“Educational Finance Corporation” is a good idea

Following is an excerpt from a PTI report.

… The proposed Corporation will give loans on easy terms which will be repaid by the borrowers only after getting jobs, he told a news conference here.

Sibal, …, said talks are on with the Planning Commission and "we hope the Corporation will be set-up during the 12th Five-Year Plan".

He said approximately 22 crore children go to schools in the country, of whom only an estimated 2.5 per cent pursue higher education in universities.

In developed countries, the percentage of students pursuing higher education stands at 40 per cent, he said.

I think this is a very good idea. This will enable more students to pursue higher education and pay for it; It will enable government colleges to be able to charge for reasonable tuition that can be used towards improving the college infrastructure (note: The infrastructure in most government colleges is in shambles, yet they don’t dare to increase the normal tuition; the only thing they do to raise some resources is to start some self-financed courses); it will enable the establishment of more private colleges, and in general it will improve the quality and quantity of higher education opportunities.

While in the past there has been concern about repayment of such loans, with the creation and usage of unique ID for everyone in India, the loans taken can be made part of everyone’s record and its repayment can be easily tracked.

The government can also use these loans and their repayment as a tool to achieve its goal. For example, it can have a policy of (partially) waiving the loans for people who teach for 5 years and thus encourage more people to go into teaching.

For the kind of scheme that is needed for India, it will help to look at the scheme used in Australia. That kind of a scheme adapted to the Indian context will work well for India.

1 comment February 1st, 2010

Government mulling schemes that will allow collateral free bank loans for higher education

Following is an excerpt on this from a report in Hindu by Anita Joshua:

The Union Human Resource Development (HRD) Ministry will soon be approaching the Cabinet Committee on Economic Affairs with a proposal to offer loan subsidies to students below the “creamy layer” in a bid to ensure access for all to professional education.

As per estimates, this subsidy will cost the exchequer Rs. 3,250 crore over the XI Five Year Plan. All students hailing from families with an annual income below Rs. 2.5 lakh will be eligible for the loan subsidy irrespective of whether they hail from the general category or the reserved categories.

The interest rate on education loans now runs into double digits; upwards of 12 per cent for amounts up to Rs. 4 lakh and it increases as the loan amount goes up. The Ministry proposes to allow students to avail themselves of loans at around 4 per cent irrespective of the market rate. The difference will be subsidised from the Ministry’s budget.

This facility will be allowed only to students seeking admission to professional courses offered by recognised institutions; both government and private. …

Students will have to begin repaying the loan only after one year of completion of the course or on getting a job; whichever is earlier. The pay back schedule can be worked out as per the paying capacity of the borrower, although Ministry officials said details were yet to be finalised with banks.

The government will facilitate the loans by standing guarantor so that the students will not have to provide any collateral. … The Ministry’s position is that it is necessary to move to a system where banks will lend freely to students who have got admission to certified institutions against a loan guarantee given by the government.

The Ministry is also working on a proposal to set up a National Student Loan Guarantee Corporation to facilitate university financing via the students. The Prime Minister’s Office is also understood to have evinced an interest in this scheme.


3 comments October 13th, 2007

Orissa government’s loan stipend fund

Orissa government has a loan stipend fund available for higher studies. This loan is available from its higher education department. There is a recent report in New Indian Express regarding it. Following are some excerpts:

The Higher Education Department has proposed to provide study loans to more number of poor and meritorious students pursuing higher studies in Government institutions from the current academic session. A meeting chaired by Higher Education Minister Samir Dey on Tuesday decided to increase the study loan ceiling from Rs 1.20 crore to Rs 2.20 crore. 

… The Government had extended loan stipend to 963 students in 2006-07 and 460 students could be extended loan this year. Applications of more students could be considered only if the loan ceiling is increased to Rs 2.20 crore.

The study loan provided to the poor and meritorious students is interest-free and the loanee students should repay the loan within one year of completion of study or within one month of getting employment. However, 10 percent interest is charged for default in repayment, Dey said. The State Government has been extending study loans since 1954 and the number of beneficiaries is 23,445. While the outstanding loan stood at Rs 7.20 crore, the Government has so far realised Rs 63.86 lakh.

