The rising cost of education is one of the biggest roadblocks for students today. Especially for students from underprivileged backgrounds, higher education is often beyond their financial means. In order to improve the availability of higher education to less fortunate yet meritorious students, the government has introduced the education loan subsidy scheme.
Economically backward students who avail an education loan through a bank registered with Indian Banks’ Association are eligible for the interest subsidy. The government-sponsored interest subsidy will completely pay for the education loan interest accrued during the moratorium period of the education loan. The moratorium period of an education loan includes the duration of the course plus an additional six months after getting employment up to a maximum of 1 year subsequent to course completion.
The scheme is open to all meritorious students who belong to the economically weaker section (EWS). Students would be classified as belonging to EWS if the total annual family income from all sources is less than or equal to Rs. 4.5 lakhs. The interest subsidy would thus be available to all students deemed as being in the EWS category irrespective of their social background. This sets the scheme apart from other schemes that are applicable to socially backward classes like SC, ST, minorities etc. Applicable to education loans disbursed from the 1st of April 2009 onwards. For loans partially disbursed before the date, subsidy will be available only on the portion of the loan disbursed after the cut off date.
Income Proof Documentation
The proof of family income would have to be obtained by the student from an appropriate authority assigned by the State Government as per the advisory issued by Government of India’s Ministry of Human Resource Development. Once a valid income proof document is submitted with the bank, it shall implement the scheme as per the appropriate rules and regulations.
EWS students enrolled in any Professional and Technical courses at institutes in India. These institutes need to be recognised by the UGC/AICTE, have been established by Parliamentary Acts, are IIMs or were established by Central or State Governments.
Additional features of the schemes
A student would be eligible to avail the scheme for either the under-graduate course or the post-graduate course/diploma subsequent to higher secondary education. An exception to this rule is in case of integrated courses for which the interest subsidy will be available for both the under-graduate and post- graduate portions of the course.
The following are some of the key exclusions in case of students who otherwise qualify for the Government subsidy:
- Students pursuing course outside of India.
- Students who drop out of their course before completion for any reason other than medical reasons.
- Students who are expelled from the institute on academic or disciplinary grounds.
Additionally, students who are enrolled in the following courses are also designated as ineligible:
- Vocational training
- Skill development
- Teacher Training
- Non-technical courses such as Music, Sociology, Commerce, Science, etc.
- Any course that may be enrolled in without clearing the 12th standard examination
The scheme is applicable to all education loans irrespective of total loan amount however the scheme prescribes a liability/limit on interest for loans up to Rs. 10 lakhs.