`Poor` students may get education loan at 4% interest

Last Updated: Friday, May 14, 2010 - 14:48

New Delhi: Government is planning to provide education loans at four percent interest rate to help students from weaker sections of society to pursue higher studies.

Discussions are on between the HRD Ministry and the Planning Commission on this innovative concept, which is seen as a significant initiative of the UPA government.

"It (education loan at four per cent proposal) is at a preliminary stage. We have discussed this idea with the Planning Commission and it is supportive," HRD Minister Kapil Sibal told a news agency.

This loan will be provided by banks while a proposed
funding corporation for higher education will re-finance the
banks to help them compensate the loss. The mandate and
functioning of the proposed National Higher Education Finance
Corporation (NHEFC) are now being worked out.

"I hope it will be crystallised soon," Sibal said.

The detailed modalities are being worked out for the
scheme, including the weaker section criteria.

The scheme will have another component of providing
loans to students at the rate of seven per cent, subject to a
ceiling. There will a cap on loan amount in this category.

There may another provision of extending loans at nine percent without a cap on the amount.

According to sources, the NHEFC, which will also
provide low-interest loans to higher educational institutions
for capacity building through commercial banks.

The HRD Ministry has already prepared a concept note
on creation of NHEFC. As per the HRD Ministry`s plan, the
proposed NHEFC will be an institutional mechanism to address
the investment needs in higher education sector.

The proposed corporation will nurture philanthropic
tradition in education by providing loans at concessional
rates on interest to such agencies for establishment of higher
and vocational institutions in educationally backward areas.

It 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 scheme will be in addition to the
existing interest subsidy on educational loan scheme. Under
the existing scheme, students, whose family income is less
than Rs 4.5 lakh per annum, are able to get loans at a
concessional rate. Normally the education loan is about one
percent less than the Prime Lending Rate (PLR) of the banks.

The PLR of the national banks is around 11-12 percent
on loans.

PTI



First Published: Friday, May 14, 2010 - 14:48

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