Model Education Loan Scheme – Interest on Education Loans
Press Information Bureau
Government of India
Ministry of Finance
Government of India
Ministry of Finance
01-July, 2019
Interest on Education Loans
All Scheduled Commercial Banks provide
Education Loan to students. IBA has formulated and circulated to all
member banks a ‘Model Education Loan Scheme’ for providing financial
support to meritorious students for pursuing higher education in India
and abroad. Salient features of the scheme inter-alia include;
I. Loan upto Rs 10 lakh for study in India and upto Rs 20 lakh for study abroad.
II. Collateral free loans upto Rs 7.5 Lakh under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).
III. No Margin for loan up to Rs 7.50 Lakh.
IV. Repayment period of 15 years
V. One year moratorium for repayment after completion of studies in all cases,
VI. Moratorium taking into account spells of unemployment/under-employment, say two or three times during the life cycle of the loan
VII. Moratorium for the incubation period if the student wants to take up a start-up venture after graduation.
II. Collateral free loans upto Rs 7.5 Lakh under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).
III. No Margin for loan up to Rs 7.50 Lakh.
IV. Repayment period of 15 years
V. One year moratorium for repayment after completion of studies in all cases,
VI. Moratorium taking into account spells of unemployment/under-employment, say two or three times during the life cycle of the loan
VII. Moratorium for the incubation period if the student wants to take up a start-up venture after graduation.
Simple interest for loan is calculated
from the date of disbursement of loan upto the end of moratorium period
i.e. course period plus one year and therefore the interest is never
risen upto principal amount. At the start of repayment period, the
interest accrued is clubbed with principal & EMI is calculated
accordingly. The servicing of interest during study period and the
moratorium period till repayment commences is optional for students.
No such instance regarding the interest
on loan rises upto the principal amount within four years of completion
of study has been reported by banks.
For the students belonging to
economically weaker sections, an interest subsidy scheme on educational
loans is in place. Under the scheme full interest subsidy is available
during the period of moratorium on educational loans upto Rs 7.50 Lakh disbursed on or after 1st April, 2009.
Further, the Model Educational Loan
Scheme of IBA provides for certain concessions on educational loans
which inter-alia includes,
(i) 1% interest
concession if interest is serviced during the study period and
subsequent moratorium period prior to the commencement of the repayment,
(ii) 0.5% concession in the interest rate to the girl students,
(iii) rebate in Income tax to the extent of interest paid on education loan.
Source: PIB(ii) 0.5% concession in the interest rate to the girl students,
(iii) rebate in Income tax to the extent of interest paid on education loan.