A majority of the loanees has simply forgotten that they had taken study loan from the Government, the Minister said adding, certificate cases have been instituted against 5,092 persons

17 comments September 5th, 2007

Educational Loans from Banks

The following is copied from the UGC page on educational loans.

Government of India in consultation with Reserve Bank of India (RBI) and Indian Banker’s Association (IBA) has framed a Comprehensive Educational Loan Scheme to ensure that no deserving student in the Country is deprived of higher education for want of finances. The new scheme covers all type of courses including professional courses in schools and colleges in India and abroad.

The Salient features of the scheme are as under:


  • The scheme envisages loans up to Rs.7.5 lakh for studies in India and up to Rs. 15 lakh for studies abroad.

  • For loans up to Rs. 4 lakh no collateral or margin is required and the interest rate is not to exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the interest rate will not exceed PLR plus 1 percent.

  • The loans are to be repaid over a period of 5 to 7 years with provision of grace period of one year after completion of studies

Tax Benefit

Repayment of an education loan is deductible under section 80E of the Income Tax Act. The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest). Only loans taken for higher education – fulltime studies in any graduate or post-graduate, professional, and pure and applied science courses – may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start repaying.

Equitable Access to quality higher education has been a concern of the University Grants Commission. To this purpose the Commission, besides encouraging colleges and universities to provide for liberal financial support to the meritorious but needy students, has also been instrumental in educational loan scheme. The Reserve Bank of India (RBI) has issued guidelines in this regard to all commercial banks. A large number of banks have already launched educational loan schemes. Provided below are links to the respective website of individual banks offering such facilities.

Disclaimer: Since the rules, regulations, eligibility conditions, repayments and interests rates etc are revised by the banks from time to time in keeping pace with the changing capital market conditions, students and parents are advised to thoroughly check the terms and conditions of educational loan scheme on offer at the time of application.

9 comments August 14th, 2007

Unsecured study loans to become easier: GOI to give guarantee to banks

Following is excerpts from a Hindustan Times article on this.

Students cutting across different social groups will soon be able to avail of education loans at highly subsidised rates to study in top educational institutions of the country.

The Prime Minister’s Office (PMO) in consultation with the Human Resource Development Ministry and the National Bank Association has finalised a scheme for paying huge loan subsidy to students from economically weaker sections.

A mean test (annual earning) will be the eligibility criteria to apply for the loan. The government is likely to announce the scheme on Independence Day. The University Grants Commission figures state that only eight per cent students from economically backward families are enrolled in higher education.

… To implement the scheme, the government plans to float a Loan Guarantee Corporation that will pay for any default by the students from the weaker sections.

 “It will be a kind of a government guarantee to the banks to give loans to poor students,” an official said. The corporation will become functional with a corpus fund from the government. A small amount from the interest paid against student loans will get deposited with the corporation.

The government found that students from weaker sections have not availed of education loans because of their failure to obtain sufficient guarantee. With the government in the picture, banks are willing to pay them loan for studying even in private educational institutions.

The loan will be available for admission to government-approved institutions. It would be paid directly to the institution. Continuance of the loan will depend on the students’ performance.


1 comment August 8th, 2007

Allahabad bank educational loan

I came across this Allahbad bank site about education loans. They give loans up to 4 lakhs without any collateral security to students of a selected list of colleges/institutes. The current list includes four Orissa institutes. They are:

  • AMITY Bhubaneshwar
  • XIM Bhubneswhwar
  • Kalinga Institute of Industrial Technology (KIIT)
  • NIT Rourkela

5 comments July 31st, 2007

SBI extends Scholar plus scheme to NIT Rourkela: easy availability of student loans

From an NIT Rourkela faculty:

Our institute has become the first among all NITs to earn the trust of SBI to sanction study loan to our students by the NIT campus branch itself ( in stead of the branches located in their native places) without asking for any sort of security. This facility was earlier available only to reputed institutes like IIT and IIM under Scholar Plus Scheme.

The story behind how this was achieved:

This has become possible due to strong follow up and bargain made by our director insisting on exclusive new ATM counter in the campus, Internet banking facility to all students (now students need not stand in the queue to pay fees in cash/cheque either in institute or halls) and this study loan, otherwise we would have given permission to other banks to open their branches in the campus to break the monopoly of SBI since inception.

Tathya.in also reports on this.

(Thanks to Sandip babu for this information.)

July 18th, 2007


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