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Interest Subsidy on Education Loans for Higher Studies

Indian government has recently launched a scheme to provide interest subsidy for the period of moratorium on education loans taken by economically weaker sections from scheduled banks. The loans will be provided for technical and professional studies.

It is projected that by 2030 India will become the largest contributor to global workforce. Indian government’s focus on ‘Make in India’ initiative can be seen as a long term goal to provide opportunities for the young population. However, India will be able to ripe the benefits of this demographic dividend or not is a big question. According to Varun Goyal (Consultant at Infosys), more than 400 million Indian work force won’t be able to participate in the job market due to skill-set mismatch by 2030. Even today industry experts feel that there is a huge deficit between the demand and skilful employees. And at the higher level the problems become more problematic due to shortage of high skilled manpower. Education industry pundits also feel that a large section of Indian students lack financial resources to pursue higher studies or professional courses.

Indian government from time to time has directed scheduled banks to issue loans for technical/professional educations. Despite the available schemes poor students find it difficult on two grounds: 1) the increasing interest rates coupled with increasing college fees and 2) Scheduled banks inefficiency to meet the demands of loans.

Realizing this difficulty, central government announced a special scheme back in 2009 to provide education loans to poor students – Educational Loan scheme of the Indian Banks’ Association. No meritorious/deserving student should leave their higher study due to financial constraint, is the aim of this policy.

This scheme is formulated by Indian Banks’s Association (IBA) for adoption by all the Indian banks. The government has approved this scheme to provide full interest subsidy during the period of completion of the courses students applied for – course period + one year or six months after getting job, whichever is earlier. This interest waiver is applicable only to approved courses of studies in technical and professional streams.

What it offers?

This scheme offers an opportunity for the deserving financially constrained students. The specifics are:

Interest Rates

The interest rate will be charged on the education loan on the basis of Base Rate of the Individual Banks and provision under this scheme.

Moratorium Period

The interests on loans taken by economically weak students will be waived off for moratorium period. Under the scheme, the moratorium period can be measured: Course Period plus one year or six months after getting job, whichever is earlier. After the moratorium is over, students have to pay the interests on remaining loan amounts.

Income Limit/Proof

This scheme will be applicable to only those candidates belonging to economically weaker sections, also the family/parents annual income should not be more than 4.5lacs.

Eligibility for interest Subsidy

Eligible students can take advantage of this scheme only for once either for graduate or post-graduate course. However, the loan can be made available for the integrated courses.

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