New Delhi: The Human Resource Development Ministry will ask states to contribute towards making education loans cheaper as proposed under the National Education Finance Corporation (NEFC), officials said on Thursday.
"We will be asking the states to contribute to the corpus," a ministry official said.
The proposed NEFC corpus will focus on re-financing banks to provide education and institutional loans at lower interest rates with longer loan repayment time. It will be started with an initial corpus of Rs 5,500 crore (Rs 55 billion) and the ministry will infuse Rs 3,000 crore (Rs 30 billion) every year to reach Rs 35,500 crore (Rs 350.5 billion) by 2020.
The issue will be taken up with state governments during the Central Advisory Board on Education (CABE) meeting scheduled June 18 and 19.
CABE is the highest advisory body to the Central and State Governments in the field of education.
"State government run educational institutions will also benefit from the NEFC, so the centre will seek cooperation from the states," the official added.
Under the NEFC, education loans will be available at an interest rate as low as 4 percent for those with parental income less than Rs.4.5 lakh (Rs.450,000) per annum. For others, the rate will be 7 percent. Loans above Rs.12 lakh (Rs.1.2 million) will attract an interest rate of 9 percent.
The present interest rates for education loans are between ten and twelve percent. The repayment time will also be increased from the present 5 to 7 years to 6 to twelve years.
NEFC will also provide loans for building infrastructure and other facilities to private and government educational institutions.