New Delhi: According to two persons familiar with the situation, the government plans to launch its modified education loan scheme before the start of the festive season.

The education department is finalizing the scheme’s details in coordination with the finance ministry, and it is expected to be implemented by October, according to the persons listed above.

In July’s annual Budget, Finance Minister Nirmala Sitharaman announced a new initiative to provide loans of up to ₹10 lakh to 100,000 students pursuing higher education.

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Center will Launch a Redesigned Education Loan Scheme

The new initiative offers a maximum collateral-free loan of ₹7.5 lakh to each student, with the option to secure an additional ₹2.5 lakh through the usual way. The full loan payback will benefit from a 3% yearly interest rate subvention, resulting in a cheaper interest rate. Center will Launch a Redesigned Education Loan Scheme

Higher education loans up to ₹7.5 lakh do not require collateral. Loans exceeding ₹7.5 lakh and up to ₹10 lakh require a third-party guarantee. The new approach requires students to provide collateral only for amounts above ₹7.5 lakh.

The current plan provides an interest subsidy throughout the moratorium period, which is the loan length plus one year, for education loans obtained from scheduled banks. The interest subsidy is credited straight to the student’s loan account.

Under an interest subsidy, the government pays a portion of the accrued interest. Under interest subvention, the borrower will pay a lower interest rate on the loan. Center will Launch a Redesigned Education Loan Scheme

According to the first person mentioned above, the benefit of revamped education loans will not be provided to students whose families have previously benefited from any government scheme, as the center wishes to target the economically disadvantaged and first-time beneficiaries with this scheme.

“Several difficulties are still being worked out. Previously, education loans were only available to children from households earning less than ₹4.5 lakh per year, according to the first person.

“A decision on whether to increase the household income limit for availing the loan will be taken soon,” the individual informed me.

“Under the redesigned system, it is unclear if interest subvention will be available for the duration of the loan, only during the first few years, or for a shorter period. “These things are being worked out,” the second person said.

Both individuals cited above spoke on the condition of anonymity. They stated that these details would be sorted out over the next few months. Meanwhile, the Department of Financial Services has advised banks to issue collateral-free loans to students once the policy is finalized.

The credit guarantee fund from the previous loan scheme will continue under the new scheme, with additional Central backing to assure banks disbursing collateral-free loans up to ₹7.5 lakh to students, according to both individuals listed above.

The education department will reimburse banks for providing loans to students at lower interest rates than the market rates, they noted. Center will Launch a Redesigned Education Loan Scheme

The Finance Ministry and Department of Education spokespeople did not respond to emailed inquiries.

According to Syed Sultan Ahmed, Founder and Chief Learner of LXL Ideas, the Union Budget 2024 allocates ₹1.20 lakh crore for education, employment, and skill development, indicating a significant commitment to developing education. “The introduction of the e-voucher scheme, which provides loans of up to ₹10 lakh for students will significantly help those facing financial barriers to higher education,” Ahmed noted.

The Indian government is set to introduce a revamped education loan scheme by the festive season of 2024. Announced by Finance Minister Nirmala Sitharaman, this new initiative will provide loans of up to ₹10 lakh for 100,000 students to pursue higher education. This move aims to make higher education more accessible by easing the financial burden on students and their families [1]. Center will Launch a Redesigned Education Loan Scheme

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