The central government may increase the guarantee limit for education loans by 33 percent to ₹10 crores from the current ₹7.5 crores.
Education loans are guaranteed under the Central Government Credit Guarantee Fund Scheme for Education Loans (CGFSEL).
Under the scheme, a student can avail of an education loan without any collateral or third-party guarantee up to a maximum loan amount of 7.5 lakhs.
The Department of Financial Services under the Finance Ministry is reportedly consulting the Education Ministry to raise the maximum guarantee limit to ₹10 lakh, according to an Indian Express report.
The revised guarantee limit could be increased to around ₹ 10 lakh or even higher; the report cited an official source.
In August, the Ministry of Financial Services met with all 12 government banks to discuss targets for the disbursement of education loans. In the meeting, the bank official asked the ministry to unify the guarantee limit for education loans.
The official pointed out that while the CGFSEL scheme provides a guarantee for education loans up to ₹7.5 lakh, some state governments have set a guaranteed limit of up to ₹10 lakh, the report added.
The CGFSEL scheme favors students who belong to the Economically Weaker Section (EWS).
The annual gross family income of the student seeking the loan should not be more than ₹ 4.50 lakh. The interest rate the lender charges for education loans under this scheme can only be 2% per annum above the base rate.
The official pointed out that while the CGFSEL scheme provides a guarantee for education loans up to ₹7.5 lakh, some state governments have set a guaranteed limit of up to ₹10 lakh, the report added.
The CGFSEL scheme favors students who belong to the Economically Weaker Section (EWS).
The annual gross family income of the student seeking the loan should not be more than ₹ 4.50 lakh. The interest rate the lender charges for education loans under this scheme can only be 2% per annum above the base rate.
In addition, EWS category students can also claim full interest subsidy on these loans during the moratorium period, which is the entire course period plus one year.
The subsidy is provided for a maximum loan amount of CZK 7.50,000.