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Education loan scheme: Know all about Loan schemes and Criteria

Created on 13 Jun 2020

Wraps up in 5 Min

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Updated on 31 Jul 2021

Wandered for hours and hours in the market, scrutinized and compared bank interest rates for availing an education loan to pursue higher studies? Confused between choosing, either a government bank or a private bank, where the government banks and schemes are not hassle-free, and the private banks favor power through connections?

Well, we feel you. So, we're here to help you. To understand the schemes and methods of obtaining an education loan, let us dive further into the topic.

Schemes, Sources & Subsidy

A mutual fund can be utilized as a collateral source, for availing education loans. If your income slab is lower than the requisite for the loan, then mutual fund investment can compensate for the lower income and also enhance your eligibility for a loan.

For availing of a loan against a mutual fund, an application must be filled by the mutual fund holder and submitted along with all the required important documents while applying for an education loan. The loan amount to be sanctioned will be a percentage of the value of the mutual fund units held on the date of sanctioning the loan. Recurring deposit, saving account & SIP in mutual funds are amongst the saving modes of procuring the loan. 

Education Loan Scheme

  • CGFSEL scheme means that the bank can finance up to 100% loan if the loan is up to the limit of Rs. 7,50,000. In this scheme, you can get a loan of up to Rs 10 lakh for study in India and up to Rs 20 lakh for studying abroad. But, if you take a loan of more than Rs 7.5 lakh, the bank may ask for collateral for the loan amount. The bank may also ask you to deposit margin money and seek a third-party guarantee.

  • Vidya Lakshmi Portal: It helps a student provide ease of access to a loan and scholarships, which might help him achieve greater heights in life.It provides various access to education loans, even in the remotest and rural areas. 

  • Central Government Scheme of Interest Subsidy on Educational Loan Scheme is provided for economically weaker sections of the society. In this, the students must provide all the enlisted points:

  1. Admission must be secured to a recognized college in India.

  2. Gross income must not exceed 4.5 lakhs.

  3. The subsidy loan amount is offered up to Rs.7.50 Lakhs (even if the loan is more than Rs.7.50 Lakhs).

  4. An income of proof must be submitted.

  5. The applicable scheme must be mentioned, and data must not be fake.

  6. Subsidies must be provided for the course and moratorium period only.

  7. Students are eligible for an interest subsidy only after the first undergraduate degree or postgraduate degree or diploma course in India.

  • Padho Pardesh Scheme: These schemes provide subsidies on education loans for overseas studies to the students belonging to the minority communities.

  1. Admission for higher studies abroad viz. Masters, M. Phil, and Ph.D. levels only are eligible.

  2. Minority community students must have an annual gross family income not exceeding Rs.6 lakh.

  3. Income certificates to be submitted must be legal, authentic, and verified.

  4. The subsidy is available for interest charged on the loan amount disbursed during a financial year.

  5. Available for the course and moratorium period only.

  6. The scheme is applicable for higher studies abroad.

  7. The students obtaining benefits under this Education loan scheme shall not be given an interest subsidy if he doesn't qualify as a member of Indian Citizenship during the tenure of the loan.

  • Dr. Ambedkar Central Sector Scheme of Interest Subsidy on Educational Loan for Overseas Studies for Other Backward Classes & Economically Backward Classes:

  1. Scheme to provide interest subsidy on educational loans for overseas studies for the students belonging to the other backward classes (OBCs) & economically backward classes (EBCs).

  2. Admission must be secured at a higher level or postgraduate level.

  3. OBC and EBC students with an annual gross family income should not exceed Rs.3 Lakh & Rs.1 Lakh, respectively, for the loan availed.

  4. The student has to submit income proof either of Form-16/ITR/certificate issued by authorized officers appointed by the respective State Governments. The subsidy is available for interest charged on the loan amount disbursed during a financial year.

  5. Available for the course and moratorium period only.

  6. The scheme is applicable for pursuing higher studies abroad.

  • Central Government Interest Subsidy Scheme (CSIS): The economically weaker students who satisfy all the following parameters can avail of the interest subsidy:

  1. The scheme is applicable for inland studies.

  2. The student should secure admission after Class XII in any of NAAC accredited Institutions or Professional Technical Programmes accredited by the NBA or (CFTIs) and the Nursing Council of India for Nursing Courses, Bar Council of India for Law, etc.

  3. Under this scheme, education loans are available without any collateral security or a third-party guarantee and are available up to a maximum extent of 7.50 lakh irrespective of the availed amount.

  4. Annual gross income should not exceed Rs.4.50 Lakh.

  5. The student should present the income certificate issued by the Tehsildar and submit the same to the financial institute, where the loan is availed, and also execution of the documents takes place as and when required.

  6. The interest subsidy is towards the interest charged in the loan account during the course and moratorium period only, which is dependent upon the interested candidate as and when he wants to pay.

N.B: Aadhar number is mandatory for applying, availing, claiming & receiving the disbursed amount for various schemes or subsidies.

Bureaucracy speaks

Bureaucracy is noticed even when banks charge a lesser interest rate for Ivy league institutes just because the brand name of the college will lead to security of repayment of education loan for the specified tenure. Such was the case of SBI loan sanctioned fraud of 2019, fake IDs were created to proceed with the documentation part.

"Seventy-six thousand people have committed this fraud", as per the data mentioned in Forbes. And what about the ones that lurk behind the veil of money, power, and authority? None knows! Just to fulfill the unmet loan targets, are we as a society trying to strip students of their virtue, or are we discriminating because money is worth more than life and quality education?

Conclusion

Education is more precious than bureaucracy; services offered must be fair and just to all, not only to the ones offering high ticket size loans because their repayment seems promising.

Ask yourselves if promoting literacy rate is a prominent concern or promoting fraud a noteworthy concern? And if this is the case, let's go Vocal for Local.

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Ayushi Upadhyay

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A Keen Learner. Tiny, brainy, and studious, this quiet one stays in her zone until she pops. And once she does, boy, are her comebacks snappy! There is no financial question that she can't answer through her magical blog-writing. 

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