ibnlive » India

Mar 21, 2008 at 10:39am IST

UPA plans total interest subsidy on edu loans

New Delhi: After the agricultural loan waiver, there may be yet another loan sop in the offing by the UPA government. And this time it is the poor students who stand to benefit from this Rs 4000-crore scheme being planned in the run up to the General Elections.

Ankit is a second semester MBA student at IIPM in Delhi.

His first brush with the Equated Monthly Installments (EMI) would be the moment he lands a job. Ankit has taken an education loan of Rs 4 lakh. He might just have to shell out a large chunk of his salary repaying this money at a high interest rate.

"The interest rate is very high. I will have to repay the loan at an interest of about 12-13 per cent and that too just as I start my job," Ankit says.

With increasing cost of higher education, the government is planning:

  • A mega scheme for softening education loans in professional courses in institutes like IITs and IIMs
  • It will provide total interest subsidy for poor students whose parents earn less than Rs 2.5 lakh per annum
  • A total of Rs 4000 crore will be spent on the scheme over the next five years

Earlier the government had proposed to set up a corporation with the help of the private sectors to provide soft education loans.

This scheme will now replace the earlier proposal.

"The policy of the government is very clear. No child should be denied higher education for the want of resources," Minister of State for Human Resource Development D Purandeswari says.

It's the season of the loan mela. With the smell of elections in the air, the government is in a mood to empty its treasury.

And waiving off interest in higher education could be the best way to target the middle and the lower middle classes.