Lok Sabha Question No. 1439 (UNSTARRED), answered on 2019-07-01
Subject: Interest on Education Loans
Ministry: FINANCE
Asked by: Rampreet Mandal

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES LOK SABHA UNSTARRED QUESTION NO. †1439 TO BE ANSWERED ON THE 1 st  JULY, 2019, ASHADHA 10, 1941 (SAKA) Interest on Education Loans

## †1439. SHRI RAMPRIT MANDAL:

- Will the Minister of FINANCE be pleased to state: (a) whether the Government provides education loans through banks to students for their studies, if so, the details thereof; (b) whether the interest of loan is calculated from the date on which loan is sanctioned to students, if so, the details thereof; (c) whether the interest on loan rises upto the principal amount within four years of completion of study, if so, the details thereof; (d) whether the Government has any plan for interest waiver on the said loans; and
- (e) if so, the details thereof and the time by which the said plan is likely to be implemented?

## ANSWER (FINANCE MINISTER) (SMT. NIRMALA SITHARAMAN )

- (a) All Scheduled Commercial Banks provide Education Loan to students. IBA has formulated and  circulated  to  all  member  banks  a  'Model  Education  Loan  Scheme'  for  providing  financial support to meritorious students for pursuing higher education in India and abroad. Salient features of the scheme inter-alia include; I. Loan upto Rs 10 lakh for study in India and upto Rs 20 lakh for study abroad. II. Collateral  free  loans  upto  Rs  7.5  Lakh  under  the  Credit  Guarantee  Fund  Scheme  for Education Loans (CGFSEL). III. No Margin for loan up to Rs 7.50 Lakh. IV. Repayment period of 15 years V. One year moratorium for repayment after completion of studies in all cases, VI. Moratorium  taking  into  account  spells  of  unemployment/under-employment,  say  two  or three times during the life cycle of the loan VII. Moratorium for the incubation period if the student wants to take up a start-up venture after graduation. (b)  : Simple interest for loan is calculated from the date of disbursement of loan upto the end of moratorium period i.e. course period plus one year and therefore the interest is never risen upto principal amount. At the start of repayment period, the interest accrued is clubbed with principal & EMI is calculated accordingly. The servicing of interest during study period and the moratorium period till repayment commences is optional for students. (c) No such instance has been reported by banks. (d) & (e): For the students belonging to economically weaker sections, an interest subsidy scheme on educational loans is in place. Under the scheme full interest subsidy is available during the period of moratorium on educational loans upto Rs 7.50 Lakh disbursed on or after 1 st  April, 2009. includes, (ii) 1% interest concession if interest is serviced during

Further,  the  Model  Educational  Loan  Scheme  of  IBA  provides  for  certain  concessions  on educational loans which inter-alia the study period and subsequent moratorium period prior to the commencement of the repayment, (ii) 0.5% concession in the interest rate to the girl students, (iii) rebate in Income tax to the extent of interest paid on education loan.

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