Education Loan Schemes and Subsidies You Must Be Aware of
The rising cost of education has made education loans all the more important for students seeking admission to good colleges and universities. An education loan can be used to pay for tuition, travel, meals, rent, and other study-related expenses in India and abroad.
The government has implemented several education loan schemes and subsidies to help students conveniently get loans for higher education. These programmes and subsidies are primarily for students who come from economically weaker sections.
If you are preparing to apply for an education loan and want to avail benefits via government schemes and subsidies, this article can provide you with the proper guidance.
Before we talk about the available options, let’s understand how education loan schemes and subsidies differ.
- Education Loan Schemes: Underprivileged students face a lot of barriers while applying for education loans, especially when it comes to collaterals, margins, guarantors and interest rates. To make the education loan process easier for such students, the Government of India runs various schemes. Under these schemes, the loans are provided with less stringent conditions and lower interest rates.
- Education Loan Subsidies: After completing the course and landing a job, the students must repay the education loan. The Government of India provides numerous interest subsidies to ease the repayment for the economically weaker students of society. The students benefiting from these subsidies must pay lower EMIs than non-subsidized loans.
Now that we know the terms schemes and subsidies, let’s look at different education loan schemes and subsidies provided by the Government of India.
Education Loan Schemes by the Government of India
1. Vidya Lakshmi Education Loan Portal Scheme
Vidya Lakshmi is an education loan portal developed under the guidance of the Department of Financial Services (Ministry of Finance). Candidates seeking education loans can apply and track their applications with multiple banks anytime and anywhere by accessing the portal.
- Vidya Lakshmi portal aims to provide loans and enable tracking of loan applications through a standard application form called CELAF.
- Students can borrow up to ₹7.5 lakh for studying in India and up to ₹15 lakh for studying abroad.
- The loans are provided at a lower interest rate, i.e. maximum of 1% above the Prime Lending rate (PLR) and no collateral or margin is required up to ₹4 lakh principal loan amount.
2. Credit Guarantee Fund for Education Loans (CGFSEL)
The CGFSEL scheme was launched in 2015 and guarantees education loans to students from economically weaker sections. The scheme is meant for students who are unable to pledge collateral security.
- Students can get loans up to ₹7.5 lakh without pledging any security or providing any third-party guarantee.
- Students seeking loans under this scheme should belong to the economically weaker section. The annual income of the students’ family should be less than ₹4.5 lakh.
- The Government of India should recognise the course and university.
3. National Minorities Development & Finance Corporation Education Loan (NMDFC)
National Minorities Development & Finance Corporation offers loans to students from minority low-income families for higher education considering their socio economic welfare. The Ministry of Minority Affairs has administrative jurisdiction over it.
- The maximum education loan amount is ₹20 lakh for India and ₹30 lakh for studies abroad.
- Students pursuing a technical or professional course are only eligible for this student loan scheme.
- Annual Family Income eligibility criterion for this scheme is up to Rs.6.00 lacs per annum.
- Only students belonging to minority communities are eligible for this scheme.
4. National Safai Karamcharis Finance and Development Corporation Education Loan (NSKFDC)
National Safai Karamcharis Finance and Development Corporation Education Loan Scheme are governed by several state entities, including the state government and regional rural banks (RRBs). By offering education loans, this scheme aims to improve the lives of cleaning workers and their children through education loans for their higher studies.
- Only the students belonging to the community of cleanliness workers are eligible for this education loan scheme.
- The maximum amount for studying in India is ₹10 lakh, and for Abroad, it is up to ₹20 lakh.
- Students from any field, such as technical, medical, or law, can avail of this scheme.
5. National Scheduled Castes Finance And Development Corporation Education Loan (NSCFDC)
On February 8th, 1989, the Indian government established National Scheduled Castes Finance and Development under Section 8 of the 2013 Companies Act. It attempts to give low-income families financial assistance. The scheme provides loans for higher education, and students can obtain them through their relevant state or Union Territory government.
- Only students from scheduled caste communities can apply for education loans under this scheme.
