Twitter

Education loans for poor students at 4% per annum

The government is considering a provision to provide loans at just 4% per annum to students with an annual parental income of less than Rs4.5 lakh.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

Students from weaker economic backgrounds can now hope to get education loans at interest rates as low as 4% per annum, with the government considering an institutional mechanism for ensuring affordable access.

The conference of state education ministers on Friday will discuss among other things the setting up of a National Education Finance Corporation (NEFC) as institutional mechanism to help students and institutions get low interest loans.

The government is considering a provision to provide loans at a rate of 4% per annum to students with annual parental income of less than Rs4.5 lakh, according to the agenda circulated by the human resources development (HRD) ministry for the meeting.

For students whose parental income is more than Rs4.5 lakh, the loan is expected to be available at 7% per annum provided the loan amount is less than Rs12 lakh.

It will also come with a provision of repayment in over six to 12 years with an option of back-loading interest with lower rates in initial years and higher in later years.

The move is aimed at encouraging more students to avail the benefits of banking facilities and achieve a higher enrolment in higher studies.

At present, the percentage of students seeking education loans for higher studies is estimated to be a dismal 9%, and a basic reason for this is that students belonging to low income families face difficulties in accessing bank credit because of their inability to provide adequate collateral security.

Banks had given Rs35,000 crore in education loans last year. The government has set a target to increase the amount in education loans to Rs122,838 crores in 2017 and Rs1,66,541 crores in 2020. This would help increase the enrolment ratio from present 12% to 30% by 2020.

The proposed financial corporation will be a Nabard-like institution in higher education and will raise debt by issue or sale of bonds for augmenting resource from the market and will finance creation of universities.

The proposed body will raise 42% of its debt by issuing bonds and debentures, 20% through deposits, 14% through equity,  reserves and surplus.

The NEFC would also attempt to nurture philanthropic tradition by directly supporting at concessional rates of interest establishment of any educational institution that has at least 25% of its project cost raised through donations or contributions from a large number of citizens or agencies.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.

Live tv