Interest Subsidy Scheme On Education Loan

For many students, funding is a major cause of worry when it comes to higher education. Education loan schemes offered by many nationalized banks have enabled extremely bright students to pursue their dreams of studying abroad. However, another stress factor for such students is their education loan repayment. It is to lighten this financial load that the Indian government has introduced a number of education loan interest subsidy schemes for the benefit of such students.

The Indian Government has introduced several schemes to support students who want to pursue higher education abroad. These schemes provide financial assistance or interest subsidies to qualifying students.This article will discuss the Central Sector Interest Subsidy Scheme (CSIS), Padho Pardesh Subsidy Scheme, Dr. Ambedkar Central Sector Scheme (ACSIS), and the Credit Guarantee Fund Scheme for Education Loan (CGFSEL) as well as education loans for studying abroad in India and abroad.

The following education loan interest subsidy schemes were introduced by the Govt. of India for students belonging to specific social groups. All the schemes majorly focus on students coming from economically backward sections.

1. Central Sector Interest Subsidy Scheme (CSIS)
2. Padho Pardesh Scheme.
3. Dr. Ambedkar Central Sector Scheme

The Central Sector Interest Subsidy Scheme (CSIS subsidy scheme) is for students who wish to pursue their higher education in India only. Since the Padho Pardesh scheme and the Dr. Ambedkar Central Sector scheme are of more relevance to students who wish to pursue their higher studies abroad, these will be explained in detail in this article.

Under any central government education loan interest subsidy scheme, the interest for the entire moratorium period is paid off by the government. This moratorium period is the course duration, plus one year or six months after getting employed, whichever happens, earlier. Since these subsidy schemes are only applicable to candidates who are financially weak, being able to save on any education loan-related expenses can provide them with huge relief.

Read More on  Margin Money: Loan Margin in Education loan

The biggest highlight of these subsidy schemes is the education loan interest waiver. Another important provision is that meritorious students who come from limited economic backgrounds are given priority under these schemes. In any case, these interest subsidy schemes offer a subsidy on a loan amount of Rs.20 Lakhs only. This means that even if the loan amount is higher, the subsidy will be applicable on Rs.20 Lakhs only.

The subsidy schemes mentioned above can help eligible students save an amount of Rs.6 Lakhs from their entire repayable loan amount.  Read on to know more!

The CSIS scheme, implemented by the Department of Higher Education, Ministry of Education, provides interest subsidy during the moratorium period (course period plus one year) for education loans taken from scheduled banks under the Model Education Loan Scheme of the Indian Banks Association
The scheme aims to support students belonging to economically weaker sections, with an annual parental income of up to INR 4.5 lakhs, who want to pursue higher education in professional or technical courses from NAAC accredited institutions or professional/technical programs accredited by NBA or institutions of national importance

Eligibility:

• The applicant should be an Indian national.
• The applicant should have secured admission in a technical or professional course in India.
• The applicant should have availed of an education loan from a scheduled bank under the Indian Banks’ Association (IBA) Model Education Loan Scheme.
• The total income of the applicant (from all sources) shall not exceed INR 4.5 lakhs per annum.

Interest Subsidy:

• Full Interest subsidy during the moratorium period (course period plus one year) for education loans taken without any collateral security and third-party guarantee, for pursuing technical/professional courses in India from scheduled banks under the Model Education Loan Scheme of the Indian Banks Association

Application Process:

• Students can apply for the CSIS scheme through the Canara Bank portal, which has been appointed as the nodal bank for its implementation
• The interest subsidy is uploaded by the bank sanctioning the education loan in the portal maintained by Canara Bank

Documents Required:

• Income certificate of the student's parents/guardians
• Admission letter from the institution
• Loan sanction letter from the bank
• KYC documents

Income Ceiling:

• The total income of the applicant (from all sources) shall not exceed INR 4.5 lakhs per annum .

The Padho Pardesh Subsidy Scheme, introduced by the Government of India, provides interest subsidy on education loans for students belonging to minority communities who want to study abroad

Eligibility:

• The scheme is open to students belonging to minority communities, as notified by the Government of India
• The annual income of the applicant must be below INR 6 Lakh
• The applicant should have secured admission in an educational institute overseas for a Master's, M.Phil, or Ph.D. program
• The 'meritorious' element in the scheme refers to the student's academic performance, extra-curricular activities, and other achievements that demonstrate their exceptional potential for success in their chosen field of study

Interest Subsidy:

• The interest subsidy is provided for the moratorium period of the education loans under the Scheme of Interest Subsidy on Educational Loans for Overseas Studies
• The rate of interest subsidy may be amended from time to time
• As per the Model Scheme of IBA, the maximum loan for study abroad is INR 20 Lakh, and interest subsidy is admissible for the loan amount disbursed above INR 20.00 Lakh
• If the course pursued by the minority student is partly in India and partly abroad, they may still be eligible for the interest subsidy

Application Process:

