Interest Free Student Loan

According to Press Information Bureau, Government of India, Cabinet Committee on Economic Affairs (CCEA) published on 27-August-2009 14:9 IST that a full interst subsidy will be provided during the period of moratorium on loans taken by students belonging to economically weaker sections from scheduled banks under the Student or Educational Loan Scheme of the Indian Banks’ Association, for pursuing any of the approved courses of studies in technical and professional streams, from recognized institutions in India

The Cabinet Committee on Economic Affairs (CCEA) has sanctioned a system to allow for full interest grant during the period of postponement on loans taken by students belonging to economically weaker sections from scheduled banks under the Student or Educational Loan schema of the Indian Banks’ Association, for following any of the approved courses of studies in technical and professional fields, from recognized institutions in India. The Indian Banks’ Association (IBA) had devised a comprehensive model student or educational loan scheme for adoption by all Banks, aimed at providing financial support from the banking system to eserving/meritorious students for pursuing higher education in India and abroad.

One of the prime concerns of the Government is to make sure that nobody is refused professional education because he or she is poor. The Hon’ble Prime Minister in his Independence Day Speech on 15th August, 2009 had, among other things, announced that “a new scheme will be started to help students form economically weaker sections of society by way of reduced interest rate on their education loans. This will benefit about 5 lakh students in getting technical and professional education”.

The broad parameters of the Scheme are:

(i) The scheme would be relevant for studies in technical and professional courses in India. The interest grant shall be linked with the existing Student or educational Loan Scheme of IBA and restricted to students enrolled in recognized professional courses (after Class XII) in India in Educational Institutions established by Acts of Parliament, other Institutions recognized by the concerned Statutory Bodies, Indian Institutes of Management (IIMs) and other institutions set up by the Central Government.

(ii) Under this system, interest payable by the student who is already availing of the Student or Educational Loan Scheme of the Indian Banks’ Association for the period of moratorium (i.e. course period, plus one year or six months after getting job, whichever is earlier) as dictated under the Student or Educational Loan Scheme of the Indian Banks’ Association, shall be carried by the Government. After the period of moratorium is over, the interest on the undischarged loan amount shall be paid by the student, in accordance with the plannings of the existing Educational Loan Scheme and as may be modified from time to time.

(iii) The benefits under the Scheme would be applicable to those students belonging to economically weaker sections, with an annual income upper limit of Rs. 4.5 lakh per year.

(iv) The interest grant under the Scheme shall be usable to the eligible students only once, either for the first undergraduate degree course or the post graduate degrees/diplomas. Interest subsidy shall, however, be admissible for combined undergraduate and post graduate courses.

(v) Interest grant under this scheme shall not be available for those students who either discontinue the course in the middle of the course undertaken , due to any reason except on medical grounds, or for those who are expelled from the Institutions on disciplinary or academic grounds.

(vi) The National Minorities Development & Finance Corporation (NMDFC) has an Student or Educational Loan Scheme for individual beneficiaries, which is enforced through State Chenelizing Agencies (SCAs). The national Safai Karamcharis Finance and Development Corporation under the Ministry of Social Justice and Empowerment also provides educational loan to the students of the target group for higher education. Interest on Educational Loan provided under these two schemes shall also be subsidized for the period of moratorium.

(vii) Sense modality for carrying out and supervising mechanism shall be finalized in consultation with the Canara Bank. There would be a tag/marker on the degree course or student indicating his repayment liabilities.

(viii) The scheme shall be applicable from the academic year 2009-2010.

The Scheme is anticipated to ease the financial load on the target group of students to go after technical and professional studies (after Class XII) in recognized institutions in India and thereby increase their admittance in these streams of education. This Scheme will benefit about 5 lakh students in getting technical and professional education.

You can read the Press Information Bureau HERE