The government pays the interest amount on education loans for students whose annual family income is not more than Rs 4.5 lakh per annum
The Ministry of Human Resource Development is in the process of making changes to its scheme meant to pay interest on education loans for students from the economically weaker section.
Instead of transferring the money to a bank's account, the sum could directly be credited to the student's account to maintain greater transparency and reduce the number of outstanding loans, official sources told DNA.
The government pays the interest amount on education loans for students whose annual family income is not more than Rs 4.5 lakh per annum.
Senior officials in the ministry have been trying towards revamping the Interest Subsidy Scheme as the number of outstanding education loans has been on a continuous high for the last many years.
According to a study conducted by Professor Jayadev M from the Indian Institute of Management-Bangalore, the unpaid loans has been rising at a rate of 12 per cent since 2008. As per the data compiled by the Indian Banks' Association, the total outstanding education loans at the end financial year 2016-17 stood at Rs 67,678.5 crore.
The ministry has been increasing its budget under the subsidy scheme. While it allocated Rs 1,100 crore in 2013-14, the amount rose to Rs 2,081 crore in 2014-15 and Rs 2,130 crore in the next fiscal. There was a slight dip in allocation in the 2016-17 budget, when the amount was Rs 1,950 crore. The amount might go up again in the coming budget, sources said.
"Even as the money is being given to banks on time, the outstanding amount has been on the rise. This is the reason we think it would be better to directly transfer the amount to the students' accounts. There is a possibility that the banks use the pool of money and loan it to further earn interest on it," said a source in the ministry.
A note regarding the proposed change in the scheme has already been moved in the ministry.
The Planning Commission's report (2011) suggests that to reach the targeted higher education gross enrolment ratio of 30 percent by 2020, at least 20 percent of the enrolled students should have access to educational loans.
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