- The interest amount will be reimbursed if the family’s annual income is less than ₹4.5 lakh per annum.
- Students can avail of a loan of up to ₹20 lakh for studying in India and up to ₹30 lakh for studying abroad or 90% of the course fee whichever is lower.
6. National Backward Classes Finance and Development Corporation Education Loan (NBCFDC)
National Backward Classes Finance and Development Corporation is an initiative of the Indian government that offers financial support to members of the underprivileged class. It aims to uplift students from backward classes through quality education.
- The scheme is only for students from the backward class with annual family income below double the poverty line.
- The maximum loan limit is ₹10 lakh for studying in India and ₹20 lakh for studying abroad.
Education Loan Subsidies by the Government of India
1. Central Sector Interest Subsidy Scheme for Education loans (CSIS)
The Ministry of HRD introduced the Central Scheme for Interest Subsidy (CSIS) to provide interest subsidies on education loans for students belonging to economically weaker sections of society. The scheme provides full interest subsidy during the moratorium period on modern education loans without any collateral security and third-party guarantee, for pursuing technical/professional courses in India.
- Under the CSIS scheme, the interest during the course period plus one year after the course will be borne by the Government.
- Students from economically weaker sections are only eligible for the CSIS subsidy scheme.
- The annual gross parental income should not exceed more than ₹4.5 lakh from the academic year 2009-10.
2. Padho Pardesh Scheme of Interest Subsidy for education loans
The Indian government’s Padho Pardesh Scheme provides educational financing for students from minority communities, such as Muslims, Christians, Sikhs, Buddhists, and Zoroastrians, for studying abroad. Students who want to pursue higher education overseas may be eligible for an education loan with reduced interest.
The essential advantage of this plan is the interest subsidy component, as the government pays the interest throughout the moratorium period. Additionally, the education loan offered by this programme may be obtained through any IBA-accredited bank. Students must, however, present documentation proving that they are members of a minority group.
- Students must belong to any of the minority communities.
- Students only from courses like Masters, PhD, and MPhil levels are eligible for the education loan under this scheme.
- Students must apply for the interest subsidy scheme within the first year of the course.
- The maximum annual income of the family should not exceed ₹6 lakh.
3. Dr Ambedkar Central Sector Scheme of Interest Subsidy for Education loans
Students from the Other Backward Classes and the Economically Backward Classes are eligible for this programme. This is a central sector scheme to provide interest subsidy to the student belonging to the OBCs and EBCs on the interest payable for the period of moratorium for the Education Loans for overseas studies to pursue approved courses of studies abroad at Masters, M Phil, and Ph. D level.
- Only the students from Economically Backward Classes (EBC) and Other Backward Classes (OBC) are eligible for this scheme.
- The family’s annual income for OBC candidates should not exceed ₹8 lakh per annum. For EBC candidates, it should not exceed ₹2.5 lakh.
Education loans help students in pursuing their desired careers. Those eligible can easily apply for a student loan scheme through one of these programmes, relieving them of the stress of paying for their education upfront.
How do I determine if I qualify for subsidy programmes?
In India, numerous tax incentives and government-sponsored subsidy programmes are available to make student loans reasonable. To learn the qualifying requirements, consult the education loan subsidy programme summary.
What criteria will be used to calculate my repayments given the moratorium period?
At the start of the payback period, the remaining interest for the moratorium period will be added to the loan balance. When the payback period is set to begin, the EMI will be calculated based on this sum. If a subsidy is applied, the government will pay the interest for the moratorium period.
Are interest rates on education loan schemes uniform in all the banks?
Interest rates are decided based on the Base Rate or MCLR. Usually, the government puts a cap on how much additional percentage banks can charge over the base rate. This cap is different for different schemes.
Whether Reimbursement Of Fees Is Permitted In Education Loan Scheme?
Yes, reimbursement of fees paid by the student/ guardian at the time of admission or subsequent stages is permissible within six months from the date of payment of fees on the individual merits of the case.
What Is The Minimum Age For Getting an Education Loan through a scheme?
Under the government schemes, there is no specific restriction concerning the student’s age to be eligible for an education loan.