Lok Sabha Question No. 798 (UNSTARRED), answered on 2022-02-07
Subject: Education Loan
Ministry: FINANCE
Asked by: Dharambir Singh

## GOVERNMENT OF INDIA

## MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. †798

TO BE ANSWERED ON THE 7 th  FEBRUARY, 2022, MAGHA 18, 1943 (SAKA)

## EDUCATION LOAN

## †798. SHRI DHARAMBIR SINGH:

Will the Minister of FINANCE be pleased to state:

(a)  whether  the  Government  provides  education  loan  to  students  for  pursuing  higher education;

(b) if so, whether interest on the loan amount is charged right from the date of disbursal of the loan, if so, the details thereof;

(c) whether this practice has put down extra financial burden on the students, if so, the details thereof;

(d) whether  the  Government  is  going  to  make  provisions  in  the  terms  and  conditions  of education loans to ensure that the interest on educational loan amount shall only be charged from students after their education gets completed and they get employment, if so, the details thereof; and

(e) whether the Government proposes to waive off the said education loan in case a student meets with an accident and if so, the details thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (DR. BHAGWAT KARAD)

(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. Need based finance to cover all the expenses required to complete the course viz; fee payable to college, hostel charges, purchase of books/ equipments/instruments/uniforms, etc.
- 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) & (c): 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. 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.

(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.

Further,  the  Model  Educational  Loan  Scheme  of  IBA  provides  for  certain  concessions  on educational loans which inter-alia includes, (ii) 1% interest concession if interest is serviced during 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.

As  per  provisions  of  the  IBA  scheme,  Banks  may,  make  it  mandatory  to  arrange  for  life insurance policy on the students availing Education Loan.

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