The Educational Loan Interest Subsidy Scheme would be launched from the 2008-09 academic year, officials said. It would benefit students pursuing courses like engineering, management, medicine, etc, but not M Phil and PhD for which there was a provision for scholarships, they added.
The officials who arrived at the scheme in the Expenditure Finance Committee (EFC) meeting a few days ago are now preparing a Cabinet note for the scheme.
"At present, students who take loans from banks get a moratorium period in the sense that they don't have to pay interest till they complete their studies. But with the launch of this scheme, the entire interest amount would be subsidised (waived)," an official told Business Standard.
The loan amount taken by the student should be commensurate with the course fee he/she is paying the institute, according to the contours of the scheme. Loans taken from any bank under the Indian Banks' Association will be eligible.
The scheme would cover students pursuing professional courses in all recognised private institutions.
While the HRD ministry would be the nodal ministry, the Canara Bank would be the nodal bank for disbursal of the interest amount to banks. The scheme would require about Rs 4,000 crore in the entire Plan period, officials said.
The scheme assumes significance in the wake of premier educational institutes like Indian Institutions of Management (IIMs) announcing a sharp hike in fees.
Even the Indian Institutes of Technology (IITs) have proposed to double the fees for their technical courses. It is assumed that even private institutions would go for an upward revision of fees.
"There are a large number of students who are not in a position to pursue professional education due to lack of resources. The government proposes to provide some avenues to mitigate their financial problems.
The scheme is being proposed to ensure that nobody is denied professional education because he/she is poor," said a ministry official.
