Interest Subsidy on Education Loans

The Government of India has decided to extend interest subsidy to those students who take education loans from banks for pursuing professional courses like engineering, management and medicine.The scheme is likely to be launched by the Ministry of Human Resources Department(HRD) to benefit students from the academic year 2008-09.Earlier students who used to take loans from banks were given a moratorium period in the sense that they did not have to pay the interest on the loan amount till they completed their studies.Now under a proposed scheme, the entire interest amount on the loan taken would be subsidised by the Ministry of HRD.Only those students will get this benefit who will raise loans for pursuing professional courses from the banks approved by the Indian Banks Association. The scheme will also be applicable to all private recognised institutions across the country.Public sector bank Canara Bank, which is the nodal bank to the ministry of HRD, will disburse the interest subsidy to the banks which will provide educational loans to the students.The scheme will have much impact because premier institutions have already raised fee for professional courses and now most of the students will be able to take the benefits of the scheme.The government has earmarked Rs 4000 crore for interest subsidy scheme for the plan period. After the fee hike, a number of students have given their representations through Members of Parliament,as they were unable to pay the fee from their resources.The government proposed to provide some avenues to mitigate their financial problems and, moreover, to ensure that nobody is denied professional education because he or she is poor. Till now, the maximum loan offered for studies in India was Rs 10 lakh and there is paper work required for the initial Rs 4 lakh. After that, there needs to be a guarantor for a loan up to Rs 7.5 lakh and above this, some collateral is required.Banks, over the years, have been gearing up to meet the demands of aspiring IIM and IIT students because the repayment ability is there. Banks are now looking at providing students with bigger loan by raising the limits. For this, they have already approached the Indian Banks Association.