In a move that would help over 500,000 students in pursuing higher education in technical and professional fields, the government today decided to provide full interest subsidy on education loans taken by poor students whose parents' income is under Rs4.5 lakh per annum.
A meeting of the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Manmohan Singh, gave its nod to the scheme that was first proposed over a year ago to enable students from economically weaker sections of society to continue any approved course in recognised technical and professional institutions in the country.
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.
Home minister P Chidambaram said the number of loans as on 31 March 2009 was 1.6 million, while the total outstanding amount was Rs24,000 crore.
He added that 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 government's subsidy liability will be based on the prime lending rate. At present, PLR is between 12.75 per cent and 13.25 per cent.