit 100,000 students every year.
However, only those who have not benefited from any other government scheme can benefit from this scheme. Given in the form of vouchers to students, the scheme will subsidize loans by 3%.
Experts said the scheme would benefit institutions and students alike. Shantanu Rooj, founder and chief executive, TeamLease Edtech, said this will help needy students on one hand and the cause of domestic institutions on the other.
Under the existing model education loan scheme, study loans up to ₹4 lakh do not require any collateral, while loans above ₹4 lakh and up to ₹7.5 lakh need a third-party guarantee. Such guarantees are waived if the loan is eligible for credit guarantee coverage. However, education loans above ₹7.5 lakh require tangible collateral, and co-obligation of parents is mandatory.
Latest data from the Reserve Bank of India (RBI) shows outstanding student loans of banks at ₹1.2 trillion as on 31 May, while it was ₹36,330 crore as on 30 September for non-bank lenders. India’s largest lender State Bank of India (SBI) charges 11.15% on student loans.
According to education ministry data, the government subsidizes interest during the moratorium period—course period plus one year on education loans taken from banks—to students belonging to economically weaker sections where annual parental income is up to ₹450,000. However, under the Central Sector Interest Subsidy (CSIS) scheme, this is applicable only for higher education in professional or technical courses.
Experts said the new subsidy would ease the burden for students looking to pursue higher education.
“The provision of financial support for loans up to ₹10 lakh through e-vouchers for students aiming for higher education in domestic institutions is a significant step towards making higher education more accessible for all,” said Mahadeo Jaiswal, director, IIM Sambalpur. “This initiative will undoubtedly empower many aspiring students to pursue their academic goals without the burden of financial constraints and increase job opportunities.”
Prateek Maheshwari, co-founder of PhysicsWallah and chair of the India EdTech Consortium said that the education loan subsidy is in line with the National Education Policy 2020’s vision of improving the country’s gross enrollment ratio, and the government should also look at introducing academic performance-linked models of funding for educational programmes.