In a significant move, government today decided to provide full interest subsidy on education loans taken by poor students to pursue technical and professional courses and fixed their parental income limit at Rs4.5 lakh per annum to avail the benefit.
A meeting of the Cabinet Committee on Economic Affairs, chaired by Prime Minister Manmohan Singh, gave its nod to the scheme to enable students from economically weaker sections to continue any approved course in recognised technical and professional institutions in the country.
The scheme would benefit over five lakh students to pursue higher education in technical and professional streams, Home Minister P Chidambaram said, adding that the number of loans as on March 31 this year was 16 lakh and the total outstanding amount Rs 24,000 crore.
The scheme, to be applicable from the ongoing academic year, would provide full interest subsidy during the period of moratorium on loans taken by students from scheduled banks. The moratorium period begins from the launch of a course till one year after the course ends or six months after the student gets a job, whichever is earlier. The interest during this period would be borne by the government.
After this moratorium period is over, the interest on the outstanding loan would have to be paid by the student borrower as per its provisions. Chidambaram said the interest subsidy would be available to students only once, either for the first undergraduate degree course or the post-graduate degree and diploma courses.
The interest subsidy scheme, formulated by the Indian Banks Association, would however be admissible for combined undergraduate and post-graduate courses. The benefit would not be available for those students who either discontinue the course mid-stream due to any reason, except on medical grounds. He said the modalities for implementation and monitoring mechanism would be finalised in consultation with Canara Bank, which has taken a lead role.
A Memorandum of Understanding would be signed with the bank. The monitoring mechanism would see how the benefits of the scheme were reaching the students belonging to the scheduled castes, tribes and OBC communities.
Observing that one of the responsibilities of the government was to ensure that no one was denied professional education due to their economic conditions, Prime Minister Manmohan Singh had in his Independence Day address this year announced that a new scheme would be started in this regard.
Finance Minister Pranab Mukherjee in this year’s budget speech also made a similar announcement.