The Cabinet on Wednesday approved a whopping Rs 6,600 crore for providing education loans to students belonging to economically weaker sections.
The Cabinet approved the continuation of Credit Guarantee Fund for Education Loans Scheme (CGFEL) and continuation and modification of Central Sector Interest Subsidy Scheme (CSIS).
The government over the period of 2017-18 to 2019-20 would provide loans for 10 lakh students.
In order to allow more students to access the benefit, (and also considering that the average loan size has been only Rs 4 lakh), the ceiling on the loan amount has been refixed at Rs 7.5 lakh.
To promote quality education, the scheme would cover loans for pursuing professional/technical courses from NAAC/NBA accredited Institutions/programmes or Institutions of National Importance or Central Funded Technical Institutions (CFTIs).
This condition would, however, be applicable to prospective effect, and would not apply to the current loans.
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As against the scheme which ran since 2009, in which average educational loans per year were only 2.78 lakhs, under the revised scheme, the number of loans per year is expected to be at least 3.3 lakhs, showing a 20% increase over the previous scheme.
A third-party evaluation of the scheme has been made by IIM Bangalore, which suggested that the scheme should be rationalised to serve more students from economically weaker sections.
The CSIS was launched on April 1, 2009. Under the scheme, full interest subsidy is provided for the education loan taken from Scheduled Banks under the Model Education Loan Scheme of Indian Banks' Association, covering a period of course duration + 1 year.
It is made available for all the professional/technical courses in India and students with annual gross parental income up to Rs 4.5 lakh.
The loans are disbursed without any collateral security and third-party guarantee. An amount of Rs. 9,408.52 crore has been disbursed towards interest subsidy and 25.10 lakh students have benefitted till date.
On the other hand, CGFEL Scheme provides a guarantee for the education loan under the Model Education Loan Scheme of Indian Banks' Association, disbursed by the banks without seeking any collateral security and third-party guarantee, for a maximum loan amount of Rs 7.5 lakh.
A dashboard would be put in place for better monitoring of the new schemes.