Interim Budget 2014: Subsidy on education loan to benefit 9 lakh students

Ipsita Sarkar Gupta | shiksha.com

In a move aimed to help as many as nine lakh students across the country, finance minister P Chidambaram announced ‘a moratorium period for all education loans taken up to March 31, 2009, and outstandings as of March 31, 2013.’

The announcement, which has come as a relief for education loan borrowers, will cost the government Rs 2,600 crore in 2013-14. The amount of Rs 2,600 crore will be transferred to Canara Bank, the nodal bank managing the interest subsidy scheme on educational loans.

The move, which has come right before the 2014 national elections, seems like an effort to entice the student community.

As of December 2013, public sector banks had 25,70,254 student loan accounts and the amount outstanding is Rs 57,700 crore, informed the FM. The government will take over the liability for this outstanding interest, but the borrowers would have to pay interest for the period after April 1, 2014.

In a statement to Shiksha.com, XLRI director E. Abraham said, "It is heartening to note that expenditure on education has increased almost eight-fold in the last 10 years to reach Rs 79, 251crores this year. Whilst the number of schools, colleges and universities have increased manifold in the last decade it is definitely a matter of grave concern that a large number of the new educational institutions in the government sector have major lacunae vis-a-vis governance resulting in gross misapplication and wastage of public funding. It is high time that the audit of the education sector is done with more rigor by the Comptroller and Auditor General (CAG) of India and corrective measures be implemented to stem the public funds leakage."

Read the excerpt from FM’s speech

“Ten years ago, only a few thousand students - mostly the well-connected - got education loans.  At the end of December 2013, public sector banks had 25,70,254 student loan accounts and the amount outstanding was Rs.57,700 crore.

“Hon'ble Members will recall that my predecessor, Shri Pranab Mukherjee, had, in the Budget of 2009-10, introduced the Central Scheme for Interest Subsidy (CSIS) in respect of education loans disbursed after 1.4.2009 under which Government took over the burden of interest for the duration of the period of study and a little beyond.  The scheme brought great cheer to student-borrowers and their families.  However, I have noticed a sense of discrimination among students who had borrowed before 31.3.2009, struggled to pay interest during the period of study, and continued to service the loans afterwards. I think they deserve some relief.  I therefore propose a moratorium period for all education loans taken up to 31.3.2009 and outstanding on 31.12.2013.  Government will take over the liability for outstanding interest as on 31.12.2013, but the borrower would have to pay interest for the period after 1.1.2014. It is estimated that nearly 9 lakh student borrowers will benefit to the tune of approximately Rs.2,600 crore.  I intend to provide the funds in the current financial year itself.  Accordingly, a sum of `2,600 crore will be transferred to the Canara Bank, the designated CSIS banker.  Details of the scheme will be announced shortly.”