• Students can apply for the Padho Pardesh scheme through their chosen lender after availing the study loan
• Submit all the relevant documents to the lender stating that you’re eligible for the interest subsidy scheme

Documents Required:

• Income certificate issued by the competent authority in the state/union territory.
• Admission letter from the educational institute abroad.
• Passport and photograph.
• KYC documents

Income Ceiling:

• Annual income below INR 6 lakhs

Note:- As per recent communication received from IBA, the scheme has been discontinued from FY 2022-23. The existing beneficiaries as on 31/03/2022 will continue to receive the interest subsidy during the moratorium period of the loan, subject to the compliance with the extant guidelines

The ACSISOBCEBC (Dr. Ambedkar Central Sector Scheme of Interest Subsidy on Educational Loan for Overseas Studies for Other Backward Classes & Economically Backward Classes) Scheme, implemented by the Ministry of Social Justice and Empowerment, provides interest subsidy on education loans for students belonging to Other Backward Classes (OBCs) and Economically Backward Classes (EBCs) who want to study abroad

Eligibility:

• The scheme is open to students belonging to Other Backward Classes (OBCs) and Economically Backward Classes (EBCs)
• Students must be pursuing courses leading to Masters (including PG Diploma), M.Phil, and Ph.D. levels
• Priority is given to students who have completed their qualifying education in a Government University/Institution before taking admission
• The total income of the applicant (from all sources) shall not exceed ₹ 8,00,000 per annum

Interest Subsidy:

• The interest payable by the students availing the education loans of the Indian Banks Association (IBA) for the period of moratorium (i.e. course period, plus one year or six months after getting a job, whichever is earlier) as prescribed under the Education Loan Scheme of the IBA, shall be borne by the Government of India.
• For a student, the eligible loan component shall be the actual loan taken subject to a maximum of ₹ 20,00,000 for the purpose of an Interest subsidy.

Application Process:

• Students can apply for the ACSISOBCEBC scheme through their chosen lender after availing the study loan
• Submit all the relevant documents to the lender stating that you’re eligible for the interest subsidy scheme

Documents Required:

• Income certificate issued by the competent authority in the State/UT Government.
• Proof of admission to the course.
• Copy of the letter confirming the sanction of loan by the Bank.
• Copy of Passport.
• Interest subsidy claim

Note:-  Fresh applications for interest subsidy under this scheme have been discontinued until further notice

The CGFSEL, notified on September 16, 2015, provides a third-party guarantee for education loans availed by students without any collateral security
The scheme aims to promote access to higher education for students from economically weaker sections.

Eligibility:

• The scheme covers education loans extended by banks to eligible borrowers as per the Model Education Loan Scheme of the Indian Banks’ Association (IBA), without any collateral security and/or third-party guarantee.
• Available to Indian nationals who have secured admission to a higher education course in India or abroad through a merit-based selection process.
• Students from economically weaker sections whose annual gross parental/family income is up to Rs. 4.5 Lakh are eligible.

Objective:

• Provide a guarantee for education loans to deserving and eligible students who are unable to pledge any collateral for their loan and are also unable to provide any third-party guarantee.
• The maximum loan limit under this scheme is Rs. 7.5 Lakh without any collateral security and third-party guarantee. The Fund provides guarantee cover to the extent of 75% of the amount in default through the National Credit Guarantee Trustee Company Ltd

Application Process:

• Lending institutions can charge an interest of 2% per annum above the base rate on education loans under the CGFSEL scheme.
• The bank sanctioning the education loan needs to upload the claim of interest subsidy in the portal maintained by the Canara bank for this purpose.
• Students need to submit the loan application form along with the required documents to the lending institution.

Documents Required:

• Income certificate of the student's parents/guardians
• Admission letter from the institution
• Loan sanction letter from the bank
• KYC documents

1. Post the loan sanction, the lending banks upload the candidates’ details into the nodal banks’ software on a quarterly basis.
2. This list goes to the selection committee.
3. The selection committee considers the following factors:

•  The merit of the candidate.
• Annual income from all the sources ( Siblings, spouses, parents, guardians).
• Under the Dr. Ambedkar education loan interest subsidy scheme, priority will be given to students who have finished their qualifying education from government universities/institution prior to being enrolled in an abroad education program.

On the directions of the governing body, all the member banks will open the subsidy portal. The application portal for these schemes will be opened only once in a financial year by nodal banks. They may reopen it again if they do not receive a sufficient number of applications that satisfy the yearly quota.

1. If the student gives up their Indian citizenship in the course duration or moratorium period.
2. Students who discontinue their courses mid-stream.
3. Students who produce false claims in order to be eligible for the subsidy schemes.

Subsidy schemes have been introduced for your benefit, and as someone who wishes to avail of their benefits, it is essential that you should be informed about them. A decision taken on the basis of incomplete information can prove to be bad for you in the future. We hope this article has answered most of your queries regarding interest subsidies. We are planning to come up with a series of articles that will focus on the education loan procedure requirements for different countries. So keep a lookout for this section on the website.